Steve Coll’s ExxonMobil book on the origin of the stability clause. How had it ended up in Guyana’s oil contract?

Aug 07, 2021 Letters

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Dear Editor,

I have long considered Steve Coll’s book, “Private Empire: ExxonMobil and American Power”, as the bible on ExxonMobil (EM). All government officials and Ministers with responsibilities for the Oil portfolio should take the time to do a serious study of this book whose publication in 2012 predated Minister Trotman’s signing Guyana’s Oil Contract.
Minister Trotman had renegotiated the Oil Contract in 2016 in secret, signed it in secret – and kept it secret for over a year. Minister Trotman should have known about the habit of EM to insert the Stability Clause that literally takes away the ability of the leaders of host countries from performing normal management of their countries. If he hadn’t read the book prior to 2016, it is likely he would have been briefed on it by his advisors at the Ministry or by the foreign consultants he had hired. (Read more on this from the Global Witness Report).
Here is a brief extract taken from page 159, describing the rationale for the Stability Clause – and how it came to be inserted in the 1988 Chad’s, and later in Guyana’s 2016 Oil Contract.
“The generous terms were required, the oil companies insisted, to compensate for the exceptional risks, which they would endure in Chad. No political order in the country was likely to last for thirty-five years. Exxon’s negotiators addressed this conundrum not just by negotiating for favourable royalties; they also inserted into the 1988 contract what was known in the oil industry as a stability clause. Article 34, entitled “Applicable Law and Stability of Conditions”, placed the terms of the convention beyond the reach of any Chadian law that might be enacted by any government of the future. The clause protected Exxon against political risk. That Exxon had the power to carve out rights trumping any future law passed by any future Chadian regime was perhaps not surprising in this instance; Exxon’s 1988 net profits of $5.3 billion exceeded by several times the size of Chad’s entire economy. Article 34.3 declared:
During the term of this Convention, the State guarantees that no governmental act will be taken in the future, without prior agreement between the Parties, against the Consortium which has the effect either directly or indirectly of increasing the obligations or amounts payable by the Consortium or which adversely affects the rights and economic benefits of the Consortium provided by this Convention.
“The contract was unambiguous about the parties’ relative sovereignty: “In case of contradiction or inconsistency between the Convention and the laws and regulations of the Republic of Chad, the provisions of the Convention shall prevail, unless the Parties decide otherwise”. When Deby [president of Chad] presented the Contract to his Cabinet for approval, recalled Salibou Garba, then the country’s Minister for Telecommunications, the president declared, “You don’t have time to read this – and they need it in Houston. “Even Deby “did not take time to go through it,” Garba said. “Only later did he realise that the terms were not as favourable as he wanted”.

The foregoing passage is as shocking as it is revealing. Leaders are sworn to uphold their nation’s laws (never to compromise on sovereignty) and at the minimum, to read properly and conduct due diligence in all contracts dealing with your nation’s natural resources.
For the Guyanese people, all the evidence on the public record, tells us that what happened in Chad was replicated in Guyana. The Stability Clause is a clear violation of Guyana’s sovereignty. Attorney Chris Ram has tirelessly argued for litigation or renegotiation to remove this clause from the contract. Just as Chad’s Deby did not read the Contract, Minister Trotman also did not read the Contract. No trained lawyer, as Minister Trotman is, could possibly have read it – and still sign away Guyana’s sovereign rights. Except for the fact that Mr. Trotman himself said he had been instructed to sign. He never revealed who instructed him to sign.
In Guyana’s case, the Contract fiasco is much worse than Chad’s. The Contract was not even presented to Cabinet for approval. One Minister’s signature (signed in Houston) was good enough – and the Contract became legal and binding for the next 35-years.
Every Friday afternoon I am out on Little Guyana Square here in Queens, New York, holding up Banners and Poster Boards pointing out how lopsided the Guyana Contract is – and calling for renegotiation. Last Friday, a Guyanese-born attorney walked up to me and said, “If Burnham were alive today, he would have ordered these SOBs back to the negotiation table a long time ago”. Later a Guyanese woman walked up and said, “Cheddi always told us how the Colonial Rulers took our bauxite and paid us pennies on the ton. It is a shame this sort of thing is still happening today in an Independent Guyana”.
What else can I say? Cheddi Jagan and Forbes Burnham must be turning over in their graves to know how today’s crop of leaders have compromised our nation’s sovereignty and sold out the nation’s patrimony for crumbs. Why did they do it? I will take up this question in my next letter.

Mike Persaud

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