Last Friday’s Stabroek News editorial captioned “The AG and the Judiciary” referred to High Court decision in the case involving the enforcement of an arbitral award by the International Chamber of Commerce (ICC) against the Venezuelan state oil company PDVSA. The decision was handed down by Justice Gino Persaud who stated that he was satisfied on a balance of probabilities that the applicants, Phillips Petroleum Company Venezuela Limited and ConocoPhillips Petrozuata BV, were entitled at common law to have the arbitral award recognized and enforced in Guyana. Similar decisions were handed down in the United Kingdom, the United States, Hong Kong, Jamaica and Trinidad which, like Guyana, are common law jurisdictions.
Justice Persaud, however, took issue with the statement by the Attorney General that if the Court were to recognise the award it would be ‘wholly offensive and expose the Court in the minds of the Guyanese people to allegations of unpatriotic and anti-nationalist conduct’. The Judge stated that such an argument was more suited to an elections campaign rather than a sound legal argument for the Court. He expressed disagreement with the Attorney General’s “public policy” argument as being misconceived and stated the latter’s statement represented ‘veiled threat to the independence of the judiciary designed to intimidate the court’. As such, the statement should have been withdrawn. Justice Persaud further stated that the Attorney General is not the legal guardian of the minds of the Guyanese people. He added that: ‘[n]o practitioner (whether a novitiate recently admitted to the Bar or the Leader of the Bar) should ever accuse a sitting judge of unpatriotic and anti-nationalist conduct moreover to reduce it into writing’.
In yesterday’s letter to the editor of the Stabroek News, the Attorney General responded by referring to the statement by Justice Adrian Saunders of the Caribbean Court of Justice that ‘the Attorney General of Guyana performs a constitutional role as legal advisor of the State and guardian of the public interest. The public interest may include several different facets’. He also referred to the legal submissions by the Solicitor General that were mischaracterized as a veiled threat to the independence of the Judiciary. The Attorney General further stated:
It is axiomatic and trite law that what amounts to a threat to national security and sovereignty are always matters for the Executive to determine and never the Judiciary. This is an elementary but universal principle of law deeply grounded in the separation of powers doctrine.
In today’s article, we provide a summary of the Guyana High Court’s decision in relation to a request by Phillips Petroleum Company Venezuela Limited and ConocoPhillips Petrozuata BV to have the ICC award against the Venezuelan state oil company PDVSA recognized and enforced in Guyana.
Resolving disputes in international commercial contracts
International commercial contracts normally provide for any unresolved dispute between the contracting parties to be referred to arbitration. Arbitration is a form of Alternative Dispute Resolution in which the parties seek to resolve their dispute without going to court, by agreeing to an impartial person, known as the Arbitrator, to hear the case and make a determination. The Arbitrator must have knowledge of, and experience in, the subject matter of the dispute. Much of the testimony and evidence gathered during the arbitration proceedings are similar to a Court hearing. The decision of the Arbitrator is usually final and binding, and the Courts will rarely reconsider the issue(s) giving rise to the dispute.
As an example, Article 26 of the Petroleum Sharing Agreement between the Government of Guyana and ExxonMobil’s subsidiaries states that in the event of an unresolved dispute, either party has the right to have such dispute determined by arbitration. That article went on to state that any such dispute is to be referred to the International Center for the Settlement of Disputes (ICSD) in Washington D.C., and the decision of the majority of arbitrators is final and binding on all the parties, and ‘judgment on the award may be entered by any court of competent jurisdiction’. The Guyana Marriott Hotel management contracts have similar provisions.
The United Nations Commission on International Trade Law (UNCITRAL) is a subsidiary body of the General Assembly of the United Nations with the mandate to further the progressive harmonization and unification of the law of international trade. Established in 1966, UNCITRAL has since prepared ‘a wide range of conventions, model laws and other instruments dealing with the substantive law that governs trade transactions or other aspects of business law which have an impact on international trade’. There are many centres around the world that offer arbitration services, including the International Center for Settlement of Investment Disputes (ICSID), the London Court of International Arbitration, and the International Court for Arbitration of International Chamber of Commerce (ICC).
International Chamber of Commerce arbitration
On 30 December 2016, two companies, Phillips Petroleum Company Venezuela Limited and ConocoPhillips Petrozuata BV (Claimants) submitted a request to the Secretariat of the ICC for arbitration in relation to a trade dispute with PDVSA, Corpoguanipa and PDVSA Petroleo (Respondents). The Claimants stated that they had entered into a loan agreement with the Respondents to finance the purchase of a 35 percent stake in an oil field.
However, the latter failed to repay the loan as agreed, which constituted a breach of contract. Accordingly, the Claimants sought repayment of the loan amount plus interest, asserting that the non-repayment caused financial harm.
The Respondents, on the other hand, argued that there were misunderstandings or misrepresentations regarding the repayment conditions. Additionally, they cited economic difficulties and external factors that impacted their ability to repay the loan.
The Respondents also raised counterclaims or defences relating to the performance of the oil field and other contractual obligations. On 29 July 2019, the Tribunal handed down its decision in which it held that the Respondents failed to honour their obligations and ordered them to repay to the Claimants the sum of US$33.7 million plus interest.
Application for enforcement of the ICC ruling in Guyana
An application was made to the Guyana courts by the two companies, Phillips Petroleum Company Venezuela Limited and ConocoPhillips Petrozuata BV for the enforcement in Guyana of a 2019 ICC arbitral ruling against PDVSA, Corpoguanipa and PDVSA Petroleo. Similar applications were made in other Caribbean jurisdictions and were granted. PDVSA had several years of commercial transactions with the Guyana Government, and payments totalling US$95 million remained outstanding at the end of 2022. This amount represents some 75 shipments of oil supplied by the Venezuelan oil company PVDSA on concessional terms during the period 2014-2015.
According to the 2022 report of the Auditor General, at the request of the Ministry of Finance, the Bank of Guyana opened an interest-bearing US dollar bank account in January 2018 at the Bank for International Settlements in Switzerland to set aside all payments due to PVDSA. The balance on this account at the end of 2022 was US$32.011 million, representing principal repayments to PDVSA inclusive of accumulated interest.
Decision of the High Court
In handing down his decision, Justice Persaud considered the following:
a) The right to enforce an arbitral award at common law is well established and arises from the implied promise to pay the award that emanates from the arbitration agreement.
b) A foreign arbitral award will be enforced at common law if the award: (i) is in accordance with an agreement to arbitrate which is valid by its applicable law; and (ii) is valid and final according to the law governing the arbitration proceedings. The applicant is required to plead and prove both the arbitration award and the agreement.
c) The general approach of the courts to such Awards is pro-enforcement.
d) The Applicants have successfully registered and enforced the same award in the UK, USA, Hong Kong, Jamaica, Trinidad, the Netherlands and Portugal, and no lawful reason was established as to why the award should not be registered and enforced in Guyana.
e) In Jamaica, the Supreme Court appointed a Receiver in 2021 to collect funds owed by the Government of Jamaica to PDVSA in relation to the PetroCaribe arrangement between Venezuela and Jamaica and so far, approximately US$23 million was collected and used towards satisfaction of the award.
Justice Persaud stated that he was satisfied on a balance of probabilities that the Applicants are entitled at common law to have the arbitral award recognized, and judgment entered in its favour and to have it enforced in Guyana. He rejected the Attorney General’s “public policy” argument and considered that it could not be relied upon to defeat the Applicants’ enforcement application: ‘I do not accept that recognition and enforcement of the Award would be contrary to public policy within the parameters argued by the Attorney General. This argument is misconceived.’
Justice Persaud further stated that: (i) since Guyana is now a premier destination for investment, it would not augur well if international arbitral awards are not recognised, registered and enforced in Guyana; (ii) it is important for there to be a strong and independent Judiciary capable of fairly and impartially pronouncing on such enforcement applications; and (iii) the Judiciary cannot be ‘timorous in the face of impassioned opposition by the State to deny recognition and enforcement because to do so would be offensive, unpatriotic and anti-nationalist’.
Order of Court
Following the conclusion of the hearing, the following Orders were made:
a) The Applicants are entitled at common law to have the arbitration award dated 29 July 2019 made by the Arbitral Tribunal in the matter of ICC case No. 22527/ASM/JPA recognized in the Supreme Court of Guyana and judgment is entered for the Applicants in the terms of the award.
b) Interest is awarded at the same rate as awarded by the Arbitral Tribunal and the Applicants shall submit a draft Order containing inter alia the principal and interest in accordance with the Supplementary Affidavit in Support filed on 25 July 2024.
c) The Respondents shall have 42 days from the date of the service of the Order of Court upon them to apply to set it aside if they so wish.
d) The Applicants are permitted to enforce the Award and judgment against the Respondents, jointly and severally after the expiration of at least 42 days following service of the Order of Court on the Respondents unless they apply within that time to set it aside.
