Dear Editor,
Two weeks ago, the Judicial Committee of the Privy Council (PC), the highest court of Trinidad and Tobago, handed down a ruling that affects the entire Region. The decision in Methanex Corporation v The Board of Inland Revenue of Trinidad and Tobago [2024] UKPC 6, raises difficult but long overdue questions about the weaknesses of CARICOM’s legal architecture, the aging 1994 CARICOM Double Tax-ation Agreement (the Agreement), and the troubling consequences of maintaining a bifurcated system of final appellate courts within the region.
At the heart of the case was a dispute between Trinidad and Tobago’s tax authorities and Methanex, a wholly owned Canadian-controlled enterprise that has routed its Carib-bean operations through a subsidiary incorporated in Barbados. Methanex claimed benefits under the 1994 Agreement, arguing that it was a resident of a CARICOM member state (Barbados) and therefore entitled to relief under the treaty.
The Privy Council, taking a literal and formalistic reading of the treaty’s text, agreed. It ruled that the absence of a Limitation on Benefits clause, a principal purpose test, or any economic substance requirement meant that Methanex was entitled to treaty benefits. In doing so, it rejected a more modern, progressive purposive interpretation offered by the Trinidadian courts below, which had urged a reading of the Agreement in line with its objective of promoting regional economic integration.
While the ruling is legally defensible under the Agreement’s text, it reveals a deeper failure – not of the judiciary or the legal profession, but of regional governance. The 1994 Agreement replaced a 1973 agreement that was more narrowly drawn and intended to operate as a closed treaty, available only to those genuinely resident and operating within the region. In contrast, the 1994 Agreement is now shown to function effectively as an open treaty, accessible to any person or entity formally subject to tax in a CARICOM member state, even if that connection is nominal or commercially artificial.
The Agreement has remained untouched for thirty-one years des-pite repeated warnings about its deficiencies. It lacks some of the modern safeguards in international tax treaties. Yet efforts to revise it have been met with institutional lethargy. CARICOM’s leadership has failed to initiate reform, and its economic affairs committees have not acted. Methanex has exposed and exploited the region’s tax base. Suriname is right not to subscribe to the Agree-ment in its present form.
The case is ripe with painful irony. It was brought by Trinidad and Tobago, which continues to reject the appellate jurisdiction of the Caribbean Court of Justice. Methanex, by contrast, is incorporated in Barbados, which has embraced the CCJ. Yet, it is Trinidad’s preferred final court, the Privy Council, whose ruling will most benefit foreign-controlled companies seeking tax advantages at the entire region’s expense – including Trinidad’s. Most directly, the Privy Council overruled Trinidad’s Tax Court and its Court of Appeal.
This contradiction extends to legal principles and the Privy Council as well. In 1976, in the Jamaican case, popularly referred to as Seramco, the PC embraced substance over form, a philosophy adopted later by the House of Lords in the famous Ramsay case. That is also Guyana’s approach, founded in separate judgments handed down by temporary Justices of Appeal Rafiq Khan and Dr. Arif Bulkan. In fact, substance over form has long been part of Guyana’s Income Tax Act (section 74). A further irony is that the Methanex decision does not bind the UK, where the substance over form principle was formally adopted in a landmark House of Lords case.
Methanex signals a return to formalism, privileging nominal residence over commercial reality. The spirit of Seramco survives in theory but has been undermined in practice.
Some may argue that companies like Methanex bring investment and employment to the region, and that legal certainty is essential. That is true. However, the issue is not whether tax treaties should exist or whether international companies are welcome. It is whether a multilateral regional treaty, explicitly intended to foster intra-regional economic integration, trade and investment, should be used to deliver tax advantages to third-country multinationals with no substantial commitment to the region’s development.
Indeed, in jurisdictions like Guyana and Barbados, Canadian investors are already covered by bilateral treaties with Canada. The availability of the CARICOM treaty as an additional option means they can choose whichever arrangement yields the most favourable tax outcome, effectively converting a regional integration instrument into a platform for treaty shopping.
If individual CARICOM states wish to offer tax relief to non-CARICOM jurisdictions, they can do so through bilateral treaties. That is a sovereign prerogative. But it is wholly inappropriate to use a regional framework designed for unity and shared prosperity as a tool of convenience for external actors. In this sense, the Methanex decision is not just about one company’s tax status. It is about the erosion of regionalism itself.
We are often told that treaty reform in CARICOM is difficult because it requires the elusive unanimity. But what we now have is unanimity of exposure. The Agreement makes every CARICOM state vulnerable to treaty shopping, base erosion, and the loss of tax revenues meant to fund public services and development goals.
CARICOM countries must respond to this decision. The 1994 CARICOM Agreement must be revised or supplemented by protocols that insert modern anti-abuse clauses. The CARICOM Secretariat must take the lead, and those states that support the CCJ must continue pressing for judicial coherence. But above all, we must restore the principle that our regional instruments serve regional interests.
We cannot afford two final courts, two tax philosophies, and one treaty that serves neither. The price of disunity is being paid in revenue lost, sovereignty diminished, and a regional project undermined by its own contradictions.
Yours faithfully,
Christopher Ram