The challenge facing Govt. and the people is how to get Exxon back to the negotiation table

Oct 18, 2022 Letters

Dear Editor,

Rip-Van-Winkle-like, the AFC, whose one-time leader Raphael Trotman – a Lawyer and fellow Fletcher School alumnus – had signed the PSA in 2016, has now declared that ‘we are willing to support the Government in going to Exxon’ on its renegotiation. So, as regards a contract which was signed without coercion or duress as part of the government back in 2016, now, in Opposition, they have experienced an epiphany, and are ready to clasp hands with the incumbent Government – who in 2016 were in Opposition and had opposed the PSA – and seek to undo the very thing to which they had signed on six years ago!

Their signing partner in the APNU Coalition Government, the PNC, not wanting to be the one left standing when the music stops, is also ready now to undo what they did in 2016, and their Leader, Mr. Aubrey Norton is quoted as saying ‘there is a mechanism to make changes…there is a clause in the agreement that allows the two parties – the Government and Exxon – to meet and negotiate and make changes as is necessary’.

The politicos are in fact playing catch-up with not one, but two distinguished international lawyers who have already advocated setting off down the path of renegotiation of the PSA, for the greater good and betterment of the populace. One such is Dr. Vivian Williams, who from his vantage point in “farrin”, has put it thus: “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.” I believe ‘sanctity of contract’ is the very antithesis of renegotiation.

The other is Ms. Melinda Janki, who resides within this jurisdiction. Ms. Janki is quoted thus: ‘Sanctity of contract’ does not mean that the contract cannot be changed by the parties to the contract…Article 31.2 [of the PSA] states, “This agreement shall not be amended or modified in any respect except by written agreement entered into by all the parties… “The Government, Esso, Hess and CNOOC can sit down and change that agreement.’

I would respectfully urge that the two legal luminaries, and indeed the Politicians, listen a little more attentively to themselves. While Dr. Williams cites a “consensual process”; Ms. Janki refers to “the parties to the contract” changing it, and for amendments to be done by “written agreement…by all the parties”. All of which beg the question, how does one get “[The Government, Esso, Hess and CNOC [to] sit down and change that agreement”, if the process of necessity is a consensual one, involving all the parties.

Put another way, if a Government wanted to amend/renegotiate the PSA and any of the other parties does not, then what? How does Ms. Janki propose to get the parties to “sit down and change that agreement”? How does Mr. Norton envisage that “the two parties – the Government and Exxon –…meet and negotiate and make changes as is necessary’” (necessary to whom!?) The Government, assuming that it would ever be minded so to do, cannot effectuate that change on its own, by staring at itself in the mirror, or by beating its chest or pulling out its hair or shouting from the height of the top of the Pegasus Corporate Suites.

Negotiation theory refers to certain classic outcomes: win-win, win-lose or lose-lose Respectfully, Ms. Janki’s recent call for the operation to be ‘shut down’ would move the needle into the disastrous, lose-lose category, with no profits accruing to the business, while fixed overheads, running costs and forward investments pile up, and no revenue stream(s) flowing to the host country to finance planned development and budgetary allocations. Environmental protection issues, while relevant, are not under the microscope here.

The challenge now facing the Government and people of this dear land of ours is how to get Exxon et al back to the negotiation table, to achieve the likely, novel outcome of a renegotiated “win-lose not so bad”agreement – the relationship, after all, continues to be lopsided

Decades ago, while registered at the Fletcher School of Law and Diplomacy on a US Government sponsored Hubert H. Humphrey Fellowship, I was fortunate enough to be able to cross register at the Harvard Law School in a course on ‘Foreign Investment in Natural Resources,’ taught by the then Vice-Dean, Prof. David Smith. As part of role-play in his seminar, Vice-Dean Smith would stand in the middle of the auditorium, dramatically shut his briefcase and set off for the exit, saying to the students, the vast majority of whom were from the third world, “I am the investor. I am leaving the negotiation, stop me if you can!”.

To which we would shout at him a number of different proposals – duty free concessions on exploration equipment, tax holiday on profits, tax postponement on other downstream operating or start-up exploitation costs, free repatriation of profits, a non-nationalisation clause, hassle free immigration procedures and so on, all while he invariably and ominously exited the building. On his return, he would review our performance.

Over at the Fletcher School, I took a course called ‘Processes of International Negotiation’, taught simultaneously by the then Dean Jeswald Salacuse and Dr. Jeffrey Rubin, an International Lawyer and Psychiatrist respectively (Dr. Rubin’s 1995 Obituary in the New York Times described him as an Expert on Negotiation). Among the ideas they exposed the class to is the classic technique of trying to figure out your BATNA – Best Alternative to a Negotiated Agreement – before signing on the dotted line. To which I had proposed a different approach, when negotiating from a position of weakness from a developing country perspective, of a WATNA – the Worst Alternative, driven often by what I had termed “the limits of one’s desperation”.

The solution then lies in the right mix of the carrot and stick approach (perhaps more carrot than stick) to re-engage Exxon et al, not in court, nor in the court of public opinion, but back in the boardroom. Although the ideas explored in the class room often involved situations prior to the classic point of ‘Getting to Yes’ and embarking on a natural resource exploitation project, which would possibly take us as far back as the first 1999 PSA, it is respectfully submitted that we have arrived at a similar juncture midstream of the Exxon-led investment, with production moving apace fantastically and Exxon and Hess Oil singing the praises of the Guyana find to their shareholders.

The ideas explored in the class room are therefore still relevant and applicable. The limits of our desperation in1999 were displaced when Exxon announced in 2015 that it had found oil in commercial quantities, that is, a year before the 2016 PSA was signed. The negotiation calculus has since experienced seismic shifts as the pace and volume of oil discoveries in Guyana’s EEZ has surprised even industry analysts.

Not to be outdone by my two colleagues, who have referred to the sanctity of contact being grounded in the age-old principle of ‘pacta sunt servanda’, that is to say, Agreements must be kept”, let me also quote some Latin as well: “rebus sic stantibus”, or “things standing thus”, which tells us that a fundamental change of circumstances relieves a party from obligations under a contract.

We have long moved past the often adversarial point of pre-negotiation and negotiation, and are now supposed to be partners with the oil companies in the simultaneous development of this resource and concurrently, the nation. Hence it should be a symbiotic relationship, rather than one that might be deemed to be parasitic. This sounds to me like a good starting point at which to persuade the parties that the time is now propitious to seize the moment and return to the negotiating table.

Finally, the Leader of the Opposition is quoted as saying ‘I believe if the Government was competent they would have begun ‘backdoor discussions’ because a lot of those discussions in the early phase, you will have to do them quietly’. As I had previously said privately to Mr. Norton, my former colleague from the Foreign Ministry who had acquitted himself well back then in the difficult pre-UNCED negotiations –and without casting any aspersions on the competence of anybody – quiet back room discussions,which in negotiation theory constitute the pre-negotiation phase, could be delegated to a second chair, away from the glare of the media, allowing for the uncluttering of obstacles and ironing out of preliminary issues. This pre-negotiation phase would set the stage for the eventual sit down between the principal parties; this approach could be emulated at the level of the constitutionally-required consultations (negotiations?) between himself and H.E. the President.

Yours sincerely,

Neville J. Bissember