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Introduction<\/strong><\/p>\n\n\n\n This is the case for\nrenegotiation of the Petroleum Agreements between the Government of Guyana and\nExxonMobil (\u201cGuyana-Exxon agreements\u201d). In my article dated 8 December 2017[1]<\/a>, I\nwrote extensively on the nature and types of stability clauses and their pros\nand cons. Most notably, what the Model Petroleum Contract describes as a\nStability Clause embodies the objective to provide assurance to international\noil companies that they will be protected from any variation in fiscal or\neconomic policies by governments for a period of as much as thirty years.<\/p>\n\n\n\n In the Guyana-Exxon\nagreements of 2012 and 2016, the Petroleum Prospecting Licence and Petroleum\nAgreement, respectively, modern stability clauses are contained in Clauses 32.1\nand 32 respectively. In addition to barring the government from amending,\nmodifying or negotiating for changes the agreement, the 2016 agreement purports\nto bind subsequent Parliaments from doing the same. This is contrary to the\nrule of law, separation of powers and common sense, and the Israeli decision of\nThe Movement for Quality Government in\nIsrael v Prime Minister HCJ 4374\/15<\/strong> demonstrated that stability clauses can\nbe stuck down by courts if it is found that the clauses defy basic principles\nof the rule of law. This and other reasons motivated this case for\nrenegotiation, which is both relevant and necessary, at this time. <\/p>\n\n\n\n Points\nto be considered<\/strong><\/p>\n\n\n\n The case for\nrenegotiation of the Guyana-Exxon agreements is based on the following facts:<\/p>\n\n\n\n On the first fact, the\ncase for renegotiation contends that the stability clauses contained in the\nGuyana-Exxon agreements fetter Guyana\u2019s sovereign legislative prerogative as\nwell as Guyana\u2019s permanent sovereignty over natural resources. Deloitte<\/a>\nreported that governments in developed countries decline granting stability\nclauses on the premise that they cannot bind a future government to the\npolicies of the current administration[2]<\/a>. The\nIsraeli decision referred to earlier, The Movement for Quality Government in\nIsrael v Prime Minister HCJ 4374\/15 27 March 2016<\/em><\/strong>, the main issue to be\ndetermined was whether the Government of Israel in its executive power, had the\nauthority to commit a stability clause which had the effect of binding future\nGovernments, especially where the composition and ideology are different than\nthe current one[3]<\/a>.\nThe court held inter alia that the actions of government were an affront to\nbasic principles of administrative law against shackling authorities ability to\ngovern. In addition, the court found that the stability clause was ultra vires<\/em> and therefore invalid, in\nthat it unduly restricted future governments from regulating their own affairs\nand market thus making the clause undemocratic and unconstitutional.[4]<\/a> How\nthen do we reconcile the Government of Guyana\u2019s conformity to the Guyana-Exxon\nagreements with a clause of this nature when legal authority suggests that\nprinciples of administrative and constitutional law are being abrogated?<\/p>\n\n\n\n In addition, the\naddress the second issue, the Nigerian case of Niger Delta Development\nCommission v Nigerian Liquefied Natural Gas Company Limited, Suit Number\nFHC\/PH\/CS\/313\/2005, unreported Judgment, 11 July 2007<\/em><\/strong>, in addressing the\nissue of the legal validity of legislative stability provisions, held that it\nis unconstitutional for investment statutes to fetter the power of the National\nAssembly, that is the legislature, from making law, a right acknowledged by the\nConstitution.[5]<\/a>\nIn Guyana, Article 65(1)<\/strong> of the Constitution\nof Guyana<\/em><\/strong> provides that subject to the provisions of the constitution,\nParliament shall make laws for the peace, order and good government of Guyana.\nTherefore, the principles of constitutional supremacy dictate that it is the\npower of Parliament to make law and this is subject to the constitution, and\nany provision contrary to this constitutional mandate ought to be deemed\nunconstitutional and invalid. It is therefore my submission that Clause 32 of\nthe 2016 Guyana-Exxon agreement severely impinges on the constitutional powers\nconferred on present and future Parliaments of Guyana and as such, the case for\nrenegotiation is open. <\/p>\n\n\n\n Special Rapporteur\nVictor Cedeno on Unilateral\nActs of States<\/a> reported that, in the interest of legal\nsecurity, certainty, predictability and stability to international relations\nand to strengthen the rule of law, an attempt should be made to clarify the\nfunctioning of this kind of acts and what the legal consequences are, with a\nclear statement of the applicable law. It is my submission that the actions of\nMinister Trotman and the Government of Guyana are unilateral acts which purport\nto bind future governments to an unfair arrangement, and this should be\nrenegotiated. <\/p>\n\n\n\n While certainty and\npredictability are important to oil and gas arrangements, it is submitted that\nlaw is intended to be fair, just and reasonable. Oxford\nInstitute for Energy Studies (2016)<\/a> recorded that modern\nstability clauses are legally workable when they are beneficial to both the\ngovernment and oil companies. However, the effectiveness of such post\n1990-stability clauses in developing countries is questionable particularly\nwhere such countries lack the administrative capability, a non-discriminatory\nand fair tax system, and credibility in general government policy, investment\nlaws and the judiciary. <\/p>\n\n\n\n Similarly, an article\npublished by the Oxford\nEnergy Forum by Curtis Chairman George Kahale on \u201cThe Uproar Surrounding\nPetroleum Contract Renegotiations\u201d<\/a> highlighted that\npetroleum agreements should renegotiated when:<\/p>\n\n\n\n While the principle of pacta sunt servanda<\/em> has often been\nraised by oil companies to justify the continued enforcement of unfair petroleum\ncontractual terms, Skyes on Oil and Gas Law: Renegotiation notes that the\ninclusion of a renegotiation clause or negotiated economic balancing clause is\nimportant through the oil and gas cycle because it ensures that the parties are\nnot put in to a position which exposes them to exploitation in an\nunconscionable manner.<\/p>\n\n\n\n There are three\nwell-known renegotiations or industry restructurings in the oil and gas\nindustry over the last few years involved the operating service agreements (convenios operativos<\/em>) in Venezuela, the\ngas production contracts in Bolivia, and the renegotiation of the world\u2019s\nlargest production sharing agreement, the one covering the Kashagan field in\nKazakhstan. However the\ncase of renegotiation for Iraq<\/a> left the Iraqi\ngovernments undertaking greater risks of compensation and infrastructure than\nthey had before. <\/p>\n\n\n\n On the third fact of\nthe non-provision of local content, it is submitted that as part of fair\nnegotiations, the provision for the supply of only local content of host\ngovernments by oil companies is an essential feature of stability contracts.\nThis ensures that on the balance in favour of the government, resources will be\nutilized by oil companies that can increase the revenue of locals. On the\ncontrary, the Guyana-Exxon agreements demonstrate a deviation from this\nexpectation in favour of all Guyanese. However, there has been no part of the\nclause that appears unfavourable to Exxon. <\/p>\n\n\n\n On the fourth point,\nagain the Guyana-Exxon agreements is one of a kind in allowing Exxon Mobil to\nself-insure versus domestic insurance in Guyana, which is an affront to the\nentire system involved in regulating the business of oil companies and ensuring\nthat Guyana is not exploited. <\/p>\n\n\n\n On the note of the\ndiscriminatory taxation provision as contained in the stability clause of the\n2016 Guyana-Exxon agreements, the Government has undertaken to pay taxes for\nExxonMobil that are otherwise payable for them. While oil companies are\nordinarily responsible for paying their own taxes whether under a system of\ndeferral or subsidy, there are no reported cases of governments paying taxes\nfor oil companies. Thus, instead of Guyana earning extensively through taxing\nExxon Mobil, the country is instead likely to run into high debt as early as\n2020. This is quite unfortunate and beckons the call for renegotiation in a\nlouder and more desperate way. Why should giant oil companies be allowed to rely\non unfair terms which affect the economy of a nation? As alluded to earlier,\ncommon sense and good faith has been demonstrated in the cases of Venezuela,\nKazakhstan and Bolivia to show that renegotiate is ideal is ideal and necessary\nin unfair petroleum contracts. In\naddition, this raises a satellite issue that will be considered on another\noccasion, that is, the role of the Chief Inspector in ensuring that the\nGuyana\u2019s oil sector is properly managed[6]<\/a>\nand not expose the economy to sudden downfalls. <\/p>\n\n\n\n On the final note of\nthe contract being made under duress, this further justifies that the contract\nin itself that not satisfy the elements of voluntariness and capacity that are\nessential features to agreements. The absence of voluntariness in this instance\nseriously undermines the capacity of the weaker contracting party and also\nmakes the contract voidable. <\/p>\n\n\n\n The case for\nrenegotiation has been considered by the competent courts and demonstrates that\nan order of court will allow defective petroleum agreements to be reviewable,\nmodified and renegotiated. The case of Associated British Ports v Tata Steel UK Ltd\n[2017] EWHC 694 (Ch)<\/em><\/strong> considered whether to declare unenforceable a\nprice review provision as an \u2018agreement to agree\u2019. Similarly, the arbitral\ntribunal in Ampal-American Israel Corp. et al v Arab Republic of Egypt (ICSID Case\nNo. ARB\/12\/11)<\/em><\/strong> gave insight into the operations of the termination\nprovisions in a gas sales agreement for non-payment. In these circumstances, it\nis evident that the Guyana-Exxon agreements cannot arbitrarily or unilaterally\nremove the jurisdiction of the courts to declare that the agreements are open\nfor scrutiny and interpretation, and can be renegotiated. The question is, who\nwill challenge these poorly drafted and unfair agreements between Guyana and\nExxon Mobil, before a court of law?<\/p>\n\n\n\n Conclusion<\/strong><\/p>\n\n\n\n It is my ultimate and\nconcluding submission that the weaknesses in Guyana-Exxon agreements trigger\nthe case for renegotiation. The stability clauses contained in these agreements\nare excessively favourable to the oil companies contracted at the expense of\nthe rule of law, common sense and modern governance. Therefore renegotiation is\nnecessary and relevant. This renegotiation is in lieu of the fact that the\nprinciples of common sense, the rule of law and pacta sunt servanda dictate\nthat agreements of this nature should be fair, reasonable, non-discriminatory and\nequal, and observed in good faith. It is my submission that the only stability\nguaranteed under the Guyana-Exxon agreement is Exxon\u2019s, and this is unfair,\nunreasonable, discriminatory, and inequitable to the people of Guyana. It is my\nsubmission that this agreement was not drafted or entered into in good faith\nand therefore a competent court should direct that this be done. [1]<\/a>\nArticle 26<\/p>\n\n\n\n [2]<\/a>\nPage 8<\/p>\n\n\n\n [3]<\/a> The\nMovement for Quality Government in Israel v Prime Minister HCJ 4374\/15 27 March\n2016<\/p>\n\n\n\n [4]<\/a> The\nMovement for Quality Government in Israel v Prime Minister HCJ 4374\/15 27 March\n2016<\/p>\n\n\n\n [5]<\/a>\nGjuzi, Jola. (2018) Stabilization\nClauses in International Investment Law: A Sustainable Development Approach<\/a>,\nSpringer: Switzerland pgs 195-196 <\/p>\n\n\n\n
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