Public Broadcasting Services Ltd – the company running the state broadcaster – could stand to lose a mammoth €10 million in court if they lose an appeal over a pension scheme, The Malta Independent on Sunday can reveal.

If the appeal is lost, it would present a major financial challenge for the company, which was, at least in 2018 – the date of its most recently filed accounts – €1.6 million in the red.

The case in question sees a total of 119 people take on PBS over the latter’s failure to implement a private pension scheme for employees who transferred to the company after it took over Telemalta in 1992.

The case was first filed in 2010, with the claimants arguing that as per an agreement signed on 1 March 1976, Telemalta had tied itself to make a pension scheme for its workers based on their years of service with the corporation, and that the obligation for the implementation of this scheme fell onto PBS’ shoulders when it took over Telemalta.

It is a case which, according to estimates produced in PBS’ accounts, could cost the company around €10 million if it is lost.

In their counter-arguments, PBS admitted that such a private pension system was meant to exist for Telemalta employees, but argued that once Telemalta was sold, they were not obliged to provide such a system.  They argued that Telemalta workers were re-employed by PBS on a distinctly different contract, and that in any case their work conditions were set out in a collective agreement signed on 1 September 1993 – over a year after the sale – which erased any previous agreement.

The Civil Court has already in fact ruled on this case: and the bad news for PBS in her judgement on 14 December 2017, Judge Jacqueline Padovani Grima ruled against it.

In a 38-page judgement, Judge Padovani Grima cited the 1992 sale agreement between Telemalta and PBS, wherein it states that: “all rights and claims (including litigious rights) and agreements regarding broadcasting services, of the Corporation against or with third parties (including any claims against the Broadcasting Authority) and all debts due to or due by the Corporation regarding broadcasting services, subject to all contractual obligations relating to any of the aforesaid rights, claims, agreements or debts. For the avoidance of any doubt the parties agree that this deed comprises all current assets and liabilities appearing on the audited balance sheet of ‘Xandir Malta’ division of the Corporation as on the thirty first of July of the year one thousand nine hundred and ninety two.”

Judge Padovani Grima stated that given that PBS inherited all the assets and liabilities of Telemalta’s broadcasting division, then it follows suit that it also assumed all its contractual responsibilities and obligations.  This means, the judgement states, that the company was wrong to exculpate itself from the obligation for the pension scheme, even if that obligation was not set out by PBS itself.

On the matter of the collective agreement, Judge Padovani Grima stated that because PBS is a parastatal entity then more onerous criteria apply – including the intention of the state.  The judgement reads that parliamentary debates had clearly shown that the government intended to grant a pension scheme to the claimants as Telemalta workers – something which was reconfirmed even after the national pension as officially introduced.

The judgement also reads that the collective agreement in question did not expressively revoke the obligation for the pension scheme and the same agreement does not hold any clauses which would be incompatible with the creation of such a scheme.

The court ruled in favour of the applicants, and ordered PBS to set up the pension scheme within three months.  The scheme however has not materialised just yet because PBS filed an appeal against the judgement, which is still ongoing today.

Questions sent to PBS last Wednesday asking whether the company remains confident that it has the legal basis to win this case remained unanswered at the time of writing.

However, PBS’ 2018 accounts – the most recent ones filed – tell us that the company’s lawyers “maintain that there are sound objective grounds in favour of the appeal.”

Many years of financial losses cast significant doubt on company’s ability to continue, accounts auditors warn

The financial aspect of this case is sure to be a matter of concern for the company.  If it loses, the company estimated that it will have to fork out a figure in the region of €10 million.

For comparison, the revenue for the whole financial year of 2018 stood at €11.6 million, and the company ended the year on a loss of €1.33 million.

Indeed, the auditors of the financial statement state that because the company incurred such a loss and because its liabilities exceeded its assets by €6.2 million, the financials had to be drawn up on a going concern basis.

“The Company has incurred losses before tax for a number of years and has experienced a deteriorating liquidity position”, the report reads.

“These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern, and, consequently, on its ability to realise its assets and discharge its liabilities in the normal course of business”, it continues.

It goes on to state that the company’s directors are committed to addressing the situation and that amongst the options they were considering were a reassessment of the company’s cost structures, the seeking of alternative streams of revenue, and possibly utilising the company’s assets on more commercially viable project.

Questions about the nature of PBS’ current financial situation, and whether it has improved or deteriorated, remained unanswered as well at the time of going to print. Likewise unanswered were questions over how the company would finance the pension scheme expenses given the scale of the expected cost if they lose the case.

What we do know about PBS’ current financial situation at least is that the aid given to it by the government has increased.

A key part of PBS’ funding comes from the state through was is called a public service obligation (PSO), which is effectively a government subsidy granted to a company for it to provide a service which is in the public’s interest.  Another example of a PSO is, for instance, the Gozo Channel.

A 2010 report by the National Audit Office stated that the PSO to PBS is to cover for the company’s obligation to offer non-commercially viable programmes of a social, cultural, or educational nature.

Out of the €11.6 million in revenue in 2018, €4.1 million of it came from the government through this PSO.

We know that this PSO as of this year will be increasing:  the government, through Minister within the Office of the Prime Minister Carmelo Abela announced last January that its government subsidy will increase by €30 million over five years – the equivalent of €6 million per year.

Abela said that the increase was so that the national broadcaster can create quality content that is not purely of a commercial nature.

The remaining revenue generated in 2018 by PBS was through the sale of airtime and advertising – which generated €6.7 million and through miscellaneous revenue which equated to just under €800,000. 

The total figure for revenue in 2018 decreased from €17.2 million in 2017 – but that is likely down to the fact that PBS received €3.2 million from the government for coverage of the EU Presidency and another €2 million to finance the Junior Eurovision during that year.

The two biggest expenses faced by PBS meanwhile are personal remunerations (mainly wages and salaries for its 99 employees) which amounted to €4.1 million and the cost of local productions, which amounted to €3.7 million, with the total expenses bill across the board coming in at €12.8 million – which is less than the €15.5 million spent in 2017.

This whole situation comes a time when PBS is facing major flak over its apparent lack of impartiality.  The Opposition has consistently complained that the state broadcaster has become nothing more than a government mouth-piece, and that it ignores or gives less prominence to scandals which rock the government.

If PBS does lose the pension scheme case it would be its second major loss in court after they were ordered to pay over €200,000 in compensation to its former CEO John Bundy after a court ruled that he had been dismissed unfairly.