Guyana’s booming oil industry forces change to ‘Contract Disputes’ law

May 20, 2024 News

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…as concerns loom over confidentiality provisions with State’s money

Kaieteur News – In light of Guyana’s booming oil industry government last Friday successfully piloted a new Arbitration Law, aiming to update the 135 Statute presently in place.

Presenting the Bill for its final stage of unanimous approval in the National Assembly on Friday, Attorney General Anil Nandlall told the House, “…we have an arbitration act in Guyana, it was enacted in 1916 and is the 1889 Arbitration Act of the UK (United Kingdom), it is therefore 135 years old.”

Compounding the situation, the Attorney General informed the House that the extant legislation was only amended twice over the years, once in 1927 and again in 1931, “almost 100 years ago.” He posited, “…without doubt our statutory arbitration framework is one of the oldest in this part of the world. Prefacing his arguments for the members of the House to support its passage through the National Assembly, he noted “it is now an undoubted fact that Guyana is the fastest growing economy in this hemisphere, as a result there is an astronomical increase and expansion in almost every sphere in national life, likewise there is an explosion of commercial activities.” This he said was also replicated in an expansion in the commercial and legal sector that he described as “unprecedented.”

According to Nandlall, “since 2020 we have begun the overhaul of our entire legislative and institutional tapestry in order to accommodate, facilitate and foster these transformational changes” arguing that “this bill is part of that changing architecture.” The Attorney General and Minister of Legal Affairs, further adumbrated, “…often times I have made reference to the intent of our government to change the statutory and legal architecture of our country as our country transforms into one of the most modern and fastest growing economy in this hemisphere and we have repeatedly brought bills to this house, designed to meet the exigencies of those changes.”

Prior to calling for a vote, he argued that “in this ever-expanding commercial environment contracts are executed on a daily basis both at the level of the state as well of at the level of the Private Sector involving billions of dollars in commercial undertakings.” These contracts, he said, both local companies as well as international corporate giants, are drafted to be modern sophisticated and commercially efficacious, and a such invariably they provide “as modern contracts do, for the resolution of dispute which may arise between parties to the contract.”

According to the Attorney General, “contemporary commerce litigation has long been relegated to an option of last resort; arbitration has replaced it as the most preferred method of settling commercial disputes.”

Given the outdated nature of the existing legislation in place, he said, “naturally it is completely anachronistic, ancient and unsuitable to meet the demands of today’s commercial environment.”

With Guyana already lagging behind the rest of the Caribbean with regard updated Arbitration Legislation, Nandlall was adamant “in the circumstances we have to update our laws not only to provide for the modern legal mechanisms to settle disputes, but also to make Guyana as an attractive destination as the seat of arbitration arising not only for contracts rising from Guyana but Caribbean and even south America.”

Adamant the industry is multi-million-dollar foray, the Attorney General in piloting the new legislation surmised, it holds the potential to create many high paying jobs.

Speaking more to the need for an updated Arbitration Legislation, the Attorney General used the opportunity to cite as example “a potential dispute between the government and Exxon (Mobil Guyana Limited) in relation to cost oil being referred to an arbitration.”
He cited too that “there is some sort of dispute between two operating oil giants in Guyana” and talk of that also being referred to an arbitration process.

The Attorney General was referencing the now ongoing dispute involving ExxonMobil Guyana Limited, Hess Corporation and CNOOC, over the 30 percent share in the Stabroek Block. This in light of a pending merger between Chevron and Hess.

“As I have indicated our arbitration network is over 100 years old” Nandlall repeated adding that in today’s era, Arbitration is now the preferred method of settling commercial disputes.

This since, arbitration is firstly consensual, in that the parties must agree that should a dispute arise, it would be resolved through arbitration, hence the arbitration clause in modern contracts.

Additionally, when opting for Arbitration as against litigation, the parties have the freedom to choose their own arbitrator(s) as the case may be.
Another selling point for Arbitration proceedings, according to Nandlall, is presented where, if the parties wish, the proceedings can be a confidential process with no disclosures.

He noted too that, the decisions of the arbitration tribunal are final and binding upon the party in the same way that a court order is binding, in addition to the fact the procedural rules for arbitration is far more relaxed and simpler than in litigation.

According to the Minister, arbitration in the 21st century, is a far more efficient and flexible process and is not subject to elongated process for appeal and challenges, in addition to very narrow grounds on which you can challenge.

Those reasons aggregated, according to Nandlall, have led to arbitration being the preferred option for the settling of contractual disputes as against, litigation, where the parties lose control of the subject to the judiciary.

The Shadow Minister of Legal Affairs in the House, Roysdale Forde SC, while agreeing with Nandlall on the need for updated legislation, expressed concerns over the lack of disclosures. This, in light of the specific references made by Nandlall, in relation to the oil companies in Guyana and looming arbitration “and what it means for the Guyanese People,” since the proceedings are to be private and confidential, unless authorized by the parties involved.

“My concern is that currently framed and enacted it seeks to restrict the public’s interest in arbitration in relation to the government and state entities.”

That, concern he said was one raised in neighbouring Trinidad and Tobago when a similar legislation was debated there. Elaborating on his concern, he pointed to the fact that when disputes are being sent to arbitration between private parties that is understandable but, in the case, where the state is involved, the requirement for confidentially seeks to blur transparency.

Ultimately at the end of the day, it would be the people of Guyana’s money which is being arbitrated and therefore kept confidential. He did nonetheless commend the legislation as a forward step in regards the role arbitration can play in the country. Other speakers to the Bill before its eventual passage included Minister of Tourism Industry and Commerce, Oneidge Walrdon, Geeta Chandan-Edmond, Sanjeev Datadin and Khemraj Ramjattan.

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• ‘Contract Disputes’ law, ExxonMobil, Guyana, oil industry, State’s money

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