“Just imagine. A sovereign state is prevented from altering the Agreement either directly or indirectly by new laws or policies, but an arbitral tribunal can do so!
If Chapter 1:01 of the Laws of Guyana sets out the country’s constitution, this Petroleum Agreement, signed AFTER the world’s largest oil find in 2015, constitutes its anti-Constitution.”
So said Attorney-at-law and Chartered Accountant, Christopher Ram, as he spoke of the ills highlighted in Article 32 of the Production Sharing Agreement (PSA) that the Government of Guyana signed with ExxonMobil.
This is not the first time Ram spoke of the Stability Clause. However, the commentator said that he becomes more sickened each time he takes another look at that particular clause in the contract.
Ram said, “Every reading of the provision strikes the observer as breathtaking, crippling, terrifying and without parallel with more recent oil contracts in its scope and application.
“By conceding on this Article, the Granger Government has not only emasculated itself but every succeeding Government up to the year 2056 and quite possibly later, depending on the rate of exploration and exploitation of what is possibly the largest petroleum area to have ever been granted to a foreign oil company by any sovereign state in the world in the post-colonial era.”
Ram said that the clause is incomparable to other recent contracts without having a look at the CGX contact that the PPP/C Government signed which government only released three days ago.
The Stability Clause of the CGX contract is almost identical to that of ExxonMobil contract.
Ram had also noted that the companies making up “the contractor” which is the term used in the contract, enjoy water-tight protection against any changes proposed by the Granger and subsequent Governments.
“They are exempted from any new or additional taxes passed by the Parliament for the several decades during which the Agreement can legally subsist.
“And on a referral by the companies, an arbitral tribunal has the authority to modify the agreement to re-establish the economic benefits to the Contractor, or to award damages for past and future losses of economic benefits – direct and indirect – under the Agreement stemming from any government action.
“Such action is defined to include changes in hydrocarbons law, the customs code or tax code, a moniker that is not common to our jurisprudence.”
In previous commentaries, Ram noted the government’s hands are tied and it is effectively prevented from exercising one of the most fundamental and sovereign duties of any state in relation not only to the oil companies but also to their successors and assignees.
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” were 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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