Dear Editor,
I HAVE long resisted the urge to join the debate about the 2016 ExxonMobil, Hess, CNOOC contract (the “PSA”). But after reading a KN article captioned, “Guyana can challenge ExxonMobil contract – Oil experts” (Friday, March 02, 2018), I have decided to join the debate. So, permit me to offer some comments. But first a full disclosure: I served as the Legal Officer in the Guyana Natural Resources Agency (made defunct by the PPP/C) from 1988 April – 1992 November. PSAs with Mobil, Lasmo, Total inter alia were negotiated and signed under the Hoyte Government.

As a member of the GNRA’s negotiating team, I have both experiential, and academic credentials on these matters (Certificates from the University of Dundee, Scotland; Georgetown University, Washington, D.C included, also researched papers – I titled “Guyana’s Licensing Regime of Petroleum Resources upstream ventures – the principle of proportionality as an incident of terminability by Cancellation considered” and “of Production sharing Agreements and Taxation: Key legal issues in the workability of fiscal Incentive terms – the case of Guyana”). I discern that the Mobil, Total PSAs are the model, the 2016 PSA with ExxonMobil is mutatis mutandis, fashioned on.

With that backdrop, I now turn to the KN article; here are some extracts–“Given the glaring abnormalities in the Guyana ExxonMobil oil agreement, several international petroleum experts are convinced that there are enough grounds for the contract to be challenged in the courts… one of the grounds on which the contract can be challenged is the fact that the nation’s laws say that a company is only permitted to hold 60 blocks; ExxonMobil was permitted to hold 600… it is illegal. As such, the contract itself is invalid… Another prominent lawyer is also of the opinion that the Stability clause in the Guyana ExxonMobil Production Sharing Agreement is also enough grounds for it to be challenged in the court system… the contract can be challenged in the court and all these clauses can be set aside, the entire contract can be set aside on the grounds that it is unconstitutional”.

I strongly dissent from, and disagree with those contentions, for even as a general proposition they ignore completely the principle of severability of those “illegal” clauses; and the maxim ut res magis valeat quam pereat (ie it is better the PSA be valid than perish). More specifically, my first comment is that, invoking the “court” process is an abuse. Our laws allow the government to contract – out of the normal right of access to the court system by agreement with ExxonMobil for international arbitration for the determination and settlement of disputes.This has happened in this ExxonMobil PSA.

The International Centre for the Settlement of Investment Disputes (ICSID) is the agreed facility/process for dispute adjudication. Guyana is a World Bank member, and a contracting party signatory to the ICSID Convention.We cannot now unilaterally resort to the “court”; I submit that court action would be incompetent, — such would itself, amount to a breach of the PSA; The law of international arbitration (ICSID)is also part of our domestic law and accordingly, the governing law of the PSA (see Arbitration Act, Cap 7:03 especially the three “schedule” ).

I suspect that neither Mr Christopher Ram, nor the “prominent attorney” is aware that Guyana is a signatory, Contracting Party to the ICSID Convention (1966). And besides, would the attorney general sue or consent to sue the Minister of Natural Resources, much less the government? A “challenge” presupposes, some dispute with ExxonMobil in relation to the PSA. Otherwise, what would this so-called “challenge” be about? And, “challenge” (so there would have to be a challenger with standing) as some public-interest litigation — this too has its inherent limitations (even, in spite of the arguably wrongly decided Marcel Gaskin case on the locus standi point in the GECOM chairman appointment matter).

Secondly, there is this relevant general principle in our jurisprudence: statute (and I emphasise here Acts of Parliament, as distinct from the Constitution) are not generally binding on the State/Government, unless expressly so provided; or by some necessary implication (examples of statute expressly binding on the State are the Interpretation And General Clauses Act, Cap 2:01; the Judicial Review Act, 2010 Cap 3:06 – when it comes into force; the Arbitration Act, Cap 7:03 (see esp. section 23).

These letter columns are no place for any elucidation of the principle of binding by necessary implication; but, it seems to me that (applying the legal test of the whole beneficial purpose being defeated if the government were not bound) both on principle and case law [Alexander V Munia (1969) GLR 75; LORD Advocate V. DDC (1989) 3WLR 1346 (HL)]; the Petroleum (Exploration and Production) Act Cap 65:04 and Regulations as regards the provision as to 60 blocks, does not by necessary implication straight jacket or bind the government to inflexibility.

The government can insist on 60 blocks maximum; it need not (Countries such as Peru, Argentina, Chile have such inflexible Petroleum regimes). So neither the PPP/C, nor the APNU+AFC Governments committed any illegality. The 60 blocks provision is wholly for government’s benefit. The law against contracting out of a benefit does not apply here ( see generally the case of Shipping Association of Georgetown V. Bentick (1969) GLR 352; (1969) 14WIR 243. Simply put, the government has freedom to contract and negotiate whether to limit ExxonMobil to 60 blocks; or award it more. This Common Law principle of freedom of contract, is not lightly displaced.

Thirdly, as regards taxation and the giving of tax incentives to ExxonMobil, the same presumption against the Government being bound, applies mutatis mutandis. The true position, is that while the Government is bound by the charging and assessment provision and cannot impose taxes on ExxonMobil, other than thosewhich Parliamenthas by taxing statutes charged; nor, apply other than the assessment methodology (and to that extent the Executive Government is pro tanto bound by any taxing statute) it is up to the Government for whose exclusive benefit taxes are charged/imposed, to decide, in favour of which potential taxpayer it would waive, as a matter of government policy, (executed by the governmental instrumentality and statutory taxing authority i.e. the GRA), its discretionary right ( as distinct from a duty) to COLLECT those taxes.

And it is sheer common sense that if Government does not intend to collect, it is pointless to assess. The APNU+AFC as the government – of – the – day, is the SOLE JUDGE of what contractual gains, and, losses or negotiable benefits foregone (economists calls this the Opportunity cost) best serves the public good in these economic development agreements. Faced with the burden of securing foreign investments, tax incentives are not some exercise by the Minister in philanthropic indulgence

Fourth, turning to the “stability clause,” there is, arguably, no clause that is more standard and classic in a foreign investment economic development contract than a “stability clause.” It would be frankly inexplicable and perverse, not to have had ExxonMobil insisting on one. Such stability clause constitutes no unconstitutionality.

Invoking the oxymoronic conception of “ sovereignty” in the context of a foreign investment economic development agreement, is neither useful, nor helpful. Government cannot approbate (take the benefit of the investment) and reprobate (assert sovereignty). Stability clauses do not, without more, offend the doctrine of Parliament’s supremacy over the Executive Government (see my arguments above). It is plainly true that “there is no contract that can lawfully prohibit a Parliament from imposing taxes”.

But that is pure abstract legal theory. Brought into relation to the ExxonMobil matter, the constitutional reality is: the President (the Head of Government) is, by the constitutional requirement of his necessary assent of Bills passed by the National Assembly, a co-vital component of the Parliament; and constitutionally can withhold assent. What on it’s true construction such stability clause really means and intends, then, is that the President (in his own deliberate judgement) through his minister, undertakes to either not assent to any future passed Bills which can adversely impact on ExxonMobil’s financial returns; or if enacted, to exercise its governmental discretionary right not to collect from ExxonMobil those taxes.

In my first paper referred to above, I did in this context quote the UN expert Pierce N. McCreary that, “… the adoption of appropriate constitutional and legislative protection of foreign investment, implemented by appropriate contractual provisions in development contracts can help to provide the investor confidence, which is an essential condition to the continued availability of capital resources and economic development”.

I suspect that neither Pierce N. McCreary, or other true experts such as professor Thomas Walde, or Dr Samir Mankabady, would for the reason/grounds advanced in the KN article, advise any challenge (“ Court” or ICSID) of the 2016 ExxonMobil PSA.
I end with this: I share the views of UG lecturer Sherwood Lowe, with his accustomed degree of erudite articulation (“Much of the criticisms of the oil agreement have been simplistic” – GC 2018 – 01 – 30). Unconstitutionality, (if it has happened) involves, ipso facto,terminability of ExxonMobil’s prospecting licence (PL) by constructive cancellation – the PL cannot exist without the PSA.

Venezuela’s territorial claim to Essequibo until resolved by the ICJ, remains like a sword of Damocles over ExxonMobil’s interest and investment. And this geopolitical reality brings me to this point – rather than stirring notions of misconceived “court” challenges, our cognitive efforts in commentaries/letters in the press, might more usefully be directed to the notion that ExxonMobil (with or without other licensees) could consider seeking leave of the ICJ to join the case (even as a matter of legal novelty) in its own individual right, as an interested Third Party – (a concept very familiar to civil lawyers and, arguably, importable into international law practice and procedure) at no cost to Guyana (i.e. by a minor mutual variation if necessary, a non-recoverable expenditure under the PSA).

With any such joinder, the results, for both Guyana and ExxonMobil, can only be all, self-evidently, beneficial (local international law experts, can join the debate as to the legal competency of such a joinder by a non-state party, such as ExxonMobil).En passant, I hold no brief for ExxonMobil.

Yours truly
Maxwell E. Edwards
Attorney-at-Law.