By Kiana Wilburg
From beginning to end, the Production Sharing Agreement (PSA) between Guyana and ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), contains numerous provisions which are not only unlawful, but rob future and current generations of what they deserve, says Chartered Accountant and Attorney-at-law, Christopher Ram.
It is on this background that the auditor said on Saturday that any party, which refuses to correct the illegalities of the PSA does not deserve to hold office.
The Chartered Accountant said, “I keep making the point that this is a post discovery contract and the provisions therein represent recklessness to the highest degree. So the failure to renegotiate this deal would be a dereliction of duty to the State and its people by our leaders.”
The transparency advocate who has written on oil issues extensively reminded that both the Government and Opposition Leader, Bharat Jagdeo, have been vocal about maintaining the “sanctity of contracts.”
But Ram told Kaieteur News that there can be no sanctity for illegal provisions in any contract. Ram asserted that at some stage, some Government will have to say that the people cannot be bound by such provisions.
The Chartered Accountant said, “The petroleum resources belong to the people of this country. No Minister or Government has the right or the power to knowingly or recklessly deprive future generations and indeed, even current generations, of their legitimate interest in these resources.”
Ram reminded Kaieteur News of several provisions within the contract, which he finds to be unlawful with one of the most upsetting for him being the Stability Clause.
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 ExxonMobil 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.”
“In such a case, the arbitral tribunal is authorised 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 compensate for the loss of economic benefits under the Agreement, both for past as well as future losses.”
INT’L GROUP OPPOSED
For nations on the road to first oil, it would be unwise for the respective governments to sign on to contracts with a stability clause. This is according to the Open Society Institute (OSI), an international body that aims to shape public policy to promote democratic governance, human rights, economic, legal, and social reform.
On a local level, OSI implements a range of initiatives to support the rule of law, education, public health, and independent media. At the same time, OSI works to build alliances across borders and continents on issues such as combating corruption and rights abuses.
According to the body, stabilisation provisions protect oil companies from governmental or legislative changes affecting any contract term and grant them compensation from the host government for any added costs due to future legislative changes, unless otherwise agreed.
It noted that originally, stabilisation clauses addressed specific political risks that could affect the contract. In developed countries, the Institute said that the greatest worry was that the host government would nationalise the investors’ assets or terminate the contract by unilateral decision.
It said that in the 1970s, there were several disputes between foreign investors and Libya following the nationalisation of the oil companies’ interests and properties in that country. It noted that the arbitrating court decided that Libya’s unilateral decision to nationalise the oil companies’ interests was a breach of contract that gave rise to liabilities and required remedy.
Be that as it may, the international body said that times have changed. It further stated that “a stabilisation clause is extremely disadvantageous for the government, which ‘agrees’ to it because it freezes the legal and regulatory situation of the country for an extended period of time and requires the government to pay compensation if changes affect an investor.”
The body emphasised that the governments of oil producing nations must closely analyse stabilisation clauses from a time perspective. It said that all governments must ask one fundamental question before signing on to contracts with this provision, “What does it mean today and what will it mean tomorrow?”
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