Foreign companies often advocate the use of a “stability clause” in the quest for certainty of contractual provisions. This clause seeks to secure the oil contract and benefits therein for the oil operator, against future government action or changes in the law.
Stabilization clauses freeze the essential provisions of the contract.
Different countries have used various forms of this clause. Ghana for example, has from time to time, used a version of the stability clause which allows for changes of contract terms by mutual consent.
But in a recent oil deal ExxonMobil signed with the Government of Ghana, the American company had no objection to the absence of a stability clause in its contract. In fact, company officials deemed the contract during the signing in January to be a “very good deal” for the people of Ghana.
In Guyana’s case however, one gets the distinct impression that ExxonMobil went above and beyond to strangle Guyana’s parliament and future governments with the use of a rigid stability clause.
This was pointed out in the writings of Chartered Accountant and anticorruption advocate, Chris Ram.
The lawyer said that Article 32 of the Guyana-ExxonMobil oil deal speaks to the stability clause. The Chartered Accountant said that when one compares the Janet Jagan Agreement to the 2016 Trotman Agreement, one notices several worrying additions in the latter.
The anticorruption advocate said that additions to the 2016 Agreement only serve the interest of Exxon Mobil as it limits the role of the government in applying new laws made in the petroleum sector. Ram revealed that if Guyana were to amend any of its laws which would affect the entity’s operations then the Government would have to restore the benefits so lost.
Ram noted that the Stability Clause provides, inter alia, “that any delay by the government to respond to any notification from the contractor that they may have suffered any adverse effects can result in the contractor taking the matter to arbitration.”
The Chartered Accountant added, “In such a case, the arbitral tribunal is authorized to modify the agreement to reestablish the economic benefits under the Agreement to the Contractor. Where such restoration is not possible, the tribunal has the power to award damages to the Contractor that fully compensates for the loss of economic benefits under the Agreement, both for past as well as future losses.”
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