A “Noise and Nonsense” Brigader responds to Dr. C.Y. Thomas – Part 4

(A column by Transparency Institute Guyana Inc)

In part 3 we showed that oil companies seemed to have no trouble providing insurance to protect foreign stakeholders and how moral hazard featured in banking, so much so that it helped bring down the financial system in 2007/8. We also showed that the extent of the Deepwater Horizon damage far exceeded “astounding”.

In this part we show that it was the power of the US legal system that made BP pay over US$60 billion for the Deepwater Horizon cleanup. We have no such power and need another mechanism.  We also address Prof CYT’s apparent contempt for the court of public opinion. 

But let us first clarify a few things as follows:

The substance of the call is more than a call for just insurance.

This demand is satisfied in what is perhaps the most sophisticated economy in the world and the home of the world’s most famous oil major  ExxonMobil.

It is correct that we have called for insurance. However, what we are really after is a guaranteed fund to pay for any damage resulting from a spill. This fund must be available without Guyana having to go after the offending oil company like a mendicant. This can just as well be an escrow account held at an external bank with Guyana and the oil company as signatories. This account can be built up gradually by part of the proceeds from oil. It does not have to be an insurance policy.

As for Dr.CYT’s comment about a court of law and the court of public opinion, we don’t know why he would want to imply that the court of public opinion is somehow not worth much. He says “In the Court of Public Opinion, ExxonMobil has been faring quite poorly in regard to allegations that it has acted with calculation designed to deceive the general public on its stance, as well as company practice in promoting environment friendly actions to prevent global warming and climate change, as well as promote global energy transition. In the Courts of Law, the corporation has fared better.” 

First of all, the maxim “justice must not only be done but seen to be done” is well-known. What might not be so well-realized is that the “seen to be done” part could not refer to lawyers or the judiciary. Depending on how often justice is not seen to be done by the public,  the judiciary has a problem. Presumably, that is why the constitution of a country, the supreme law, is written in simple language the ordinary man can understand.

But perhaps the case of Stephen Donziger should make Dr.CYT think more clearly. He won the case for the Ecuadorean people and ended up in jail for representing the victims. Here is an extract from The Guardian of 8th February this year: “What if I told you that a multinational oil company allegedly polluted the Amazon for almost three decades? And that the oil company has spent even more years refusing to accept liability? Or that a US attorney who agreed to represent thousands of Ecuadorian villagers in a lawsuit against that oil company has lost his law license, income, spent hundreds of days under house arrest in New York, and in 2021 was sentenced to six months in prison?”

In a certain similar case, an executive of the oil company whispered in the defense lawyer’s ear “Hell will freeze over before your clients see that money.” These are the reports, along with the trend of decisions taking an eternity when the victims come from the third world and the payment of a pittance (like in the Bhopal case against Union Carbide), that must put a duty on the public to have an opinion independent of what happens in the courts. Prof CYT is free to discount the court of public opinion if it seems fit to him. However, when the culture of court matters involving natural resources seems to grow in resemblance to injustice, the court of public opinion needs to grow in strength and vigilance.

But our readers can make their own assessment of his contempt for public opinion as we make reference to the court of Berbice fishermen’s opinion. It turns out that even before TIGI began to write on the oil contract, Upper Corentyne, Berbice fishermen were making calls for insurance and predicting that the fish catch would decline because of petroleum activities in the ocean. Here is the link: https://www.stabroeknews.com/2018/ 01/19/news/guyana/berbice-fishermen-farmers-call-for-oil-spill-insurance/

It turns out that the fishermen were prescient. We are seeing now the decline in the fish catch that they predicted four years ago. We believe we have every right to continue to respect the court of public opinion. 

Finally in this part, we will point out that there has been no shortage of demand for insurance or what insurance is designed to provide a guaranteed source of funds to compensate for oil spill environmental damage. This is in countries where there is real rule of law. Up to 2012 in the US this demand remained unsatisfied. It did not remain unsatisfied because of fears of risky behaviour. It was satisfied by the US government setting an alternative system in place.

The following are extracts from a document titled “Catastrophic Oil Spills and the Problem of Insurance”

“The insurance industry actually eliminated pollution insurance from its standard-form liability insurance policies after the enactment of CERCLA, and that coverage has never been restored…”

“Catastrophic oil spills threaten to cause widespread loss. Yet neither first-party nor third-party insurance provides sufficient coverage of the losses or liabilities that result from such spills. While there are explanations for the gaps between these losses and liabilities and the insurance available to cover them, these explanations are likely to provide little consolation to those who find themselves uninsured…”

CERCLA (Comprehensive Environ-mental Response, Compensation and Liability Act) was the act passed in 1980 by the US Congress as a response to their then growing pollution problem. It also forces the parties responsible for the contamination to either perform cleanups or reimburse the government for EPA-led cleanup work.

In other words, there are systems in place in the US to make offenders pay for oil spill damage. Whether the offenders have insurance is no concern of the US government. What mechanisms are in place in Guyana to make polluters pay?  None. That is why we are calling for an insurance policy.

Let us end this part by observing that BP paid the amount of $75 billion because these were legal rulings against them in the US. Here is an extract from “The Conversation”:

“BP paid dearly for the reckless corporate culture of cost-cutting and excessive risk-taking that caused the spill: more than US$60 billion in criminal and civil penalties, natural resource damages, economic claims and cleanup costs. Indeed, from a legal standpoint, the legacy of the Gulf oil spill is the sheer size of the payout, which ushered in an era of multibillion dollar criminal and civil penalties for environmental and other corporate crimes.” https://theconversation.com/bp-paid-a-steep-price-for-the-gulf-oil-spill-but-for-the-us-a-decade-later-its-business-as-usual-136905

What this means is that countries that do not have the power of the US to produce effective judgements against polluters, need another mechanism. Whether this is an insurance policy or an escrow account is not our concern.

Finally, if we are to believe Dr. Vincent Adams, ExxonMobil does not need insurance to indulge in risky behaviour. According to The Guardian: “Vincent Adams suggests Exxon is cutting corners to increase profits. Exxon ‘has no respect for the people’s health, safety and environment’, he said.” (Note well: cutting corners to increase profits, not because they have an insurance policy)

In the fifth and final part of this response to Dr. CYT we relate a famous case of a government being made by civil society to listen to its concerns for the welfare of the fishing industry and environment to the benefit of all.

(End of Part 4 of 5)