Court strikes down Malta government hospital management deal

VALLETTA (Reuters) -A Maltese court on Friday struck down a highly controversial 2015 deal under which the then government granted management of three hospitals to an international group with no experience in the medical sector.

In a detailed ruling at the end of a five-year court challenge, judge Francesco Depasquele said fraud had been committed before the signing of the deal between the government of former Prime Minister Joseph Muscat and the previously unknown Vitals Global Healthcare Group.

The judge also said Vitals had not observed contractual obligations to invest in the three hospitals and ordered that they should be returned to government control.

Muscat and Vitals have denied any wrongdoing.

"I confirm that in all stages of the process for the hospitals' concession discussion was held within the cabinet supported by documentation and legal advice," Muscat said in a statement on Friday.

The deal was conservatively valued at 4 billion euros ($4.23 billion) over a 30-year period, including annual government subsidies.

Vitals in 2019 transferred the 30-year deal to U.S. healthcare company Steward.

Steward said in a statement that it strongly disagreed with the court's decision that the hospitals should be restored to state control.

It called allegations made in the judgement "outrageous" and said they would be contested in all fora locally and abroad.

The judge said in his ruling that well before the government published its intention to privatise the three hospitals, Vitals shareholders had already signed a memorandum of understanding with the state.

"The investors, aware of the political situation at the time, used fraudulent tactics to get the concession," the judge said.

And when, several years after the deal was signed and it became evident that Vitals was not meeting its obligations, the government "incredibly" renegotiated the deal in Vitals' favour, giving it more subsidies and funds.

But still Vitals did not do what they were meant to do, he said.

The judge criticised the subsequent deal that transferred management to Steward, saying it was too onerous on the government. He therefore annulled the agreement and ordered that the hospitals be returned to state control.

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(Reporting by Christopher Scicluna; Editing by Crispian Balmer and Gavin Jones)