Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 135
Introduction
This is the final part of an adaptation of a talk I gave last July at a forum sponsored by the US NGO Oil and Gas Guyana Network (OGGN). The thrust of my contribution was that the Government’s excuse for reneging on its commitment to “review and renegotiate” the 2016 Petroleum Agreement is specious and opportunistic. Even more significantly, the Government ignores the sovereignty issue addressed in Column #134 and more devastatingly, the constitutional question which of course is related to sovereignty.
Today’s column looks at what is described as the Stability Article in the 2016 Agreement, generally referred to as a stability clause. In essence, this Article serves as a protective shield for the oil companies and is designed to maintain a stable legal and economic environment for their investment in Guyana. In effect, the clause freezes the law as it stood in 2016, ensuring that the conditions prevailing at the time the Agreement was signed, would endure until 2056 when the period of exploration and production ends.
Recall that the Agreement was signed by a Minister, and only its tax provisions were incorporated into subsidiary legislation – not the Agreement as a whole. I have always argued that the section under which a Licence could be granted did not allow for Exxon to be issued with another agreement after the 1999 agreement had expired, but that is neither here nor there now. Unfortunately, the APNU+AFC coalition government recklessly bowed to pressure from Exxon and gave them a further licence in 2016 by an artifice called a Bridging Deed. Sadly, Guyana now has to live with that Agreement for the next 40 years or so.
Assessing the Stability Clause
Yet, the fact that the Agreement may not now be set aside does not mean that every provision therein is untouchable. Indeed, any provision in the Agreement which violates the Petroleum Exploration and Production Act, if challenged, would be held to be invalid. But let us assess the Stability Clause against the following provisions of the Constitution.
Article 65 (1): Powers and Procedure of Parliament provides that “Subject to the provisions of this Constitution, Parliament may make laws for the peace, order and good government of Guyana.”
Article 8 provides that “This Constitution is the supreme law of Guyana and, if any other law is inconsistent with it, that other law shall, to the extent of the inconsistency, be void.”
Articles or language similar to Article 65 (1) is common in many Commonwealth constitutions and is generally interpreted to confer plenary legislative authority, subject only to express any constitutional limitations. Such a provision is interpreted extremely widely, subject only to other constitutional provisions, including fundamental rights and the separation of powers. Article 8 on the other hand, establishes the Constitution as the supreme law, rendering any laws inconsistent with the Constitution void to the extent of the inconsistency.
Hierarchy
Here then is a hierarchy with the constitution sitting at the apex of the legal system followed by laws properly passed, international Treaties between States, subsidiary legislation and administrative powers and decisions. What this Stability Clause seeks to do is insulate the Agreement from changes, even made under the authority of the Constitution, a clear constitutional and statutory heresy. Here is how it does so.
It nullifies Parliament’s power to legislate granted by Article 65(1).
It violates the principle of constitutional supremacy established in Article 8.
It binds and disempowers future parliaments, as well as Permanent Sovereignty over natural resources, and in respect of fiscal and environmental matters. Such a situation would be completely unacceptable in the UK whose courts have consistently held that no Parliament can bind its successors. UK has parliamentary sovereignty whilst Guyana has constitutional sovereignty, which would mean that a stability clause, unless quite reasonable, will not be enforceable here.
Article 32 of the 2016 agreement is simply too wide and too long. No court can rule that a decision by a minister of government, even if acting within his administrative powers, could prevent successor ministers, Cabinet and Parliaments from carrying out their or its powers in future years.
Changing judicial attitudes
It is true that the legal community has generally nodded in approval at Stability Clauses, with international arbitrators – often coming from the investor countries – upholding their validity. The trend in recent years, however, has been towards more nuanced approaches. The rigid freezing clauses of yesteryear are giving way to more flexible mechanisms that seek to maintain economic equilibrium rather than absolute legal stasis. This shift represents an attempt to balance the legitimate needs of investors for predictability with the equally valid requirements of states to govern in the public interest, to exercise sovereignty over their natural resources, and to exercise constitutional powers.
And here is a great real-life example from 2015 in Israel concerning a 10-year stability clause for a gas deal, in which the Israeli Supreme Court ruled that the stability clause in the gas deal was unconstitutional because it limited the government’s sovereignty. This provides a strong precedent. Applying the same legal principles and logic, Article 32 in the 2016 Agreement will not prevail. Here is why.
Guyana’s Constitution has supreme authority. No agreement, regardless of its perceived importance or the principle of “sanctity of contract,” can supersede constitutional principles.
Duration of the agreement: The 40-year timespan extends far beyond the term of any single government or minister, raising serious questions about democratic accountability and hobbling future governments from making decisions in the best interests of their citizens.
Limitation on governmental powers: No current government should be able to bind successor governments over such an extended period.
There is simply no jurisprudential basis supporting the notion that contract sanctity can override fundamental constitutional principles and national interests.
Quite frankly, the current Government is fully aware that the stability clause is unconstitutional and would be struck down if an application was made to a court of standing. I began this (US) talk by quoting “review and renegotiate” and “we will renegotiate” by Irfaan Ali and Bharrat Jagdeo respectively in statements prior to the PPP assuming power in 2020. Now we hear the nonsensical and hypocritical cant about sanctity of contract.
Dr. Maurice Odle in a recent autobiography attributes the reversal to the PPP/C’s visceral fear of alienating America’s interest, mindful of the US’s role in the PPP’s removal from government in 1953 and 1964. Odle sums up the PPP by saying that “remaining in office is more important to the Party than the effective maximisation of benefits according to the people of Guyana.”
Not only is this explanation as plausible as any but more dangerously, the PPP/C is sacrificing both permanent sovereignty over natural resources as well as the our constitutional sovereignty.
