Civil society pools funds to fight tax giveaway case

Mar 14, 2022 News

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…as Guyanese pay for Exxon’s legal fees

By Zena Henry

Kaieteur News – Based on the arrangements in the 2016 Production Sharing Agreement (PSA) between oil giant, Exxon Mobil and the Government of Guyana (GOG), the country will pay all legal fees incurred by the oil company regarding challenges directly related to their operations. This of course, would include the court matter brought against the state by Kaieteur News’ Publisher, Glenn Lall, where Exxon’s subsidiary, Exploration and Production Guyana Limited (EEPGL) has decided to become party to the matter given its particular interests.
But, even as Guyana is contractually obligated to pay the legal costs for the oil major, civil society persons have been pooling their resources to help Lall mount the court challenge. This is according to Lall who told this newspaper that it was the coming together of three persons that saw the legal challenge moving forward. “Yes, it was three persons who contributed to the (legal) fees, myself included. We came together and we each put one, one million to take this thing to the court.”

The Kaieteur News publisher is of the firm view that under the country’s petroleum law, exemptions of value-added, duty and excise tax among others, to operators other than the licensee are against existing legislation. Lall filed the High Court case back in January challenging what he describes as 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.
Prepared and filed by his Attorney, Mohamed R. Ali, the legal document outlines among other things 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 violates the Petroleum Exploration and Production Act, the Financial Administration (and Audit) Act, the Prevention of Discrimination Act, and the Constitution.
Through his lawyer, Lall contends that the provisions are unlawful, null and void, and of no legal effect. With respect to violations of the Petroleum Law, Lall further 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…”
Where it is also stated in the Agreement that, “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 exploration period on income earned in Guyana for any given tax year if the Affiliated Company or Non-Resident Sub-Contractors have conducted business for one hundred eighty-three (183) days or less on a cumulative basis in the tax year of assessment,” the Attorney flagged those for legal inconsistencies.
Apart from these and other areas of legal contention, Lall has charged the reason behind the court challenge to the extent of which the provisions of the petroleum contract creates oppressive circumstances that hinder locals as well as the extent to which it breaches the laws.
Lall is concerned about the severe impact the contract’s provision will have on the nation’s ability to satisfactorily benefit from the oil resource. “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,” he insisted.
Lall pointed out that according to the Audit General’s report, in 2020 alone Guyana lost some US$720M in taxes. This equates to more than 1.4 billion Guyana dollars. The publisher told the newspaper that where the matter is concerned, it is the role of civil society on full display. He said that even as the monies to challenge the repressive exemptions are being pooled by ordinary citizens and Exxon is having their legal fees paid for by the Guyanese people in the PSA’s recoverable costs outlines, he is prepared for the long haul since he deeply believes that Guyana deserves more for their oil resources.
The PSA specifies that, “All costs and expenses of litigation and legal or related series necessary or expedient for the procuring, perfecting, retention and protection of the contract area and in defending or prosecuting lawsuits involving the contract area or any third party claim arising out of the activities under the agreement or sums paid in respect to legal services necessary or expedient for the protection of the interest of the parties are recoverable. Where legal services are rendered in such matters by salaried or regularly retained lawyers of the contractor or an affiliated company of the parties comprising contractor, such compensation will be included instead under sub-section 3, 1 (B) or 3.1(D) above as applicable.” Subsection 3, 1(B) speaks to labour and associated labour costs and 3, 1 (D) speaks to third party contracts. If there is an oil spill and ExxonMobil is sued, Guyana will also pay the price.
ExxonMobil is a veteran in the oil and gas industry and a global power house. This mega company is well known for dwelling in profit margins that dwarfs the size of some country’s Gross Domestic Product.

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