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Legal minds should provide guidance on inclusion of Stability Clause in new PSA – Dr. Yog Mahadeo
By Davina Bagot
Kaieteur News – Vice President Bharrat Jagdeo has clearly indicated that future oil contracts will include a Stability Clause that currently exists in the 2016 Production Sharing Agreement (PSA) Guyana inked with US oil major, ExxonMobil.
The Stability Clause is a binding agreement that seeks to ensure that the profits of the contractor is unaffected. One specific term in that Clause outlines that even if Guyana changes its laws, this will not affect the oil companies. Another section makes it clear that the Government shall not require a renegotiation of the agreement without the written consent of the contractor.
To this end, transparency advocate, Dr. Yog Mahadeo believes that such an “onerous stability” must not find its way into any new PSA, unless so determined by legal minds.
In a recent interview with this newspaper, he said, “No one person or party should argue the fairness of the stability clause – it is the judiciary that must so determine.”
Transparency advocate, Dr. Yog Mahadeo
Dr. Mahadeo believes that the legal minds should not be locked out by any contract. He told this newspaper that a decision should be made by legal minds to this end, on invitation of the Attorney General, Anil Nandlall, S.C.
The activist explained, “Jagdeo is right on the point that investors need a stability clause which is usually there to protect investors against political risk (among other things) but if the contract was a fair contract then we can accept such a stability clause. We cannot have a lopsided contract with such an onerous stability clause. It is unconscionable to even defend the current contract – which, thankfully, Jagdeo did not do.”
During airing of The Glenn Lall Show last week Tuesday on Kaieteur Radio (99.1, 99.5 FM), Vice President Jagdeo was asked to explain what is preventing him from renegotiating the 2016 deal when he pointed to the Stability Clause.
He however maintained that to ensure investments in Guyana, the future contracts will include a Stability Clause. “A Stabilisation Clause should be in a contract…once we have a higher take, we will stabilise (or) ensure that the company gets what’s in the agreement which will be a smaller share of profit but they have an expectation that they will get that share whatever the share is. It would be smaller because the government will get a bigger take but we will have to stabilise that,” the VP said.
In a previous interview, Dr. Mahadeo argued that the Exxon contract is a mockery to the country’s constitution as it attempts to shackle the country into more unfair provisions or benefits for the petroleum companies operating in the Stabroek Block.
The Stability Clause that is included in the 2016 PSA with ExxonMobil
At the time, he explained, “Of critical importance to me is the fact that we have not only allowed the Exxon contract to remove our wealth but are allowing them to effectively remove our constitutional right to elect a government that can create and enact laws on our behalf, that is, the contract mocks and neuters our Parliament’s ability to pass laws.”
According to him, the PSA attempts to shackle the Government into financial and other lopsided deals. “It also attempts, in Article 32, to handcuff the Government away from contemplating changing any laws that can impact the agreement to the economic detriment of the contractor. By attempting to shackle the Government, it therefore attempts to fetter the entire population from getting a Government in place that can pass laws as desired by and for the people. This unconstitutionality threatens our right to elect a Government that will make the right decisions on our behalf.”
Article 32, which lists conditions for ‘Stability of the Agreement’ states at 32.1 that “Except as may be expressly provided herein, the Government shall not amend, modify, rescind, terminate, declare invalid or unenforceable, require renegotiation of, compel replacement or substitution, or otherwise seek to avoid, alter, or limit this Agreement without the prior written consent of Contractor.”
The agreement goes on to say at 32.2 that “after the signing of this agreement and in conformance with Article 15, the Government shall not increase the economic burdens of contractor under this agreement by applying to this agreement or the operations conducted thereunder any increase of or any new petroleum related fiscal obligation, including but not limited to, any new taxes whatsoever, any new royalty, duties, fees, charges, value-added tax (VAT) or other imposts.”
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