AN arbitration board yesterday ruled that the Government should pay Ezroy Millwood’s National Transport Co-operative Society (NTCS) about $10 billion in compensation, plus interest for failing to meet its obligation to guarantee a return on investment when the NTCS operated Kingston’s shambolic bus service in the second half of the 1990s.

Last night, Government lawyers were analysing the 50-page report by the arbitrators setting out the reasons for the award before Transport Minister Robert Pickersgill briefs a Cabinet sub-committee that was set up to monitor this matter.

“The Government has taken note of the arbitration award handed down today in favour of the National Transport Co-opertative Society (NTCS),” Pickersgill told the Observer.

He did not say when the issue would reach the Cabinet committee, after which the administration “will indicate how it intends to proceed in dealing with the matter”.

However, the ruling by the arbitrators, — retired judges Boyd Carey (chairman) and Ira Rowe, and lawyer Andrea Hudson-Phillips, QC — clearly stunned the administration, which is now struggling to keep within its target of a public sector deficit of between five and six per cent this fiscal year.

“This is a stunning blow,” said one administration source. “It sounds crazy.”

In yesterday’s ruling, the arbitrators held that the NTCS was entitled to $4.5 billion in loss of earnings between 1995, when the co-operative was awarded the franchise to operate most of the city’s bus routes, and March 2001, when the administration bought back the routes to be run by the state-owned Jamaica Urban Transit Company (JUTC). The administration had failed to implement appropriate fare tables, they held.

But the panel also said that the debt should be subject to interest at the treasury bill rate, which, over the period hovered at over 20 per cent per annum.

“On my rough back-of-the-envelope calculations the whole debt should be around $10 billion,” said Trevor Hamilton of the management consulting firm, Trevor Hamilton & Associates, which advised the NTCS on its negotiations with the Government on the surrender of the bus franchises 30 months ago.

Millwood, the NTCS president, was unavailable for comment last night.

The Government agreed to go to arbitration to end a court case in which the NTCS had claimed $6.8 billion in lost earnings over the initial seven-year period of the franchise and to clear the way for the administration’s eventual buy-out of the remaining five years. Those losses, the NTCS had said, related to 500 buses.

Initially, the NTCS had demanded $7 billion for the last five years of the franchise, but the Government eventually paid $337.7 million. It also agreed to buy 350 buses, estimated to have cost about $200 million.

Before the Government’s take-over, Kingston’s bus service was over-crowded and unkempt. Hundreds of individual owners made it difficult to impose discipline on the operation, although they nominally fell under the NTCS.

Buses often raced each other hoping to snap up passengers. Passengers were abused by rude crews and safety issues were mostly ignored. The Government spent billions of dollars to create the JUTC, which, despite problems, has been credited with returning relative decency to the city’s bus service.

However, the NTCS argued that the system remained poor because the Government’s failure to ensure that there was a return on their investment meant that operators did not have the cash to upgrade the system.

But the take at the time was largely pitched as pitting big government against small investors — an allusion which was evident again last night.

“The little people have won,” said Hamilton.