Attorney at law and Chartered Accountant, Christopher Ram yesterday stumped a panel at the three-day Oil and Gas Summit being held at the Marriott Hotel.
When Ram was given the opportunity to ask a question during the afternoon session, it came with specific instructions from the moderator of the session, Joanna Homer, who is a Legal Officer attached to the Ministry of Natural Resources. She asked that he make his question, quick and straight.
Ram acknowledged the request to be “quick and straight” but asked that the facilitators recognize the serious issues being addressed; issues that should not be hurried.
Ram followed up on what one of the presenters had to say about taxation. He said that if consideration is to be given to the question of taxation, “we must realize that we cannot get any tax because we have the perfidious section 51 of the Petroleum Exploration and Production Act. So my question is; is there any plan to repeal Section 51 which grants almost blanket tax exemption, this includes income tax, corporation tax, property tax and capital gains tax?”
Ram also asked if there is an intention to remove what he refers to as the strangulation clause of the contact otherwise known as the Stability Clause.
He asked, “What happens to the petroleum agreements that we have signed with very restricting stability clauses which state that no new law will apply to the existing agreements?”
Ram continued, “We focus a lot on the Petroleum Commission Bill, but we must not forget the regulatory framework which includes the Petroleum Exploration and Production Act and a host of current petroleum agreements that contain very restricting stability clauses.”
Homer, who is also an advisor to the Minister of Natural Resources, Raphael Trotman told Ram that there was no one on the panel who could respond to him on the intention of legislative reform as far as Section 51 is concerned.
Ram expressed the opinion that Homer, being an advisor, can state whether the intention exists. However, she told him that she was only wearing her hat as a facilitator.
The contract signed between the Government of Guyana and ExxonMobil clears the company from any future law or tax that can come in the way of the huge profits that the company intends to reap. That kind of security for ExxonMobil is enshrined under Article 32 of the contract that speaks to “Stability of Agreement.”
Article 32 states that “Except as may be expressly provided herein, the government shall not amend, modify, rescind, terminate, declare invalid or unenforceable, require renegotiation of, compel replacement or substitution or otherwise seek to avoid alter, or limit this agreement without he prior written consent of the contractor.”
The drafters of the contract were very explicit in stating that under no circumstances should ExxonMobil have to submit to any new law or pay any new tax. No new taxes “whatsoever” was expressly included in the contract.
The contract reads, “After the signing of this agreement and its conformance with Article 15, the Government shall not increase the economic burdens of the contractor under this agreement by applying to this agreement or the operations conducted hereunder any increase of, or any new petroleum related fiscal obligation, including but not limited to any new taxes whatsoever, any new royalty, duties, fees, charges, VAT or other imposts.”
Also, the contract states that if at any time after the signing of this agreement there is a change in the laws of Guyana – whether through the amendment of existing laws or the enactment of new laws or a change having the force of law in the interpretation implementation of application – ExxonMobil must not be affected.
Guyana agreed that despite whatever may change, ExxonMobil must receive the “same economic benefit under the agreement that it would have received prior to the change in law.”
The contract compels Guyana to resolve “promptly” and by “whatever means may be necessary” any conflict or anomaly between this agreement and any such new or amended legislation including by way of exemption, legislation, decrees and/or other authoritative acts.
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