Examining Debt Characterization and Partnership Issues
A Brattle team led by Principals David Plastino and Jake Zahniser-Word was retained by Davis Polk and Holland & Knight, counsel to ExxonMobil, to evaluate whether a joint venture between an ExxonMobil subsidiary and the State of Qatar had the economic characteristics of a partnership and whether the production payments made to Qatar under the agreement’s terms had the economic characteristics of debt. The team also evaluated whether – absent the tax benefits – the transaction had a meaningful economic impact on the parties. In April 2024, Mr. Plastino testified at trial that ExxonMobil and Qatar shared in the economic upside and downside of the Al Khaleej Gas (AKG) project and that AKG had other economic characteristics of a partnership. He also testified that the production payment had the economic characteristics of debt and analyzed the transaction’s non-tax business purposes.
Following a week-long trial, US District Judge David C. Godbey ruled in ExxonMobil’s favor, noting that “ExxonMobil’s tax treatment correctly reflects both the tax law and the economic substance of the transaction.” In his opinion, Judge Godbey found ExxonMobil’s fact and expert witnesses, which included Mr. Plastino, to be “credible and helpful” in reaching his conclusions that AKG was a partnership and that the production payment was debt.
