Breach of contract can cost State billions – legal expert
Oil exportation licence scrapping
…the contract was with State, not any party in power
As reports have surfaced that the Government has scrapped the oil exportation licence granted to China
The Chinese company’s multimillion-dollar bulk fuel facility
Zhonghao Inc, owned by Chinese businessman Su Zhi Rong, at least one legal luminary has warned that the Administration was threading on dangerous ground, as there could be tremendous litigation costs brought to bear on the State as a result of a breach of contract.
Sections of the media reported that following a forensic audit into the operations of the Guyana Energy Agency (GEA), the A Partnership for National Unity/Alliance For Change (APNU/AFC) Government terminated the contract signed with the Chinese company under the previous People’s Progressive Party/Civic (PPP/C) Administration, without providing any solid basis for doing so.
Earlier this year, the Government had asked the company to conduct some corrective works on its multimillion-dollar bulk fuel facility called “Falls”, which was being constructed at Coverden, East Bank Demerara, following a complaint by the Maritime Administration Department (MARAD) that the works were not being done to the approved specifications.
Those corrective works were reportedly undertaken; however, the Government still went ahead and quashed the contract.
Speaking with a legal expert who requested anonymity, Guyana Times was told that any decision to bring to an end a contract must be done with solid justification, as he cited the sanctity of contracts, noting that “once parties duly enter into a contract, they must honour their obligations under that contract”.
“Contracts can only be terminated for just cause in accordance with the terms of the contract since many contracts provide grounds upon which they can be terminated,” the expert, who practises civil law, explained.
The expert went on to explain that the litigation costs could be humongous for the party which terminated the contract without proper reason.
“In other words, a contract cannot be whimsically and arbitrarily terminated. If that happens, the affected party can launch legal proceedings for damages and compensation for wrongful and/or unlawful termination of the contract and that can run into hundreds of millions of dollars depending on the subject matter of the contract,” the civil lawyer outlined. The expert said while not being fully privy to the terms of the contract, based on the trend in recent months, there seemed to be some misperception by the Government that contracts signed prior to it assuming office could be arbitrarily quashed.
“The Government seems to believe that they are not bound by contracts entered into under the previous Government. That is a terribly flawed view. Contracts with the State of Guyana, entered into by the Government of the day, continue to be enforced, notwithstanding that there may be a change of government,” the expert highlighted.
Efforts to contact officials of China Zhonghao Inc, as well as the Chinese Embassy in Georgetown, for a comment were unsuccessful.
Recently, former Prime Minister Samuel Hinds, under whose tenure the licence was granted, had come out defending the decision of licensing the company to export fuel, arguing that there was nothing corrupt or unusual about the contract.
Hinds, who was responsible for the energy sector, in a Letter to the Editor back in April 2016, had said that it was a matter of regret that the issuance of the licence was presented to the public as an outrageous matter.
He had explained that the granting of the licence was not against the law, since already Guyana had small incidental exporters/re-exporters of fuel, explaining that all fuel sales to international carriers –ships and planes – were exports/re-exports.
He also defended the decision as one which was intended to grow the local economy.
