Last Wednesday, Hurricane Beryl, downgraded from a Category 5 storm to Category 4, was heading for Jamaica after its devastating effects on a number of other islands, including Grenada.
At 250 kilometres per hour, Beryl was the earliest Category 4 storm on record that moved from a Category 1 to a Category 4 storm in less than ten hours. Scientists have suggested that climate change is the likely cause for the quick and early formation of this usually fierce storm, as global warming is helping to push temperatures in the North Atlantic to all-time highs. This has caused more surface water to evaporate, which in turn provides additional fuel for more intense hurricanes with higher wind speeds.
There can no longer be any denying that the extraction and burning of fossil fuels are the main contributors to climate change and global warming. If the planet is to be saved, it is necessary for countries to scale back significantly on the use of fossil fuels for energy needs and replace it with renewable sources, such as from the sun (solar energy), water (hydropower) and wind. Numerous studies have shown that solar power is more cost-effective than electricity generated from coal, natural gas, or other fossil fuel options. In fact, according to the International Energy Agency, solar energy is now the cheapest form of electricity in history. When the cost of clean-up and reconstruction from the various climate change-induced disasters is taken into account, it could very well outweigh the benefits derived from the extraction and burning of fossil fuels.
Attorney-at-law, Nigel Hughes, has recently been elected leader of the Alliance for Change (AFC). His law firm Hughes, Fields and Stoby is currently providing legal services to ExxonMobil and several other oil companies operating in Guyana. Concerns have, however, been expressed regarding a potential conflict of interest in view of Mr. Hughes’s new role as well as the fact that he is a Politically Exposed Person (PEP). Political commentator Kit Nascimento argued that Mr. Hughes has disqualified himself from contesting for the Presidency of Guyana at the forthcoming General and Regional Elections, or for any other political national leadership post, by declaring that he cannot comment on any matter involving ExxonMobil.
Former City Mayor Ubraj Narine expressed an opposite view when he stated that ‘[b]eing a politician or political leader of a party and serving as a lawyer for a company or any entity does not in and of itself or themselves become conflict of interest’. Mr. Narine noted that several senior government functionaries, including Ministers, are providing directly or indirectly various forms of services to ExxonMobil which by their nature present a conflict of interest vis-à-vis their roles in government.
In response, Mr. Hughes stated that he would not sever ties with his law firm unless he is elected to government. He argued that the issue of conflict of interest will only arise if and when he becomes President or when he acquires a position of power since he would then be in a position to influence government policy. Mr. Hughes also asserted that there are no legal provisions prohibiting him from maintaining ExxonMobil as a client while leading the AFC. He went on to state that if he is elected President, he would isolate himself from any decision relating to oil and gas.
It is unclear why the fact that Mr. Hughes is a Politically Exposed Person (PEP) has been raised as an issue. The Anti-Money Laundering and Countering of the Financing of Terrorism Act 2009 defines as a PEP as:
Any individual who is or has been entrusted with prominent public functions on behalf of a state, including a Head of State or of government, senior politician, senior government, judicial or military officials, senior executive of state owned corporations, important political party officials, including family members or close associates of the politically exposed person whether that person is resident in Guyana or not.
According to the Financial Action Task Force (FATF), financial institutions are required to apply additional anti-money laundering measures to
business relationships with PEPs, mainly in relation to enhanced customer due diligence requirements. As Mr. Hughes has pointed out, close relatives of all Members of Parliament are also PEPs, including the Vice President, and ‘there is no magic to being PEP’.
This columnist was denied consideration for employment in a senior government position because he was deemed a PEP, notwithstanding that he demitted office as Auditor General some ten years ago at the time. While the FATF has set no time limit for a person to remain a PEP, it made it clear that the matter should be dealt with on a case-by-case basis. For example, Canada has set a time limit of five years. In Guyana, however, once a person is considered a PEP, that person remains so for the rest of his/her life! That apart, being considered a PEP should only be applicable to the adoption of anti-money laundering measures by financial institutions, and not for any other purpose.
Conflict of interest in perspective
Various definitions abound as to what constitutes conflict of interest. Briefly stated, a conflict of interest occurs where a public official’s decisions are influenced by his or her personal interest. It has the potential to undermine the impartiality and objectivity of the person because of the possibility of a clash between his or her self-interest and the person’s professional or public interest. A conflict of interest exists regardless of whether that influence actually takes place. Once there is reasonable belief that of a risk that secondary interests may influence decisions, there is conflict of interest. It can also exist even though there are no improper acts since differing roles are likely to provide an incentive for improper conduct.
There are various types of activities that can create possible conflict of interest situations. Three of these can be singled out: nepotism – the practice of giving favors to relatives and close friends, especially in relation to hiring and the award of public contracts; self-dealing – a situation where a person in a position of responsibility in an organization having outside conflicting interests and acting in his/her own interest rather than that of the organization; and insider dealing – using confidential information for personal gain. In the United States, there are federal and state laws that criminalize conflicts of interest in the public sector.
Even after someone leaves a position, a conflict of interest can still occur. It is for this reason that many institutions have specific restrictions, such as prohibiting “switching sides” or entering non-compete agreements after leaving office. In deciding whether a conflict of interest exists, the overriding consideration, indeed the standard test, is whether a reasonable, unconnected and uninformed person, weighing all the specific facts and circumstances available at the time, would be likely to conclude that the risk of conflict of interest exists, despite safeguards that may be put place to mitigate the effects of such a risk.
Ways of dealing with conflicts of interest
There are a number of ways of mitigating conflicts of interest. These include: (i) eliminating the conflict of interest in its entirely; (ii) disclosure of the facts to the appropriate authorities; (iii) recusal from any deliberations of the matter giving rise to the conflict; (iv) third party evaluation; and (iv) adherence to codes of ethics.
For elected public officials, the options are, however, very limited since they hold positions of public trust, and the first and foremost consideration is the public interest. As such, the highest standards of integrity, ethics and probity are expected of them. Elected public officials should at all times avoid conflicts of interest, and where such conflicts are likely to exist, elimination by removal from the setting is perhaps the best option. For example, if someone elected to public office owns corporate stocks and is a member of several corporate boards, he or she is expected to either dispose of such stocks and resign from the boards or demit public office.
Disclosure does not eliminate or remove the existence of a conflict of interest. Rather, it serves to inform stakeholders of the existence of competing interests. It is then the responsibility of those in authority to decide whether there are enough safeguards to prevent private interests taking precedence over the public interest and advise accordingly.
Recusal relates to one-off events and not continuing situations. The practice is common among members of the legal profession. For example, judges and magistrates routinely recuse themselves from presiding over cases where, because of an association with the plaintiff or the defendant, they may be placed in a difficult situation to maintain their impartiality. However, in an organizational setting, recusal presents its own difficulties, especially if the person involved is the head of the organisation. One recalls when the State-owned Sanata Textiles Ltd. was sold, the then President insisted that he had recused himself from the deliberations and decision-making regarding the sale because the potential buyer was his close friend. The Cabinet approved the sale to the President’s friend. While there might have been justifiable grounds for the Cabinet’s decision, it is difficult for an ordinary person to conclude that the Cabinet could have acted otherwise.
Third party evaluation takes place where a need exists to ensure that a transaction being undertaken is an arm’s length one, especially in relation to setting prices. For example, a private sector entity that leases a property owned by its Chief Executive Officer may well consider it advisable to have an independent evaluation so that a fair price can be obtained for the leasing of the property. However, since in the public sector accountability is far more rigorous and demanding, in such a setting it would be desirable to procure the services elsewhere through a process of competitive bidding.
While in principle conflicts of interest should be eliminated in their entirety, it is recognized that in certain cases removal of the conflict can present difficulties. Many organisations and professional bodies have therefore developed codes of ethics or conduct which members are obliged to follow, and the failure to do so can result in disciplinary action being taken against the person involved. For example, auditors hold positions of trust and must display objectivity and impartiality, have an unbiased attitude, and avoid conflicts of interest. Competing interests will almost certainly destroy that trust and hence the credibility of their work. Auditors are therefore precluded from accepting engagements or employment in situations that can give rise to conflicts of interest.
Conflict of interest and the Integrity Commission Act
In Guyana, the Code of Conduct for senior public officials, Ministers of the Government, and other Members of Parliament, is contained in Schedule II to the Integrity Commission Act. The Code relates mainly to the acceptance of money, property, benefits, and gifts; discriminatory conduct; conflict of interest; disclosure of confidential information; the use of public property; offensive sexual comments; and aiding and abetting a breach of the Code.
As regards conflict of interest, the Code states that:
No person in public life shall: (a) allow private interest to conflict with his or her public duties or improperly influence his or her conduct in the performance of his or her public duties; and (b) allow the pursuit of his or her private interests to interfere with the proper discharge of his or her duties. Any such conflict shall be resolved as soon as practicable in favour of his or her public duties.
Persons in public life shall avoid using their official positions to transmit any information made available to them in the course of their official duties, to benefit themselves, their relations, or any other individuals with whom they are associated. They shall avoid compromising themselves or their office, which may lead to an actual or perceived conflict of interest. The failure to avoid or declare any conflict of interest may give rise to criticism of favouritism, abuse of authority or even allegations of corruption.
Conclusion
Avoiding conflicts of interest is essential to the practice of good governance, especially in the public sector which exists to provide various services to the public. It is the quality of those services and putting the public interest above all other interests that are of paramount importance. While there are various ways of mitigating the effects of conflict of interest, eliminating conflict of interest in its entirety is perhaps the best course of action in order to win the confidence of the public.
In the case of Mr. Hughes, there is no conflict of interest at the moment. However, once elected to public office, such as becoming a legislator, a Minister, or the President, he will have to sever ties with his law firm that provides legal services to ExxonMobil and other oil and gas companies operating in Guyana. We do not believe that recusal will be enough to allay fears of an apparent conflict of interest. Mr. Hughes needs to act now in order to win the confidence of citizens that their best interest vis-à-vis those of the oil and gas companies to which his law firm is associated, will be properly taken care of. He ought to be aware of the serious concerns of a wide cross section of the population as regards the Petroleum Sharing Agreement between Exxon and the Government of Guyana which undoubtedly is overwhelming weighted in favour of the U.S. oil giant.
Sooner rather than later, Mr. Hughes will need to state unequivocally whether, once elected to public office, he will seek to renegotiate the Agreement to ensure that Guyana gets a greater share of the revenues derived from the extraction of oil resources. After all, the natural resources of a country belong to all of its citizens, present and future, and should be exploited in such a manner that they enjoy the maximum possible benefit from such resources.
As Mr. Hughes points out, the issue of his being a PEP is a mere ‘red herring’ in that it has no relationship with any consideration of conflict of interest.
