The ExxonMobil Case 2001 (Alabama)

I came across this case while surfing around the net, one of the classical examples on how a multinational corporation is taken advantage of due to one small mistake. Much like diabetic patient losing a limb because of a small cut. There are other example cases like McDonalds being a target for their nutritional value causing obesity or even tobacco company targeted for lung cancer causing agent. But these are story for another time. For now, ExxonMobil in the State of Alabama, U.S.

This particular case deals with taxation issue where a contractual relationship is establish between Alabama and ExxonMobil. In the contract, as ExxonMobil claims, has well establish terms relating to how tax should be paid and the amount promised. But then according to Alabama, the terms does not cover the extra 40 million U.S dollars royalties.

ExxonMobil Vice President Public Affairs, Kenneth P. Cohen in a press conference said "ExxonMobil sought judicial review of the lease agreement to resolve the $40 million question and Exxon communicated with the State in a completely transparent, straightforward manner. At the time Exxon started production, the company advised the State how it would calculate royalty payments and fully reported all volumes of natural gas and products produced from its wells to the State. When the State expressed confusion over contract language and requirements or if it needed additional information, Exxon provided it immediately."

As claimed by Exxon, it seems that Alabama wanted a fair share of the royalties or even some share in the result of punitive damages. Due to the nature of the dispute, it is dealt as a fraud case where income was not honestly shown. And by the nature of contracts, courts provide protection to lesser parties, in this case although hard to admit, is the State of Alabama. However, a case like this must always be dealt with carefully and with exclusion in a case to case basis. Or else a floodgate will open and these multinational corporation will face endless slaughter from leeches. That's the reason Exxon wanted a judicial review to overturn the verdict.