President Ali does not seem to understand the difference between renegotiation and contract sanctity

Dear Editor, 

President Ali’s recent interview on Al-Jazeera was embarrassing.  

He does not seem to understand the difference between renegotiation and sanctity of contract. He does not seem to understand his role as a head of state. 

Sanctity of contract is simple – you have to do what you agreed to do in the contract. You cannot break a bargain because you don’t like it any more. Business depends on the simple proposition that you do what you promised to do in the contract or else you pay the other person for the loss they suffered because you broke your promise.   

Renegotiation is an entirely different matter. The parties to an agreement were free to enter into the agreement. They are also free to come back and change it if they wish. If President Ali reads the Petroleum Agreement he will see that Article 31.2 of the Petroleum Agreement says: “This Agreement shall not be amended or modified in any respect except by written agreement entered into by all the Parties which shall state the date upon which the amendment or modification shall become effective.”  

But renegotiation would be unwise. The three companies – Exxon, Hess and CNOOC – are here to make money for their investors. They will renegotiate if they get something advantageous. They will not (and should not as commercial entities) reduce the return to their investors unless there is some compelling legal or business reason to do so. In-country lamentations about exploitation and unfairness don’t count.  

There is no guarantee that President Ali and his government will negotiate better than the Granger government. President Ali’s stewardship of Guyana’s energy sector has been unimpressive. Renegotiation is likely to make Guyana even worse off. 

When President Ali said that he has to work within the existing agreement to obtain the “best possible returns” he is completely wrong. A president is not a businessman. He is a public servant. President Ali’s job is to serve the nation, including the hundreds of thousands of Guyanese who did not vote for the PPP/C party. He must ensure that Exxon, Hess and CNOOC fulfill their contract obligations and comply fully with national law.  

Lastly President Ali and his government must be open and transparent so that when they fail, ordinary citizens can call them to account, can challenge and criticise them freely, and ultimately can go to court to uphold the rule of law.  

Yours sincerely,

Melinda Janki