PII struggles to get FSM payment

The Chuuk road construction project in the 2009-2013 period was at the time the largest US-funded construction project in the country. PII was terminated by the FSM in 2013 with about 90 percent of the work complete. This file photo from 2011 shows construction work in progress in Chuuk. Photo: Pacific International Inc.


Pacific International Inc. received a mediation award in its construction dispute with the FSM government over US government-funded road work it did in Chuuk state from 2009-2013. But the FSM refused to pay the mediation award of an initial $2 million on a total $6 million award.

More recently, PII received a $9.5 million award from a three-member panel of independent arbiters. In July, the FSM Supreme Court upheld this ruling and rejected an FSM government request for “reconsideration.” And still the FSM is attempting to avoid paying PII.
Late last month, FSM Joses Gallen informed PII’s Guam attorney Thomas Tarpley that the “FSM plans to bring this case up to the Appellate Court now that the trial court has denied our motion for reconsideration.”

This is the latest blow to the effort to gain compensation from the FSM by PII, which filed the lawsuit in FSM courts in 2014. The suit was filed a year after PII was terminated from the work in Chuuk on what was initially a $25 million road and water pipe installation project, at the time the FSM’s largest-ever infrastructure project.

Both PII and the FSM government agreed to the arbitration, which took a year to accomplish and led to the $9.5 million award, including interest until paid, in 2020. This past July, the FSM Supreme Court accepted the findings of the arbitration panel: “The court finds that the FSM should be bound by the arbitrators’ decision, as it fully participated in the arbitration process,” said Judge Beauleen Carl-Borswick. She added that the FSM did not question the validity of the arbitrators conclusions, only the amount to be endorsed by the court.

Prior to the FSM Attorney General advising PII on August 26 that the FSM intended to appeal the arbitration award to the FSM’s appeal court, PII’s attorney Tarpley had asked Gallen to resolve the matter by the FSM paying the judgment in full.

“You know as well as I that the parties voluntarily submitted this dispute to binding arbitration,” said Tarpley in an email to Gallen. “As you can see from PII’s Opposition to the FSM’s Motion for Reconsideration, the overwhelming authorities from across the States and Federal Courts are against the arguments raised in that motion. A further appeal would be only to delay things further. It would dampen the already declining confidence in the FSM government, and it would be very costly. By our calculations it is costing the FSM $2,347.26 per day in interest on the judgment ($856,749.90 per year).”

Tarpley said the action would not enhance the FSM’s standing with construction contractors that it is attempting to bring in from Guam and elsewhere handle major construction work for the government.

He noted that the World Bank annually publishes an economic profile of the FSM in its “Doing Business 2020,” comparing the FSM to 190 economies globally. Tarpley pointed out that the FSM is ranked very low: 184 out of 190 under the criteria “Enforcing Contracts.” 

Tarpley also added that in February this year, “the FSM came to the Guam Contractors Association with a power point presentation to plea for bids on FSM projects, which contractors have been reluctant to do. PII was the only bidder on the Chuuk Road Project at issue and look at the trouble it had and is having. Not a good example to potential bidders for FSM projects.”

PII is now awaiting next steps in the appeals process by the FSM government.


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