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Govt. maintains can’t get unlimited parent company guarantee
Kaieteur News- While the recently passed Oil Pollution Prevention, Preparedness, Response and Responsibility Bill sets no clear requirement for an unlimited parent company guarantee, the government of Guyana has assured that the US$2B affiliate guarantee that has since been lodged by the Stabroek Block partners will not be scrapped.
During the Parliamentary Debate on the Bill two Fridays ago, the Attorney General and Legal Affairs Minister, Anil Nandlall, described unlimited parent company guarantee as an “unknown animal” as he argued in defence of the proposed law.
Attorney General and Legal Affairs Minister, Anil Nandlall
On Saturday, the Ministry of Legal Affairs addressed concerns regarding the Bill. It explained that while “experts” have interpreted Section 21 of the proposed legislation to mean that an operator will be the sole responsible party in the event of an oil spill, this was not the case.
Clause 21 of the bill states, “An indemnification or any like agreement shall be invalid for the purposes of transferring the liability of a responsible party under this act.”
To this end, the Ministry explained, “The clear intention, as expressed in the language above, is to prevent a responsible party from divesting or alienating to a third party any liability that it may attract in the course of its operations. It is a common feature in the commercial world for entities to transfer liability to third parties so that their assets are insulated and protected from financial and other consequences which may result from such liability. This section intends to prohibit that practice so that the liability incurred, at all material times, remain with the responsible party.”
Therefore, instead of evading liability, the Ministry argued that the Bill provides for the opposite.
Furthermore, it was explained that this section of the proposed law does not deal with or have any connection to any form of financial assurance, including the parent company guarantee.
“Financial assurance is exclusively addressed in another Part of the Bill. It is elementary that Acts of Parliament must be read as a whole so as to ensure that their specific provisions are interpreted in their proper context,” the Ministry urged.
Part VIII of the Bill, titled “Financial Responsibility”, addresses financial assurance. The government argued that it expressly maintains the status quo, upholding the current mechanisms of financial assurance in place, including insurance, bonds, and parent company guarantees.
It was explained, “A guarantee (of which a parent company guarantee is a species) is legally distinct, and commercially different, from the concept of transferring liability. Our expert commentators have either conflated or confused the two. A guarantee does not transfer liability. It assures liability in the event of the failure to discharge by the primary actor (the responsible party). A transfer of liability permits the assignment of liability to a third party, thereby allowing the primary actor (the responsible party) to evade or elude liability. Section 21 prevents this.”
Additionally, section 27(4) of the Oil Spill Bill requires assurance coverage to be as “comprehensive as practicable”. The Ministry of Legal Affairs urged that these financial provisions must be read along with section 17, which places “no cap whatsoever” on the liability that it creates.
Section 17 of the Bill states, “A responsible party is liable for all damages caused by an oil spill incident, removal and removal costs, and restoration of the environment as far as practicable, and for any costs arising therefrom or connected therewith.”
The “responsible party” is defined as the operator or licence holder in the proposed law.
It is important to note that stakeholders have argued that since ExxonMobil Guyana Limited (the responsible party) does not have adequate assets, the burden of oil spill-related costs could be left on Guyana, especially in the absence of unlimited coverage from the parent company. These and other “flaws” have prompted Guyanese to urge President Irfaan Ali not to assent to the Bill, passed in the National Assembly on May 16, 2025. Be that as it may, the Ministry maintained that the “robust statutory framework now established protects Guyana and its people.”
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