An undertaking is required if liabilities exceeds the insurance coverage

Regarding the recent High Court’s ruling in relation to the Environmental Liability (EL) matter between Esso Exploration and Production Guyana Limited’s (EEPGL) and the Environmental Protection Agency (EPA). As expected, the media is overwhelmed with a plethora of opinionated letters, articles and editorials proliferating the view that the High Court’s ruling should not be appealed by the Government. With respect to the worst-case scenario concern, which is not to be discounted, should the liability be in excess of the current insurance coverage and the Parent Company Guarantee, it does necessarily translate to the country becoming exposed to this liability. In this regard, an undertaking from ExxonMobil, the Parent Company, is required, such that if the liability exceeds the insurance coverage and the Parent Company Guarantee, the Parent Company is legally obliged to honor those liabilities.

Suffice it to state, such an undertaking is already in place, inter alia, the Environmental Permit itself. In this respect, there is a clause that followed EEPGL’s affixed signature on the Permit where it states that, “EEPGL hereby accepts the above terms and conditions upon which this Environmental Permit is granted and agree to abide by the Environmental Protection Act, Cap.20:05, Laws of Guyana, the Environmental Protection (Amendment) Act, 2005, and the Environmental Protection (Authorizations) Regulations, 2000, and any existing or forthcoming regulations, best practices, guidelines and standards made under this Act”. Condition 14.1 of the Permit states that, “the Permit Holder is liable for all costs associated with clean up, restoration and compensation for any damages caused by any discharge of any contaminant, including the cost of all investigations into pollution incidents or discharge of contaminants, conducted at the instance of Agency.” Therefore, even if the cost exceeds the insurance coverage and guarantee amount, the Permit Holder is still liable.