The Great Balkan Arbitration: It’s a wrap (2)
The first part of this piece dealt with how the Government of Ghana (“GoG”), Balkan Energy LLC (“BEC”) and Balkan Energy Ghana (“BEG”) came together. In sum, it was a union of necessity. GoG needed someone to fix its power barge. And the Balkan sisters (BEG and BEC) came over to help. The relationship was however rocked by disappointment. And it turned sour. GoG accused BEG of failing to fix the barge in 90 days (as promised). BEG in turn accused the government of failing to provide it with electricity and other logistics in order to deliver on the project within the 90 days.
BEG commenced arbitration. GoG entered the fray. GoG then sought to throw a spanner in the works by alleging that the Power Purchase Agreement (“PPA”) together with the arbitration agreement had not received parliamentary approval. The spanner missed its target. The arbitration tribunal was not convinced that the arbitration agreement was invalid. The tribunal, therefore, decided to go ahead. This second part focuses on (a) the happenings before the arbitral tribunal; (b) the interim award made by the tribunal regarding the procedural issues raised by GoG; and (c) the final award.
Proceedings before the Permanent Court of Arbitration
On 22 December 2010, the arbitral tribunal issued a preliminary award (interim award) dealing with some procedural issues raised by GoG. Two main issues were dealt with. The first was whether the PPA was valid (in the absence of the parliamentary approval as contemplated under Article 181 (5) of the 1992 Constitution). The second issue was the applicable law governing the arbitration (since the PPA did not provide for the law governing the arbitration). The choice had to be made between Ghanaian law and Dutch Law. These two issues aside, there was the lingering question as to the weight to be placed on the Attorney-General’s legal opinion approving the transaction.
Validity of the PPA
BEG’s case was direct. First, it argued that the PPA was valid under Ghanaian law. After all, the PPA was an agreement in writing. It had been signed by the parties. The PPA had been in operation for three years; and as a result, GoG was estopped from relying on Article 181 (5) of the 1992 Constitution. In support of their estoppel case, they further stated that the Attorney-General had issued two legal opinions giving the green light for the parties to go ahead with the transaction. Pause for a moment. If you are a Ghanaian lawyer, I am sure you would roll your eyes at this kind of argument. This is because the case of Tuffour v Attorney-General firmly establishes the point that principles of estoppel cannot be called in aid to go around a constitutional obligation. But that is exactly what happened.
In upholding the validity of the arbitration clause in the PPA, the tribunal was of the view that Article 181(5) was irrelevant in deciding whether arbitration agreement was valid. In order to escape from the claws of article 181(5), the arbitral tribunal, relying on the principle of separability, carefully drew a line between the PPA and the arbitration agreement.
Choice of law
The applicable choice of law was another battle ground in this contest. Here is the thing: the PPA was to be governed by Ghanaian law. But GoG and BEG did not provide for a specific law to govern the arbitration. GoG argued that the appropriate law to govern the transaction was Ghanaian law. For BEG, the validity of the agreement must be determined by Dutch law (including Dutch procedural law in relation to arbitration and substantive contract law). BEG went on to say that the choice of law governing the arbitration must reflect the intention of the parties. And wait for this: BEG argued that the parties ought to be taken to have chosen the law that upholds rather than destroys or frustrates the intention of the parties to arbitrate.
In adopting an Ut Res Magis Valeat Quam Pereat approach, the tribunal reiterated that where there were two laws – one of which destroyed the intention of the parties to arbitrate and the other which gave meaning to the intention of the parties – the law to be followed is the one which gave meaning to the intention of the parties to arbitrate.
Having decided that the appropriate law of the arbitration was Dutch law, the tribunal noted that all formal requirements regarding the arbitration agreement had been met under Dutch law, the New York Convention, and Ghana’s Alternative Dispute Resolution Act, 2010 (Act 798). The Tribunal further stated that where no express choice of law had been settled on by the parties, the default law becomes the law of the seat of arbitration (in this case Dutch law).
Vienna Convention on the Law of Treaties Argument
BEG also argued that GoG could not set up its own internal law as a reason why it could not fulfil its obligations under international law. The Tribunal accepted this argument.
Interpretation of constitutional provision by an external body
Then there was the question as to whether the arbitral tribunal could set out to interpret a constitutional provision. GoG argued vigorously that under Ghanaian law, only the Supreme Court had jurisdiction to interpret a constitutional provision. The converse was argued by BEG. The Tribunal disagreed with GoG. According to the Tribunal:
“Arbitration tribunals are not infrequently confronted with the need to interpret and apply constitutional provisions relevant to the resolution of disputes submitted before them, just as they are usually required to interpret and apply treaties that are relevant to disputes.”
In relation to article 130 of the 1992 constitution (providing for the exclusive jurisdiction of the Supreme Court in relation to the interpretation of constitutional provisions), the tribunal noted that,
“the purpose of that provision, like similar clauses in numerous other constitutions, is to establish the judicial supremacy of the supreme court in the organisation and allocation of power in the domestic context of Ghana.”
The tribunal continued: “Where there is a case that transcends national borders because of arbitration agreement or some other legal commitment, such obligation becomes qualified and not necessarily prominent.”
On the general level, the tribunal found that both parties were responsible in one way or the other that for the breach of the contract. At paragraph 575, the tribunal noted that:
“When all the elements involved in this dispute are considered in the aggregate, it becomes evident for the tribunal that the PPA no longer serves it purpose and is incapable of governing the relations between the parties so as to ensure its objectives. A decision of the tribunal requiring enforcement of the PPA and strict compliance with its terms would, far from settling the dispute, give rise to continuing confrontation between the parties.”
The Tribunal acknowledged that a termination was inevitable due to the extra-ordinary circumstances of the case and the bitter confrontation between the parties.
In addition to the claim and counterclaim for breach of contract, there were also other claims made by the parties. These claims included allegations of unjust enrichment and fraud or deceit. The unjust enrichment claim was made as an alternative to the main claim of the breach of the PPA. BEG argued that if indeed the PPA was invalid (due to lack of parliamentary approval), then GoG should be taken as having been unjustly enriched by sums in excess of USD 40 million expended by the Claimant in connection with the barge. On the flip side, GoG argued that a claim in unjust enrichment cannot arise as GoG has not received any benefits. In other words, GoG’s asserted that it has not received the electricity expected from the barge and thus “money spent does not necessarily equal benefit conferred.” The tribunal sided with the GoG.
On the claim of fraud and deceit, BEG relied on the two opinions issued by the Attorney-General as the basis for saying that it was fraudulently induced or deceived into entering the PPA. The tribunal, siding with Ghana, came to the conclusion that the Attorney-General’s opinion was at best a mistake and that the could not rely on it to establish fraud or deceit. The tribunal [in paragraph 538] noted that:
“it would be hardly conceivable that the two opinions of the Attorney-General issued at the time of the negotiations of the PPA were done with the deliberate intention of misrepresenting the law or the facts to the Claimant.”
At the end of the arbitration, BEG walked away with USD 13.3 million. And the next step was to go in search of assets to satisfy the arbitration award.
The enforcement procedures started in 2017 with BEC and BEG
With the arbitration award confirmed, the stage was set for enforcement. It is worth recalling that BEG had initially attempted to attach the assets and bank accounts of the GoG in the Netherlands without success. It did not stop there. BEC and BEG went as far as South Africa and France in search of assets to satisfy the judgment debt. In the proceedings in South Africa, the BEC and BEG sought to “make a foreign arbitral award an order of [the] court in accordance with the provisions of […] the Recognition and Enforcement of Foreign Arbitral Awards Act 40 of 1977.” The BEC and BEG sought to attach 6, 373, 650 shares held by GoG in Anglo Gold Ashanti Limited. The
GoG settled its claim with the BEG and BEC on 2nd October 2018.
1980 G.L.R 637