Koror State Capitol

Koror State law unconstitutional, violates contract clause

After nearly five years of litigation, Court issued an order dismissing the case brought against Koror State Public Land Authority (KSPLA) and Palau Sea Ventures by Koror State Legislature.

The court ruled that Koror State Public Benefit Act law violated the national Constitution’s Article IV, Section 6, Contract Clause, which states, “Contracts to which a citizen is a party shall not be impaired by legislation.”

It further ruled that a newly enacted law cannot void an existing lease contract between Koror State Public Land Authority and Palau Sea Ventures as it cannot be applied retroactively.

According to court documents, in February of 2014, KSPLA sought tenants for two lots in Malakal, one of which was previously occupied by Palau Marine Industries Corporation (PMIC).  KSPLA through a bidding process, awarded the lease of former PMIC lot to Palau Sea Ventures in April of 2014.

MeanwhileKoror State Legislaturehad informed KSPLA of its intention to pass a legislation reserving the two lots for public use, a bill called Public Benefit Act.

The bill stated that Koror State “had no other property available to it with access to water on this long stretch of coast line” and sought to keep the lots for “government operations or for emergency purposes”.

The bill passed Koror State Legislature on April 15, 2014 but was vetoed by then Koror State Governor Yoshitaka Adachi on April 25, 2014.  On May 2, 2014, Koror State Legislature overrode the governor’s veto and the bill became law KSPL K10-269-2014, the Public Benefit Act.

Following this passage, Koror State Legislature through its former Speaker EyosRudimch filed a claim against Koror State Planning Commission and Koror State Public Land Authority for permitting activities on the lot in violation of the newly passed Public Benefit Act.

In March 2015, Palau Sea Ventures filed a counter claim against Koror State Legislature and Koror State Government citing eight causes of action and seeking relief.

In March of this year 2019, KSPLA joined by Palau Sea Ventures, filed a motion for summary judgment dismissing all claims against it with prejudice.

Court held a hearing with all parties in July of 2019 with all parties presenting their arguments on the Motion for Summary Judgment.

Last week, the court issued order granting the Motion for Summary Judgment dismissing all claims with prejudice, ruling in favor of Defendant Koror State Public Land Authority and counter-claim plaintiff Palau Sea Ventures.

It ruled that “the Act cannot be retroactively applied to render the lease entered into between PSV and KSPLA invalid.”

Furthermore, it stated that KSL has not demonstrated a compelling government interest for impairing a contract between KSPLA and PSV.

None of the parties disputed the fact that the law impaired the contractual relationship and therefore triggered the ROP Constitution’s Contract Clause, a fundamental right under Palau Constitution.

Court finds Public Benefit Act to be in violation of the Contract Clause, a fundamental right under ROP Constitution Article IV.

“I am just happy that it’s over and that we can move forward.  It has been 5 years since this case started,” expressed Sam Scott of Palau Sea Ventures.

Lease contract between KSPLA and Palau Sea Ventures include a clause whereby PSV will “provide waterfront access to the Koror State Government/Koror State Rangers to serve the public in case there is any natural disaster or emergency.” (L.N. Reklai)