Every Man, Woman and Child in Guyana Must Become Oil-Minded - Column 133 Sanctity of Contract vs Sovereignty over Natural Resources
Introduction
This column is an adaptation of a presentation I made at an OGGN sponsored activity in New York last July 27. OGGN is a US registered NGO with its membership drawn from the Guyanese Diaspora in North America, Europe and the Caribbean. Dr. Vincent Adams and I were the two presenters. Adams spoke on the environmental implications of intensive fossil fuel production in a concentrated area of 26,000 km2 and of his tenure as head of the (Guyana) Environmental Production Agency from which the PPP/C Administration removed him following the 2020 elections in Guyana. Adams was able to enliven his presentation with anecdotes, incidents and several confrontations he had in the EPA’s oversight of the much discussed and criticised 2016 Petroleum Agreement. That agreement was signed by the APNU+AFC Coalition Government and a consortium of oil companies headed by the American giant ExxonMobil Guyana Inc. a far-removed subsidiary of ExxonMobil Corporation of the USA.
The theme of the activity was Sanctity of Contract versus Sovereignty. Let me begin this presentation by showing two clips that are widely available on social media, one by President Irfaan Ali and the second by Vice President Bharrat Jagdeo.
Interviewer to President Ali: Did you review the oil contract and agree with the signing away of $55 billion?
Response by President Ali: “We have made it very clear that we have to go through the contract and ensure that our country does not get the wrong end. Everything is on the table for review and renegotiate.”
Jagdeo on video clip. “They (the APNU +AFC Coalition) sold us out to the foreigners. Every time there is a find we should be sad because nothing comes over way. We are going to renegotiate these contracts. They come into office barrels of reserves, and they give up royalty, no taxes, no fencing.”
Having come into Government, both Ali and Jagdeo have left those commitments behind, now repeating the mantra “Sanctity of Contract” . So, for today’s talk, I will look at sanctity and argue that this is not an absolute rule of law but rather is one that is subject to a number of exceptions, anyone of which could cause a contract to be set aside. As I hope to show, the 2016 Petroleum Agreement can be set aside under several of these exceptions.
In this first part of the adaptation, I invite you to look first at the excuse being used by the PPP/C.
Sanctity of Contract
The sanctity of contract is a legal principle which states that agreements, once freely made, should be honoured and enforced. It means:
1. Contracts are binding.
2. Parties must fulfill their promises.
3. Courts generally uphold valid contracts.
This principle is important, promoting trust and stability in business relationships. However, when called upon, the courts not only consider the exceptions such as fraud, duress, illegality and unconstitutionality, but may also balance “sanctity” with fairness and the public interest.
First and foremost, my view is that having exhausted an earlier 1999 Agreement between Esso and the Government, Exxon was NOT ENTITLED to a second Agreement. Section 10 of the Petroleum Exploration and Production Act of 1986 conceived of a single Agreement that is phased out after ten years, barring any production licences issued under the Agreement. In essence, section 10 grants the Minister the power to enter into an agreement not inconsistent with the Act with respect to any or all of four specified matters, namely, the granting of a licence, the conditions attaching thereto, the procedure to be followed in exercising any discretion granted to him under the Act and any matter incidental thereto.
Illegality
But this provision was turned on its head under a socalled Bridging Deed conceived by Houston, Texas in which one of the recitals states as follows:
“Pursuant to section 10 of the Act, the Minister has entered into this Deed together with the Contractor Parties to set out the process whereby 1999 Licence and the 1999 Petroleum Agreement will be replaced by a new petroleum prospecting licence and petroleum agreement in respect of the Contract Area.”
It is ironic that the Exxon who is now hiding behind “Sanctity of Contract” described at the April 2016