Judge to rule next week whether Exxon’s operations should be suspended for failing to provide unlimited parent company guarantee  

Jun 01, 2023 News

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Kaieteur News – The Guyana Court of Appeal is one step closer to determining whether a stay would be granted in relation to the High Court order issued for the Environmental Protection Agency (EPA) to direct Esso Exploration and Production Guyana Limited (EEPGL) to provide a parent company guarantee or financial assurance to safeguard Guyana in the event of oil spill disaster at the Stabroek block.

Appeal Court Justice Rishi Persaud on Wednesday heard arguments in relation to the order to suspend Exxon’s permit to operate in the Stabroek block if it does not provide Guyana with the guarantee.

High Court Justice Sandil Kissoon had issued the order for EEPGL to provide a parent company guarantee to Guyana failing which the company’s operation permit would be suspended by June 10, 2023.

The EPA and EEPGL have appealed the decision. During the hearing, attorneys for the EPA, Sanjeev Datadin and Francis Carlyle as well as Attorneys for EEPGL, Edward Luckhoo, SC and Andrew Pollard, SC presented arguments calling for a stay of the order.  After listening to the arguments, Justice Persaud told the parties that he will provide a ruling on the issue of the suspension order before next Wednesday.

The appeal case is premised on an application filed in the High Court on September 13 by Attorneys Seenath Jairam, SC, Melinda Janki, and Abiola Wong-Inniss.  In the case, Guyanese activists, Godfrey Whyte and Frederick Collins said, “an oil spill would be devastating for our country and Region as many Guyanese and Caribbean peoples depend on the ocean for their livelihoods. That is why we have decided that the time has come to take matters to the court for relief.”  The litigants said that their resort to the court is to make sure that the company takes full financial responsibility in case of harm, loss, and damage to the environment.

Noting the failure of the EPA to carry out its statutory functions, Justice Kissoon  in a strongly worded ruling had issued an Order of Mandamus directed to the agency to issue an Enforcement Notice pursuant to Section 26(1) and (2) of the Environmental Protection Act, on or before 9/05/23, directed to EEPGL to perform its obligations under Condition 14:10 and 14:05 of the Environmental Permit to provide, within 30 days thereafter, on or before 10/06/23, the unlimited liability Parent Company Guarantee Agreement and/or unlimited liability Affiliate Company Guarantee to indemnify and keep indemnified the Government of Guyana and the Agency against all such environmental obligations within the Stabroek block, together with Environmental liability insurance as is customary in international petroleum industry in accordance with the Conditions at 14:05 (i), (ii), (iii), (iv), (v) and (vi) from an insurance company standing and repute that equates to Grade A Plus as envisaged by Condition 14:05  failing which the permit stands suspended.

Narrow case

In his capacity as lead attorney for the EPA, Datadin argued in reference to the Order of Mandamus that the issue of the stay is a narrow one that hinges on the interpretation of the permit. Datadin explained, “The case relates simply to statutory interpretation and the interpretation of the permit. Respectfully your honour…the ills that may befall Guyana or the catastrophe that may result are irrelevant. The overarching issue is what the parties meant when they intended at the time they entered the agreement.”

The lawyer said the likelihood of a disaster that may befall the country should not be considered. “The existence of insurance has never ever prevented something from happening…Insurance is to compensate when the event occurs.” Data added.

He submitted too that the insurance will only be applied whenever the disaster strikes. “To speak of an assurance or a guarantee to be a shield or protector of some event god forbid befalling our dear country is without proper basis,” Datadin continued. The lawyer also argued that the quantum of the assurance should have nothing to do with how much money the company makes but the risk that is imminent if any at all.”

“How much money the company makes has no bearing on the interpretation of the permit…it has absolutely no place if you take that in logical conclusion… because you making so much you should offer so much …” he stated.

In this regard, the attorney said that he found the call for unlimited parent company guarantee or assurance flaw. “Condition 14.3 of the permit provides for an estimate which means this is an average or finite sum, not unlimited assurance 14:3 says that forms of financial assurance shall be guided by an estimate of the sum of reasonable credible cost, expenses, and liabilities that may arise from any breaches of the permit.  You can’t have an estimate that is unlimited that would preposterous,” the lawyer said.

He claimed that the option of litigation is always an avenue that is open to the Government of Guyana if the amount is not satisfactory. In any event, when someone would have suffered a loss, they can always approach the court.  Datadin reasoned too that by its order to suspend the permit the court has usurped the authority of the EPA.

“Discretion is something that was granted to EPA for it to exercise within the parameters of the agency, under those circumstances, the EPA would be bound to exercise discretion and grant Esso a chance to be heard,” the attorney stated.

Similarly, Senior Counsel Luckhoo submitted that condition 14 of the permit does not require an unlimited parent or affiliate guarantee. The formula for arriving at a finite sum in regard to financial assurance is set out in Condition 14.3 of the permit…there is a clear indication that the assurance is a finite sum and not unlimited. Luckhoo noted that in making a determination to grant the stay the court must consider whether the appeal has a good prospect of success.

He said while the argument proffered by the respondents that the company providing the assurance must have the financial capability to do so, it is a baseless argument since Esso has billions of dollars in assets.

In his view, the attorney said he does not believe in the necessity of a parent company guarantee as Esso is capable enough to handle its own cleanup. In response to the arguments, Senior Counsel Jairam of views that the trial judge correctly interpreted the terms and conditions of the permit

“If there is an oil spill – we have seen examples in the world, the Court can even take judicial notice of the kind of devastation it will cost. I dare say, and I say this with reluctance, an oil spill can set Guyana back to the ice age if there is no assurance…. Accidents on the high seas cost billions upon billions, a US$2B (parent guarantee) would be a drop in the ocean…”

As such, Jairam pointed out that condition 14. 1 states that the permit holder is liable for all costs as it relates to the clean-up or damage to the environment as a result of an oil spill.  He emphasized too that the permit holder is liable to provide forms of financial assurance to cover all the legitimate liabilities under the permit. In the meantime, Senior Counsel Jairam said that while the EPA is requesting a stay, they have made no attempts to comply with the order. “They did not seek to comply with the timeline given by the court not even by asking for an extension of time… We say they are in contempt and should not be heard,” the Senior Counsel stated.

 

 

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• Environmental Protection Agency, Rishi Persaud, Seenath Jairam, Stabroek Block

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