Ruling on oil spill insurance coverage: Appellate Judge puts off arguments on preliminary matter to Wednesday

Justice of Appeal Rishi Persaud was forced to postpone a hearing on a preliminary matter from Monday to Wednesday in the State’s appeal against a High Court ruling, ordering ExxonMobil’s local affiliate, Esso Exploration and Production (Guyana) Limited (EEPGL) to provide unlimited Parent Company Guarantee for offshore oil operations it is engaged in with its co-venturers in the Stabroek Block.
This was because Sanjeev Datadin, one of the lawyers representing the appellant, the Environmental Protection Agency (EPA), had experienced a delay in his return flight to Guyana.

Justice of Appeal Rishi Persaud

During Monday’s hearing, it was revealed that all flights scheduled to land at the Cheddi Jagan International Airport (CJIA) on Sunday night had to find alternative landing due to heavy fog in the area. The flight Datadin was on was diverted to Puerto Rico.
In light of this, the lawyer, who is also a Government parliamentarian, was unable to attend the hearing. The Judge, in deferring the matter, recognised that flight delays do happen and that they are beyond one’s control. Monday was fixed for arguments on whether the appeal has a reasonable prospect of success. The EPA had previously issued a statement in which it noted that it has confidence in winning the appeal.
Cognisant that the deadline for compliance with Justice Sandil Kissoon’s ruling had been fast approaching, Datadin, at a May 15 Case Management Conference (CMC), had requested a stay of the order issued on May 3.
But his request was refused by Justice Persaud, who had committed to hearing the preliminary issue expeditiously and giving a ruling in the shortest possible time, highlighting that the matter is one of high national importance.
In fact, the Judge had committed to ruling on the matter before June 10—the last day for compliance with the order.
In that order, the EPA was directed to issue EEPGL with an Enforcement Notice on or before May 9, for the company to provide, within 30 days, an unlimited Parent Company Guarantee Agreement and/or unlimited liability Affiliate Company Guarantee, together with environmental liability insurance, as is customary in the international petroleum industry.
Non-compliance will result in the suspension of the company’s Environmental Permit.
Also on Wednesday, the Court of Appeal’s full bench will sit to consider an application filed by the Attorney General to be added as a party to the proceedings.

Enforce liability clause
In September 2022, the President of the Transparency Institute of Guyana Inc (TIGI), Fredericks Collins, and Guyanese citizen Godfrey Whyte moved to the court to get the EPA to enforce the liability clause in the permit issued to ExxonMobil for its operations.
They wanted the court to ensure EEPGL takes full financial accountability in the case of harm, loss, and damage to the environment from a well blowout, oil spill, or other failures in the Stabroek Block.
On the issue of whether the EPA acted in breach of its statutory duty and unreasonably permitted Esso to carry out petroleum production operations in the absence of compliance with the terms of the permit, Justice Kissoon ruled that the EPA has committed an illegality, acted unlawfully, ultra vires, unreasonably, in defiance of logic, irrationally, and without any jurisdiction.
He inter alia, found that Esso was engaged in a “disingenuous attempt” which was calculated to deceive when it sought to dilute its liabilities and settled obligations stipulated and expressed in Condition 14 of the permit, while simultaneously optimising production in the Stabroek Block.
“The insurance obtained by the EEPGL from its Affiliate Company AON UK Ltd, both for the Liza Phase 1 and Phase 2 Projects, does not satisfy the stipulation and obligation set out at Condition 14:5 of the Environmental Permit, or even what is considered environmental liability insurance according to international standards of the petroleum industry,” he held.
In the end, EPA and Esso were ordered to pay Whyte and Collins $1.5 million in court costs.

Grounds of appeal
Several days after the High Court ruling, EPA filed a Notice of Appeal in which it advanced several grounds on which it is seeking to set aside the ruling, among them being that the lower court’s reasoning was flawed and that the Environmental Permit was in keeping with the law.
“The trial court erred in law in its interpretation, consideration, and application of the combined effect of Clause 14 of the Environmental Permit…and erroneously concluded that the financial assurance to be provided by the third respondent herein, EEPGL, in relation to the said permit was unlimited,” one of the agency’s grounds of appeal outlined.
Another ground states, “The trial court erred in law and misconstrued the Environmental Protection Act and its regulations to determine that the appellant [EPA], a statutory body, had specific statutory powers which in fact it did not have.”
Another contention of the EPA is that the court wrongly ascribed meaning to the Environmental Protection Act that was contrary to specific provisions in that very Act.
It is also contended that the court “in effect substituted its own discretion as the decision of the appellant when the appellant, at all material times, had exercised its discretion and acted well within its statutory and regulatory powers.”
According to the EPA’s legal documents, the orders granted by Justice Kissoon are coercive and entirely remove the EPA’s discretion, which would have severe consequences. According to the agency, there would be severe disruption to the national economy if the order is allowed to stand.
EPA has been keen to point out that the very permit at the heart of the case is critically important to Guyana’s economic growth. It argued that should the permit which pertains to the Liza 1 and 2 fields be cancelled, this would have catastrophic consequences on the economy.
“Guyana as a nation now earns billions of dollars annually from the petroleum activities conducted on the Liza 1 and Liza 2 fields, both of which are subject to the permit. The suspension or cancellation will have a catastrophic effect on national funds for development, and also the private sector which supports the activities on the said Liza 1 and 2 fields,” EPA averred.
Also strongly contesting the High Court’s order is EEPGL.

No obligation
Attorney General and Legal Affairs Minister Anil Nandlall, SC, had pointed out after the ruling that the Environmental Permit imposes no obligation on the permit holder to provide an unlimited Parent Company Guarantee Agreement and/or Affiliate Company Guarantee Agreement.
The AG also pointed out that this ruling can have profound ramifications and grave economic as well as other impacts on the public interest and national development. He noted that the EPA and EEPGL had spent almost a year negotiating a Parent Guarantee and Indemnity Agreement to the tune of US$2B in liability coverage, in compliance with EEPGL’s financial assurance obligations under the Environmental Permit and the Environmental Protection Act.
“These negotiations only concluded [recently]. These negotiations and their material details were placed before the court for its consideration, but unfortunately to no avail,” a statement from the Attorney General’s Chambers had disclosed. There are several court cases challenging various aspects of ExxonMobil’s operations offshore Guyana. (G1)