Guyanese burdened with Exxon’s legal fees in environmental, tax exemptions cases

Mar 19, 2022 News

---

Kaieteur News – Based on the provisions outlined in the Stabroek Block Production Sharing Agreement (PSA) which was signed between the Government of Guyana and an ExxonMobil led consortium, the oil giant is not only able to recover all monies spent to clean up any environmental mishap that may occur during its work, but it will also have all of its litigation costs met by Guyanese. This is irrespective of whether the country could prove that Exxon caused the mishap or not.

The 2016 Production Sharing Agreement states 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.”
Apart from this, Annex C of the PSA outlines all costs ExxonMobil is allowed to recover. One of those costs is insurance which is listed on Page 11 of Annex C. It states that, “Insurance premium and cost incurred for insurance pursuant to Article 20 provided that if such insurance is wholly or partly placed with an Affiliated Company of the parties comprising the contractor, such premium and costs shall be recoverable only to the extent generally charged by competitive insurance companies other than an Affiliated Company of a party comprising the contractor. Costs, losses, and damages incurred to the extent not made good by insurance, are recoverable, including costs, losses or damages resulting from the indemnities in Article 2 of the agreement unless such costs, losses or damages have resulted solely from an act of willful misconduct or gross negligence of the contractor.”
According to the agreement, Guyana would need to prove “gross negligence” on the part of Exxon so that the oil company would handle the environmental mishap without looking to be reimbursed. It therefore means if Guyana decides to take Exxon to court for its interpretation of “gross negligence” or “willful misconduct”, the onus is on Guyana to prove that it was the absolute fault of the contractor.
Notably, the information in the 2016 PSA is a major step up from what was agreed originally to in the 1999 agreement signed by former President Janet Jagan. At that time, the agreement had only that Exxon would provide insurance to cover environmental issues caused by the company, but the insurance would have been covered by its affiliate insurance company with possibilities of being self-insured.
Section 20.2 (a) and (b) of the 1999 PSA says that, “The contractor shall effect at all times during the term of this Agreement, insurance as required by applicable laws, rules and regulations and of such type and in such amount as is customary in the international petroleum industry in accordance with good oil field practice appropriate for petroleum operations in progress in respect of but not limited to (i) loss or damage to all assets used in the petroleum operations; (ii) pollution caused in the course of petroleum operations for which the contractor or the operator may be held responsible; (iii) loss or damage to property or bodily injury suffered by any third party in the course of petroleum operations for which the contractor may be liable to provide an indemnity pursuant to Article 2.4; (iv) The contractor and/or operator’s liability to its employees engaged in petroleum operations. To the extent permitted by applicable laws, rules and regulations, such insurance may be provided through contractor’s affiliate insurance company.”
It also states at 20.2 (b) that, “Subject to the minister’s approval, which shall not be unreasonably withheld, the contractor, notwithstanding the provisions of Article 20.2 (a), shall have the right to self-insure all or part of the aforementioned insurances in Article 20.2 (a).”
There are currently three ongoing court cases of which Exxon is party to since it relates directly to its oil operations here. One case was filed by Dr. Troy Thomas, a Scientist and a University of Guyana lecturer and Quadad de Freitas, a South Rupununi Region resident who believe that oil and gas productivity in Guyana would have a negative effect on climate change.
The second case involves three courageous Guyanese women, Sinkka Henry, Sherlina Nageer and Andriska Thorington, who through their attorneys-at-law, Melinda Janki and Ronald Burch-Smith, filed a case against Guyana’s Environmental Protection Agency (EPA) back in January to put a stop to flaring by ExxonMobil aboard the Liza Destiny.
The third case involves Kaieteur News Publisher Glenn Lall against the government as he seeks to have the court reverse massive tax exemptions that will exclude Exxon, its affiliate companies and subcontractors from paying taxes ordinary Guyanese companies are subjected to.

 

---

---