The Local Content Law needs to be shown the red card

Oct 05, 2022 Features / Columnists, Peeping Tom

Kaieteur News – Guyana’s Local Content Act is a sloppy piece of legislation. And it appears as if its implementation is more problematic than was originally contemplated.

It is therefore not surprising that the government is embroiled, yet again, in another controversy over local content certification of a company. This column is not familiar with the specific facts of the case, and since the matter is now sub judice, it would refrain from commenting on the merits of the case even though expressing such an opinion can hardly be deemed as prejudicial to its outcome.

What is of concern is the legislation itself as well as the problems which these pose for foreign companies seeking contracts in Guyana’s oil and gas sector. The Local Content Act carves out certain sectors exclusively for local companies. And it provides a definition of what is considered a local company. This has become an issue of contention.

The government has been expressing concern over certain practices by foreign companies. The government views some of these practices as attempts to circumvent the legislation to allow the foreign-owned companies to qualify, under the legislation, as local companies.

It now appears that some of these matters will have to be determined through judicial review. But instead of the challenges to certification, the regional companies, should bite the bullet and ask the Caribbean Court of Justice (CCJ) in its original jurisdiction, to strike out the Local Content Act as being violation of the Revised Treaty of Chaguaramas (RTC).

This column ran a series of articles arguing that Guyana’s Local Content Law is in violation of the RTC. The RTC prohibits discrimination on the grounds of nationality. Guyana’s Local Content Law flies in the face of this prohibition. The opinion is expressed here that there is sufficient case law to strike out Guyana’s Local Content Law as being in violation of Article 7 of the RTC.

In 2007, then President of the CCJ, Michael de la Bastide, addressed the Annual Dinner of the Rotary Club of Georgetown and made this observation: “When one considers such provisions of the Treaty as the general prohibition in Article 7 [of the RTC] against discrimination on the grounds of nationality alone, and those designed to eradicate anti-competitive business conduct within the region, one might well conclude that the breach by a Member State of virtually any provision of the Treaty could give an individual or company the right to bring proceedings in the Court.”

The right of establishment of regional companies is also enshrined in community law. Guyana’s Local Content Law is a restriction on this right and therefore ultra vires of the RTC.

But it appears that the regional private sector is too timid to challenge the government of Guyana at the CCJ. But unless Guyana’s Local Content Act is struck down, the disputes which some regional firms are experiencing will continue. It is time that someone bites the bullet and moves to strike down the Local Content Act.

Community law is supreme to national law. But even if a foreign firm is not disposed to challenging the Local Content Act at the CCJ, it should consider challenging it on the grounds that it contradicts the local Investment Act.

The Investment Act authorises investors to operate in all fields, except in respect operations which may be prejudicial to national security, health and the environment. The Local Content Act contradicts the Investment Act by reserving certain services exclusively for local firms.

The services that are listed in the First Schedule as being exclusively reserved for local firms are Customs brokerage, ground transportation and insurance. Other provisions of the First Schedule of the Local Content Act has thresholds as high as 95 percent for security services, 90 percent for legal and accounting services and lay down yard facilities. These thresholds are restrictive of the right to establishment and of competition and therefore are in contradiction of the Investment Act.

It is not unusual for two pieces of legislation to conflict. In order to express which is superior and which is inferior, it is normal for the later legislation to contain a proviso that should any of its provisions conflict with any other law, the latter law is superior. No such proviso exists in the Local Content Act.

The Local Content Act in its present condition will allow for the raining of disputes, not only over certification but also other investors’ rights. The only solution to stop interminable disputes is to have this sloppy piece of legislation struck down. But finding someone courageous enough to bell this cat, and to have locus standi to do so, is easier said than done.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)