Finding prospects of success in the appeal filed by the EPA to a High Court ruling ordering it to enforce the liability clause in a permit for ExxonMobil’s offshore oil operations here, Appeal Court judge, Rishi Persaud has granted the EPA and the company a stay of that order which had also provided for the suspension of the permit.
The judge said that the interest of justice warranted the grant of a stay; but he has ordered ExxonMobil’s local affiliate—Esso Exploration and Production Guyana Limited (Esso/ EEPGL)— to lodge US$2 billion in guarantees within the next 10 days, failing which the stay order would be dismissed.
The judge said that the US$2 billion guarantee is aimed at allaying any anxiety as to impending doom as conceived by some, but was keen in pointing out that the justice of the case “clearly mandates a stay of execution.”
In a ruling last month, High Court judge Sandil Kissoon declared the Environmental Protection Agency (EPA) to be in breach of its statutory duty in failing to enforce compliance by Esso of its financial assurance obligations, and keep indemnified the agency and the Govern-ment of Guyana against all environmental obligations of the permit holder and co-venturers within the Stabroek Block.
Among other things, he specifi-cally declared Esso’s failure to comply with Condition 14 of its permit which he said imposed on it “unlimited and uncapped liability for all costs associated with clean up, restoration and compensation for all damages caused by any discharge of any contaminant arising from its exploration, development and petroleum production activities within the Stabroek Block.”
Justice Kissoon had made it clear that if the unlimited liability to fully indemnify Guyana was not put up by tomorrow, then the Esso permit would be suspended.
It is this that would then form the basis of an appeal filed by Esso, which came on the heels of one filed by the EPA which argued among other things that Justice Kissoon’s finding that the financial assurances set out in the permit were “unlimited”, was a flawed line of reasoning.
Both the EPA and Esso argued vehemently for a stay of the High Court’s ruling.
The preliminary issues which had to be considered by Justice Persaud were whether the appeals had any prospect of success and then, whether the circumstances of the case warranted the grant of a stay.
The judge found in favour of the appellants on both issues.
Merit
In delivering his ruling yesterday, Justice of Appeal Persaud sought to emphasise that “emotivity, political and patriotic considerations and impassioned pleas aside,” the issue regarding the merits of the appeal, was a straightforward one of law.
On this point he said that there needed to be a proper interpretation of Condition 14 of the permit vis-à-vis the purport, scope and ambit of the governing legislation—the Environmental Protection Act— as a whole and more particularly Section 31 thereof.
Section 31(2) he said, requires the specification of an amount of financial assurance; while Condition 14(3) of the permit he noted, provides a formula that guides the form, quality and quantity of the financial assurance which he said must be guided by an estimate of a reasonably, credible cost which is not expected to address inestimable cost which can be recovered by civil action.
A defined quantum that can be estimated is what is required the judge said; while adding that the conflation of Condition 14(1) which provides for “all costs” with the necessity of an assurance in Condition 14 (3) and held to be unlimited, is on the face of it problematic.
Justice Persaud said that the seeming use of Condition 14 to interpret and extend the clear wording of the Act and Condition 3 of the permit itself seems to be impermissible; even as he sought to emphasise that the general obligation for liability of “all costs” which he said the permit holder has acknowledged “in no uncertain terms,” must be read separately from the precise requirements for assurances.
“To do otherwise would amount to a complete disregard for the purport and intent of the governing Act,” the Judge said; even as he added that it is also noteworthy that Condition 14(4) authorises the EPA to ask for further forms of assurances if necessary.
“The inference to my mind is obvious,” Justice Persaud said.
The judge said it is noted that by Condition 14(5) of the permit, there is a requirement for environmental liability insurance in the amount that is customary in the petroleum industry; and that there is a further requirement that such insurance be procured from an insurance company graded A+ by the Better Business Bureau or is equivalent as is deemed appropriate by the EPA.
From his assessment, Justice Persaud said it seems on the face of it that trial judge Kissoon misconstrued the processes in relation to the acquisition of insurance and at the same time ignored the EPA’s discretion under Condition 14(5) to consider any rating equivalent as it deemed appropriate.
Against this background the appellate judge said that Justice Kissoon’s order which he (Persaud) described as “coercive” that an unlimited guarantee be put forward, failing which the permit would be suspended, is also cause for concern.
On this point Justice Persaud said it is well established that in judicial review proceedings, a Court is restricted to a consideration of whether the procedural requirements for the exercise of regulatory power, were followed, and not its decision.
Justice Persaud said that in this particular case, it seems that the EPA can be considered as an expert body which ought to have prompted judicial restraint on the part of the trial judge.
“Surely, that body (the EPA) is better placed to evaluate such complex and non-legal matters within its expertise,” Justice Persaud said, for which he stressed necessitated judicial restraint.
Additionally, he said that the effect of the High Court’s “coercive” order was to have the EPA perform an act, that is, to have required an unlimited assurance which he said is not within the ambit of its governing legislation.
Justice Persaud said that as argued, the Judicial Review Act does give wide powers to a judge, but he expressed doubt that its intention was to facilitate the substitution of his or her discretion for that of an expert body and to empower that judge to compel an act which falls outside the scope of the legislation.
In all the circumstances, Justice Persaud said he was of the view that the appeal has merit and has prospects for succeeding.
Stay
On the issue of the grant of the stay, the judge said he needed to assess the interest of justice. On this point he said that it needed to be considered whether there was any risk of injustice associated with the grant or refusal of a stay.
What is the balance of convenience and the overall interest of justice, he asked? Noting that the testimony of Alistair Routledge—President of Esso, “paints a damning picture,” highlighting that “the revenue lost to the permit holder, and more importantly to the state of Guyana may have serious implications and devastating consequences in the event of a permit suspension.”
Further, the seeming uncertainty as to what an unlimited assurance may entail and the time frame ordered to provide such an assurance makes this event likely. “The prejudicial effects are palpable,” Justice Persaud said.
He said that on the other hand it is generally accepted or ought so to be that the event of a well-blowout or some sort of associated environmental disaster is unlikely.
“Now, coupled with the prospects of success, the interest of justice clearly mandates a stay of execution,” the appellate judge said, while stating the Justice Kissoon’s order that the permit be suspended is stayed, pending the hearing and determination of the appeal.
Justice Persaud said, however, that “in an effort to allay any anxiety as to impending doom as conceived by some, and moreover, in the interest of justice,” Esso is to lodge US$2 billion in guarantees within the next 10 days, failing which the stay order stands dismissed.
The stay of execution is to last until the full hearing and determination of the appeal.
Each party has been ordered to bear their own costs.
The next stap in the case is for a date to now be given for case management for when the substantive appeal will be heard, which Justice Persaud said should be soonest in the interest of the public.
Jurisdiction
To the EPA’s challenge to the single judge in Chamber hearing the preliminary issues, Justice Persaud ruled that he did have jurisdiction to hear the case.
He said it would be an impermissible stretch of legal construction and interpretation to conclude that Order 2 Rule 17 of the Court of Appeal Rules mandates that an application for a stay must first be made to the court below, thus depriving a single judge of the Court of Appeal with jurisdiction to entertain an application for a stay
Order 2 Rule 16 clearly empowers a single judge to entertain an application once an appeal has been filed for a stay “in any cause or matter before the court,” Justice Persaud said in declaring his jurisdiction to hear the matter.
Background
President of the Transparency Institute of Guyana Inc (TIGI) Frederick Collins, had said that the EPA’s appeal has no merit.
Collins, together with another concerned citizen—Godfrey Whyte—had moved to the court last year to get the EPA to enforce the liability clause in the permits it had issued to ExxonMobil.
The litigants have said that the resort to the court was their bid to ensure that the company takes full financial responsibility for possible resulting harm, loss and/or damage to the environment.
Esso has agreed in the permit to provide insurance and an unlimited parent company indemnity to cover all environmental loss and damage that might result from a well blowout, oil spill or other failures in the Liza 1 Development Project in Guyana’s Stabroek Block.
Justice Kissoon in delivering his judgment had said that in the course of the proceedings, the Court found on the evidence that EEPGL was engaged in a “disingenuous attempt which was calculated to deceive, when it sought to dilute its liabilities,” while simultaneously optimising production.
He said of the EPA, “It has abdicated the exclusive statutory responsibilities entrusted to it by Parliament under the Environmental Protection Act 1996 and the Environmental Protection Regulations 2000 to ensure due compliance by Esso Exploration and Production Guyana Limited.”
Collins and Whyte had argued through their attorneys that “…the agency, through its human minds, including its officers has failed or omitted to carry out or to show that it has carried out its legal duties and or obligations thereby amounting to misfeasance in public office by them and by failing or omitting to act, has acted unreasonably, irregularly or improperly and or has abused its power.”
