Letter to the Editor
Jose vs. Esso
Dear Sir:
Over the past months there have been muchdiscussion in the paper about the Local Companies 'Control Licences(LCCLs) of the two fuel companies, particularly Esso.
I am writing this letter for a number of reasons. First, Jose'sLimited is a Cayman Esso dealer, which is adversely affected bythe licencing issues. We are not one of the distributor/dealerswho signed the recent letter condoning Esso's practices. Indeed,it is probably the events surrounding Jose's Limited that hasbrought this matter to the attention of the Trade and BusinessLicencing Board. I should also make it clear that Jose's Limitedcommends the way in which the Trade & Business Licencing Board,particularly the immediate past Chairman, Mrs. Berna ThompsonCummins, has handled this particularly difficult and sensitiveissue.
In 1987 I had just completed the modernisation of a station onland I had purchased at the junction of Smith and Crewe Roads.Esso approached me and requested me to open the Island's firstconvenience store (C-store) and change the appearance of my stationso that it looked like any other Esso station. Esso was particularlyconcerned about this latter aspect given the proximity of my stationto the airport. In order to do this (all of which was to be paidfor by me) Esso arranged a loan facility which was secured bya mortgage over my property and they also pre-paid the rent for10 years.
Shortly after we started the C-store it proved to be particularlysuccessful.
Esso wanted to open further C-stores around the Island and neededan idea of the volume of sales I made in the C-store. This wasnot information they were entitled to and I declined to give itto them. This culminated in a senior manager of Esso informingme that I had to give him the information because Esso "ownedme". In light of that sentiment I made arrangements to repayEsso the money they had lent me to refurbish the station as aC-store. Since 1990 I have not owed Esso any money. I have topay the driver of the tanker truck before he delivers fuel toour station. This happens every time a delivery is made.
Unfortunately, the relationship with Esso continued to deteriorateas it was made clear my principal function as an Esso dealer wasto do their bidding. Matters came to a head in 1997 when I decidedthat Jose's Limited and Esso could no longer tolerate the relationship,which had clearly broken down irretrievably.
In the course of assessing our legal position it became clearthat although Esso held an LCCL to operate a bulk fuel installationfacility, they had expanded the scope of their business to includeleasing stations to dealers and operating a franchise. It wasclear that since 1988 Esso purchased or leased a number of fillingstations and Esso were in turn sub-leasing those stations to dealerswho operated them.
The difference here is that Jose's Limited owns the site fromwhich it operates whereas with the other dealers, Esso owns thesites or has the right to sub-lease them to other dealers. Inthe franchise arrangement Esso is paid a franchise fee; it ispaid in cash for the fuel it delivers to the station; it is paidmonthly in advance for the rent for the station (the rent is notdiscounted or a nominal rent) and now is receives a commissionnot only on the fuel that it has already sold the dealer but alsoon the volume of sales of newspaper, magazines, candy, snacks,soft drinks and anything else that might be sold in the conveniencestore. By no stretch of the imagination can anyone properly cometo the view that making money on the sale of patties falls withinthe definition of bulk fuel installation facility.
It would appear that the Trade and Business Licencing Board sharedour concerns when they recently granted the fuel companies conditionalLCCLs. As we understand it the intent was two-fold. First, togive the fuel companies the opportunity to rearrange their operationsand secondly to give proper effect to the law and bring to anend the mockery of the laws that existed until the latest LCCLswe're granted.
Space does not permit an in-depth explanation of the Local CompaniesControl Law. The relevant features of the law are that it limitsthe extent to which non-Caymanian controlled businesses may operatewithin the Cayman Islands. Unless a business is Cayman controlledit must apply to the Trade & Business Licencing Board foran LCCL.
The law directs the Board to consider an application for an LCCLin light of 10 matters that are stated in the law. These includethe economic situation of the Islands and the due protection ofpersons already engaged in business in the Islands; the natureand previous conduct of the person applying for the licence; thedesirability of retaining in the control of Caymanians the economicresources of the Islands and the efforts made by the company toobtain Caymanian participation.
I have highlighted these from the 10 matters in the law becauseanyone acquainted with the facts of this case would have the sameconcerns that the Trade & Business Licencing Board did.
Your readers have not been told that Esso previously approachedthe Board with a two-fold view of obtaining a service stationlicence and made an application for a service station licence.In both cases previous Boards have made it clear that the applicationwould be refused. Notwithstanding this Esso has continued, evenas recently as last year, to take on sites and then lease or sub-leasethem to dealers.
Furthermore, Esso has been content, when its licence has expired,to allow years to elapse before applying for a new licence. Obviously,with no application before the Board, it simply cannot even consider,let alone grant, a licence.
Is this the sort of conduct that should be condoned by grantinga licence? It is laudable that the Trade & Business LicencingBoard and Mrs. Thomson Cummins saw it fit to apply our laws andapply them properly. Let us hope that others follow the lead theyhave given, failing which, I trust our legislature has the integrityto repeal legislation that is clearly only window-dressing.
Yours sincerely,
Jose Webster