Newspaper Publisher files historic legal challenge to ‘oppressive, discriminatory’ tax provisions in Exxon Stabroek Block Contract

Jan 14, 2022 News

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By Kiana Wilburg

Kaieteur News – Publisher, Glenn Lall, in an historic move, filed a case in Guyana’s High Court on Thursday, which challenges some of the most repressive tax provisions of the Stabroek Block Production Sharing Agreement (PSA) with ExxonMobil and its partners, Hess Corporation and CNOOC Petroleum Guyana Limited.

The case which was prepared and filed by his Attorney-at-Law, Mohamed R. Ali, outlines that many of the provisions listed under Article 15.1 of the Petroleum Agreement, dated June 27, 2016 between the Guyana Government and the oil companies, grants exemptions to persons other than licensees, which violate the Petroleum Exploration and Production Act, the Financial Administration (and Audit) Act, the Prevention of Discrimination Act, and the Constitution.
In light of this, Lall through his lawyer, contends that the provisions are unlawful, null and void, and of no legal effect. With respect to violations of the Petroleum Law, Lall contends that this occurs at Article 15.1 of the oil contract which states: “…no tax, value-added tax, excise tax, duty, fee, charge or other impost shall be levied at the date hereof or from time to time thereafter on the Contractor or Affiliated Companies, in respect of income derived from Petroleum Operations or in respect of any property held, transactions undertaken or activities performed for any purpose authorised or contemplated hereunder …….”
Lall’s lawyer also flagged paragraph 2 of Articles 15.10 of the Agreement which states: “Notwithstanding any provision to the contrary in this Article, Affiliated Companies or Non-Resident Sub-Contractors shall not be subject to the provisions of the Income Tax Act (Cap 81:01) and Corporation Tax Act of Guyana (Cap 81:03) during the expiration period on income earned in Guyana for any given tax year if the Affiliated Company or Non-Resident Sub-Contractors has conducted business for one hundred eighty-three (183) days or less on a cumulative basis in the tax year of assessment.”
Lall’s attorney said too that Article 15.11 of the Petroleum Agreement which states: “There shall be no tax, duty, fee, withholding, charge or other impost applicable on interest payment, dividends, deemed dividends, transfer of profit or deemed remittance of profits for Contractor’s, Affiliated Companies’ or Non-Resident Sub-Contractors’ branch in Guyana to its foreign or head office or to Affiliated Companies,” is also a violation of the petroleum laws.
His lawyer also flagged Article 15.12 (ii) of the deal which states: “Notwithstanding any provision to the contrary in this Article, expatriate employees of Contractor, Affiliated Companies or Non-Resident Sub-Contractors shall not be subject to the provisions of the Income Tax Act of Guyana (Cap. 81.01) and shall not be liable for personal income tax in Guyana on income earned in Guyana for any given tax year if the expatriate is physically present in Guyana for one hundred eighty-three (183) days or less on a cumulative basis in the tax year of assessment.”
For all intents and purposes, the Applicant Glen Lall, contends that “licensee” as defined by the Petroleum Exploration and Production Act refers only to the Stabroek Block partners, being: Esso Exploration and Production Guyana Limited, CNOOC Petroleum Guyana Limited and HESS Guyana Exploration Limited, and not to any other person.
The Applicant will therefore argue that any exemptions referred to in Articles 15.1, 15.10, 15.11, and 15.12 (ii) purporting to extend concessions to persons other than the licensees are not consistent with the provisions of the Petroleum Exploration and Production Act which does not allow for this and therefore violate the oil law.

FINANCIAL ACT VIOLATIONS
Lall contends that several tax articles of the agreement which include 15.5, 15.7, 15.9, 15.10, 15.11 and 15.12 of the Petroleum Agreement violate the Financial Administration (and Audit) Act.

Article 15.5 of the Petroleum Agreement provides as follows: “The Contractor shall provide the Minister with the Contractor’s income tax returns to be submitted by the Minister to the Commissioner General, Guyana Revenue Authority, so the Minister can pay income tax on behalf of the Contractor as provided under Article 15.4 (a). On such returns, the Minister shall note that he is paying the income taxes on behalf of the Contractor, so that the Commissioner General, Guyana Revenue Authority can properly prepare the receipts required under this Article 15.5. Within one hundred and eight (180) days following the end of each year of assessment, the Minister shall furnish to the Contractor proper tax certificates in the Contractor’s name from the Commissioner General, Guyana Revenue Authority evidencing the payment of the Contractor’s income tax under the Income Tax Act and corporation tax under the Corporation Tax Act. Such certificates shall state the amount of tax paid individually on behalf of the Contractor or parties comprising the Contractor and other particulars customary for such certificates.”
Article 15.7 of the deal states: “Subject to the conditions of section 49 of the Act, the Minister may remit in whole or in part, or defer payment of any royalties payable by Contractor.”
Lall said the foregoing, along with other provisions in the contract, cumulatively, alter certain tax laws to grant remissions, concessions and waivers contrary to section 6 of Financial Administration (and Audit) Act. Lall, through his lawyer, is therefore asking the court to grant a declaration that Article 15.7, among others, violate the Financial Administration (and Audit) Act and is unlawful, null and void and of no legal effect.
Lall is also arguing that Articles 15.4 and 15.5 of the Petroleum Agreement requiring the Minister responsible for Petroleum to pay taxes for and on behalf of the Licensees and for the Commissioner General to issue certificates to that effect is therefore a violation of the Petroleum Exploration and Production Act as well as the Financial Administration (and Audit) Act and should therefore be deemed unlawful, null and void and of no legal effect.
It was further noted, in the legal documents filed, that Article15.12 of the Petroleum Agreement is discriminatory to Guyanese employees by exempting from personal income tax, income earned only by expatriate employees of the Contractor, Affiliated Companies or Non-Resident Sub-contractors who are physically present in Guyana for 183 days or less on a cumulative basis in the tax year of assessment. Lall is therefore seeking a declaration from the court that the said section is null and void and of no legal effect.

REASONS FOR CHALLENGING CONTRACT
Asked about the reason for his court challenge to the contract, Lall told this newspaper that when one takes into consideration, the extent to which the provisions of the contract create oppressive circumstances that hinder locals as well as the extent to which it breaches the laws, there is no way he could sit back and not take action.
What also incensed the KN Publisher is how costly these provisions are to the nation. Lall said, “When you take into account the cost of these provisions to the country, the enormous revenue Guyana is giving away and the impact it can have and it will have on the country and its citizens, it is unimaginable. It must therefore be challenged. For example: We gave away US$720M in 2020 alone in taxes to the oil companies and that was a figure from the Auditor General’s report.”
The Publisher continued, “But even that is not entirely accurate, if we are to take into account what is being given away, when we look at the oil production figures. But let me give an example of what that US$720M could do for us. Had Guyana collected that, it could have increased the public service salary 10 times. It could have given us a bridge across the Demerara and Berbice Rivers and another from Parika to Leguan half way. And I don’t want to talk about the number of roads that US$720M could have repaired. These are the things that have been eating away at my soul that forced me into moving to the courts.”
Lall said he moved to the courts not just as the Publisher of the newspaper who is passionate about his duty to the people, but as a citizen, who refuses to sit idly by while the lion’s share of the oil wealth is given to foreign companies and Guyanese are relegated to eating the crumbs that fall from the table.
Lall who said the case was in the making for just over nine months categorically states that he reposes the absolute confidence in the judiciary here to determine the case but noted nonetheless, that he is prepared to go all the way to the Caribbean Court of Justice (CCJ) on the matter.

 

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