‘Exxon contract not cast in stone’

Oct 03, 2022 News

– Int’l lawyers says ‘sanctity of contract’ doctrine does not mean an agreement cannot be changed

Kaieteur News – “There is a willingness not to treat contracts as cast in stone (so) that while contracts bind us to terms and conditions, if the conditions have changed so dramatically and so detrimentally, then the reopening and renegotiation of contracts is a reasonable demand of the people of Trinidad and Tobago and we anticipate that our partners in this business will see our claim as a fair and just one and we anticipate that there will be some reopening of contracts so that at the end of the day, we can all sustainably benefit from the God-given riches of Trinidad and Tobago.”

International Lawyer, Melinda Janki

This is the position of the T&T Prime Minister, Dr. Keith Rowley on the issue of renegotiation, and getting more value from the natural resources his country is blessed with, for its citizens. Rowley made these statements during an Energy Conference held in the twin island, putting oil companies on guard that he will be “reopening” the oil contracts as “dramatic changes” trigger this reasonable demand.

Here in Guyana, the leaders have taken the position that the 2016 Production Sharing Agreement (PSA) the country has with oil giant ExxonMobil and its partners will not be changed to maintain “sanctity of contract”. But various experts have clarified that the lopsided contract can be changed.

More recently, International Lawyer, Melinda Janki weighed in on government’s position on the deal, explaining that this ‘sanctity of contract’ term does not mean that a renegotiation is impossible. Janki was a presenter on a Globespan 24×7 discussion where she pointed out “when we hear people yapping about sanctity of contracts and that is the reason for not changing the contract that is of course complete nonsense. Sanctity of contract does not mean that the contract cannot be changed by the parties to the contract. Sanctity of contract means that one party cannot unilaterally suddenly decide that he or she, or it doesn’t like these terms so they are not gonna do it. It’s two different things…”

The lawyer was keen to note that the 2016 PSA, specifically at Article 31.2 states, “This agreement shall not be amended or modified in any respect except by written agreement entered into by all the parties which shall state the date upon which the amendment or modification shall become effective.” As such, Janki told viewers of the online programme that the deal most definitely can be changed. However, she did point out, “The government, Esso, Hess and CNOOC can sit down and change that agreement. They can amend it. The difficulty is why would they. Exxon is here to make money; so is Hess, so is CNOOC and the worst that the deal is for Guyana the more money they will make.”

Only yesterday Kaieteur News reported that both the former and present governments have been misusing the sanctity of contract doctrine to avoid renegotiating the lopsided deal. This is according to a New York-based Guyanese, lawyer, Dr. Vivian Williams who explained in an invited comment that, “What is playing out is the misapplication of a legal doctrine to avoid acting in the nation’s best interest. Because the sanctity of contract doctrine does not apply to the consensual process of contract renegotiation, common sense should have shut down that argument before it was even made.”

The lawyer added, “Simply put, sanctity of contract means, an agreement made freely, knowingly, and fairly by competent parties, must be kept. It operates as a fundamental principle of contract law, reflected in principles such as pacta sunt servanda, well unknown to state actors. Therefore, despite sovereignty, a state is liable if it unilaterally breaches an agreement.”

However, Dr. Williams contended that the renegotiation of a contract is a common practice that does not collide with the sanctity of contract doctrine. He said it involves the revisiting of problematic terms of an agreement by parties who may or may not reach agreement on a revision. Therefore, Dr. Williams argued that sanctity of contract and renegotiation of contract are parallel processes that compliment rather than offend each other.

Last week, it was reported too that former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams said the major changes in the Stabroek Block validate the calls for a renegotiation of the deal. He was keen to note that when the deal was inked in 2016, Guyana had merely discovered approximately 1.1 billion barrels of oil, but fast forward to six years later, the country has found more than 10 billion more barrels of oil with exploration activities still ongoing. He said that it is customary for changes in an environment to inform modifications to contracts in countries around the world. In addition to this, the former EPA boss highlighted the fact that modifications have already been made to the 2016 contract, which further shows the invalidity of government’s “sanctity of contracts” argument.