The CCJ should be asked for an advisory opinion on Guyana’s Local Content Act

Jun 24, 2022 Features / Columnists, Peeping Tom

Kaieteur News – Guyana passed into law a Local Content Act. Among the aims of the legislation was the prioritising of Guyanese nationals and companies in the procurement of goods and services for the petroleum sector.
The Act defines a Guyanese company as any company which is incorporated under the Companies Act and in which Guyanese nationals have majority beneficial ownership, and which employs at least 75% of Guyanese in executive and senior management positions and at least 90% of nationals in other positions.
The clear intention here is to exclude or limit non-national companies from involvement in certain activities of the petroleum sector. The Act reserves minimum local content participation for certain sub-sectors. For example, 90% of accommodation, rental of office space and catering services are set aside for Guyanese nationals; 100% of ground transportation, insurance, customs brokerage and accounting services are reserved for Guyanese; 95% of pest control and security services are similarly set aside for locals; and 75% of cargo management, trucking, industrial cleaning and marketing and advertising services must be provided by companies beneficially owned by Guyanese nationals.
The Act requires Guyanese companies to be registered with the Local Content Secretariat. If a local company is not registered, their operations will not be treated as that of a local company. This therefore will limit or exclude their participation in the petroleum sector since they will not be considered as a Guyanese company when measuring the targets for local content.
A controversy has erupted over the non-registration of a logistics company which indicated that it had sold the majority of its shares to a local investor. Reports in the media point to sources which state that the company may not have satisfied the other requirements relating to the holding of management positions by locals. The company denies this.
One report in an online media source also said that the non-registration may have been due, in part, to not proving the sources of the funds for the sale of its majority shares to the local investor. This is a red herring because the Local Content Act does not empower the Local Content Secretariat to enquire into or satisfy itself as to the source of funds for any sale of shares.
This issue has serious implications for businesses involved in the local petroleum sector. For one, it is respectfully submitted herein that the Local Content Act cannot be applied retroactively. That is, it can only relate to contracts signed after the passage of the Act on 29th December, 2021.
Any company, foreign or local, which had signed contracts for the supply of goods and services cannot be disqualified from fulfilling those contracts. In other words, the measuring of local content targets can only be in relation to contracts signed after the passage of the Local Content Act.
The benefits of those contracts are considered as property to the supply company. The Constitution of Guyana protects property. It insists that no one may be deprived of property without compensation. As such, so long as a firm had secured a contract for the supply of goods and services prior to the passage of the Local Content Act, that firm cannot be inhibited in fulfilling the terms of that contract, and certainly not by any action undertaken by the Local Content Secretariat.
Thirdly, it is respectfully submitted that the Local Content Act is in violation of the Revised Treaty of Chaguaramas (RTC). Guyana is a signatory to the RTC and is bound by the treaty, Article 7 of which prohibits any member state of the Caribbean Community from discriminating against a regional firm on the grounds of nationality.
Guyana is well aware of this provision. It was taken to the CCJ twice for discrimination against regional firms in favour of local firms: first in relation to the importation of cement and second in relation to the discriminatory application of the environmental tax on imported beverages.
That company which has been denied registration under the Local Content Act should pursue remedies on two limbs. First it should challenge the grounds for its non-registration by the Local Content Secretariat. And secondly, it should put an end to this discriminatory legislation by asking the CCJ for an advisory opinion as to whether the legislation is indeed in violation of the RTC.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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The CCJ should be asked for an advisory opinion on Guyana’s Local Content Act

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