Home News US$2B parent company guarantee: Litigants move to Appeal Court for disclosure of...
Documentation verifying the US$2B unlimited parent company guarantee has not yet been received by Frederick Collins and Godfrey Whyte, who have sued the Environmental Protection Agency (EPA) to force US oil giant ExxonMobil (Guyana) to provide an unlimited parent company guarantee for the offshore oil operations of the company and its joint venturers.
As a result, the legal team representing Collins and Whyte — which includes lawyers Melinda Janki and Abiola Wong-Inniss, and is led by Senior Counsel Seenath Jairam — has filed a summons asking the Court of Appeal to order the EPA/ExxonMobil to produce the parent company guarantee. But during a hearing in that Court on Thursday, Sanjeev Datadin, attorney for the EPA, argued that Justice of Appeal Rishi Persaud lacks jurisdiction to hear the summons.
“My client’s [EPA’s] instructions are to resist this application at this time, while they consider their position as it relates to the disclosure. It isn’t one person who does it; they wanted to speak to the members of the Board as it relates to that,” Datadin has said. Citing case laws, Datadin submitted, “The court does not have the jurisdiction to proceed to make that sort of order [being requested in the summons].”
Threaten contempt
Senior Counsel Jairam countered with a rebuttal, and threatened to bring contempt of court proceedings against ExxonMobil (Guyana).
He said that in his correspondence with EPA/Exxon, he has been requesting a copy of the guarantee, and has cited their obligation to comply with his request under the Legal Practitioners Act.
“I don’t see the hesitation/ resistance in showing you all a copy of the guarantee,” Judge Persaud said in response to Jairam’s statement. Senior Counsel Jairam then said, “Exxon is playing with fire. I’m going to take contempt proceedings, and I am going to argue that they are not in compliance, since they are being difficult and adversarial. We will end up in the CCJ [Caribbean Court of Justice].”
Justice Persaud has ordered the parties to submit their submissions about the jurisdictional issue. On February 1, they will appear in court once more to make their arguments.
Court order
On May 3, 2023, High Court Judge Sandil Kissoon issued an order, inter alia, directing the EPA to issue ExxonMobil (Guyana) with an Enforcement Notice on or before May 9, 2023 for the company to provide, within 30 days thereof, 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. Failing to do so, the Environmental Permit granted to the company for its operations stands suspended.
The EPA complied with that court order, but, shortly after, filed with the Court of Appeal an appeal against Justice Kissoon’s ruling, and later went to that court to request a stay of the said order, pending the hearing and determination of the appeal filed by the agency.
Then, on June 8, 2023, Appeal Court Justice Rishi Persaud stayed the order issued by Justice Kissoon for the oil company to provide an unlimited parent company guarantee. In the interim, Justice Persaud ordered ExxonMobil to lodge a US$2B guarantee in “an effort to allay any anxiety as to any impending doom”. The company has already lodged that guarantee, as required.
The High Court order has its origin in a case filed in September 2022 by Collins and Whyte, who had moved to the court to get the EPA to enforce the liability clause in the environmental permit.
They want the court to ensure Exxon takes full financial accountability in the case of harm, loss, or damage to the environment from a well blowout, oil spill, or other failure.
Does not require
Senior Counsel Edward Luckhoo, representing Esso/EEPGL, is contending that Condition 14 of the permit does not require an unlimited guarantee.
Maintaining that Justice Kissoon had misinterpreted the clear language of this Condition, he had told the appellate court that what the permit does provide for is an estimate of a finite sum, noting that the formula for arriving at that sum is set out therein.
But Senior Counsel Jairam begged to differ, arguing that an unlimited parent company guarantee is necessary to protect Guyana in the event of an oil spill, which could have catastrophic effects on the environment.
“[Exxon] has been carrying out oil operations in the open high sea without financial guarantee. An oil spill could send back Guyana to the Ice Age if there is no insurance, because it is not easy to contain. A parent company guarantee does not cost [Exxon] a cent, but just requires it to show that it has the financial capacity to restore and rehabilitate the environment in the event an oil spill occurs,” Jairam had submitted at a previous hearing.
According to him, the permit mandates that Exxon and its co-venturers shall be jointly and severally liable for any loss or damage, or pollution to the environment.
The EPA and Attorney General Anil Nandlall, SC, have maintained that the environmental permit granted to Exxon imposes no obligation on the company to provide an unlimited parent company guarantee agreement and/or affiliate company guarantee agreement.
On the issue of whether the EPA had acted in breach of its statutory duty and had unreasonably permitted Exxon to carry out petroleum production operations in the absence of compliance with the terms of the permit, Justice Kissoon had ruled that the agency had committed an illegality, and had acted unlawfully, ultra vires, unreasonably, in defiance of logic, irrationally, and without any jurisdiction. He found, inter alia, that Exxon was engaged in a “disingenuous attempt” that 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,” Justice Sandil Kissoon had declared.
The Government of Guyana is concerned that Justice Kissoon’s decision may have far-reaching effects on the public interest and the advancement of the country, both economically and otherwise, if it is not overturned. (G1)
