High Court Halts Arbitration Proceedings

By J. Ato Kobbie, Managing Editor

The Commercial Division of the High Court, on Monday granted an interlocutory injunction application by the Attorney-General, to stay proceedings at the international court of arbitration, initiated by Balkan Energy in its dispute with the Government of Ghana over a 20-year lease agreement of the ‘Osagyefo’ Power Barge.

Granting the injunction, the court, presided over by Justice Barbara Ackah-Yensu said the Attorney-General had established its legal right, and also that it could suffer greatly irreversible losses if the application was not granted and the arbitration process were to continue, since the court did not have jurisdiction over that process.

The court sustained arguments by the Deputy Attorney-General that assets seized could not be reversed and that there was a real danger outside of the country where the jurisdiction of the court did not extend.
After granting the injunction, the court directed the Attorney-General to, within 14 days, file an undertaking at the Registry to fully compensate the defendants if in the final analysis the defendants suffered any losses as a result of the stay of proceedings.
The Attorney-General filed the application seeking an injunction restraining Balkan Energy (Ghana) Limited (2nd Defendant) from proceeding with or taking any further steps whatsoever in the arbitration proceedings instituted by it on December 23, 2009 against the Government of Ghana in the Permanent Court of Arbitration (PCA).
The application also sought to restrain the 2nd Defendant from taking any further steps in relating to or in connection with a decision made by the District Court of Amsterdam, The Netherlands on February 26 2010 attaching the Government of Ghana’s assets in The Netherlands pending the final determination of this suit and an injunction restraining the defendant, its privies and agents from instituting or pursuing any other arbitration proceedings or any other relief in any jurisdiction outside the jurisdiction of Ghana in respect of a Power Purchase Agreement dated July 27 2007 pending the final determination of this suit.
According to the Plaintiff, there was a serious question to be tried which, if determined in the terms sought, would prevent the arbitration from proceeding and would remove the basis on which the 2nd Defendant is able to bring actions against the Government of Ghana in various foreign courts.
The 2nd Defendant had obtained leave from the District Court of Amsterdam to attach the Plaintiff’s accounts in the Netherlands to the limit of US$66,330,000 which was done without notice to the Government.
According to the 2nd Defendant, the Plaintiff in agreeing to international arbitration by the PCA at The Hague under the United Nations Commission on International Trade Law (UNCITRAL) rules embraced the risk of such orders being made either by the arbitral tribunal or by the courts of the Netherlands.
Furthermore, it said, under clause 24 of the agreement, the Plaintiff explicitly waived immunity from execution in any jurisdiction that it is entitled to claim such immunity from jurisdiction, enforcement and attachment or any other legal action in relation to itself, its assets or revenues.
It also averred that the order was made in respect of assets of the Plaintiff in certain specific banks and it turned out that the Plaintiff had no assets in those banks, thus no property was attached and no operations of the Government had been impeded.
It will be recalled that on July 27, 2007, a Power Purchase Agreement was executed by the Minister of Energy acting on behalf of the Government of Ghana and by Mr. Phillip David Elders (3rd Defendant) acting on behalf of Balkan Energy (Ghana) Limited (2nd Defendant) for the lease by the government to the 2nd Defendant of a one hundred and twenty-five megawatt (125MW) dual fired power barge, popularly known as the Osagyefo Barge, situated at Effasu in the Western Region of Ghana and owned by the Government of Ghana.
The agreement also involved the repair, rehabilitation and commissioning of the Osagyefo Barge by Balkan Energy Gh. Ltd within 90 days of the Effective Date as defined in the Power Purchase Agreement.
However, the contract did not go through Parliament which violated Article 181 of the Constitution which principally deals with Parliamentary ratification of loan agreements.
While Article 181(1-4) deals with parliamentary ratification of loan agreements, article 181(5) extends the requirement to “international business transactions’ to which the government is a party. It states that “This article shall, with the necessary modifications by Parliament, apply to an international business or economic transaction to which the Government is a party as it applies to a loan”.
But the defendants argued that the PPA is a valid contract between the Plaintiff and a Ghanaian company. According to them it was not an international business or economic transaction to which the government is a party and thus in need of parliamentary approval under Article 181(5) of the Constitution.
Citing the Companies Act (Act 179), they claimed that the nationality of a company is determined on the basis of where it is incorporated, adding that under section 302(2) and Schedule 1, clause 1 of the Companies Act, an ‘external company’ is “a body corporate formed outside Ghana.”
They also referred to Section 315 and Schedule 1, clause 1, saying the term “non-Ghanaian company” was defined as “any association incorporated or to be incorporated outside Ghana not being an external company as defined in section 302 of this Act”.
But the plaintiff disagrees, citing several factors which make this transaction an international business transaction. According to the plaintiff, the expression of interest in the commissioning of the Barge and the negotiations for the PPA were conducted entirely by Balkan Energy LLC which entered into a memorandum of understanding for the project and undertook to execute the project.
Per the affidavit in support, noted the Plaintiff, Balkan Energy LLC, by its own representations, is a private company incorporated under the laws of the Netherlands and having its registered office at One Hickory Center, 1800 Valley View Lane, Suite 300 in Dallas, Texas, USA.
The Plaintiff argued that the 2nd Defendant, the party that eventually executed the PPA, was nominated to do so by the 1st Defendant and incorporated in Ghana some 11 days before the execution of the PPA.
The 2nd Defendant, the company incorporated in Ghana, is owned as up to 100 per cent of its issued shares are owned by Balkan Energy Limited (Balkan UK), a company incorporated in and resident in the United Kingdom. Balkan UK’s sole shareholder at incorporation is an entity called Syntek West Inc with its address in Texas in the United States of America and Syntek West Inc is in turn wholly owned by a Mr. Gene Phillips, a national of USA, the plaintiff had averred
On the indemnity provisions of the PPA, the plaintiff argues that the provisions potentially apply to foreign persons.
Plaintiff argues citing Clause 15.4 of the PPA which provides that the Government “shall indemnify and hold harmless BEC (and its officers and employees) from and against all damages, losses and reasonable expenses suffered or paid by BEC as a result of any and all claims for personal injury, death or property damage to third parties…. and resulting from any act or omission of GoG or its agents or employees”

“As noted in paragraph 13 of the affidavit in support”, plaintiff said, “the 3rd Defendant who is the managing director of the 2nd Defendant is a citizen of the USA”. It went on that “Pursuant to the provisions of section 5 of the Contracts Act, 1960 (Act 25) and clause 24 of the PPA, the Government is exposed to claims by any foreign employees or officers of the 2nd Defendant under these indemnity clauses”.

Furthermore, it added, this clause would entitle the 2nd Defendant to claim an indemnity from the Government in respect of any claim made against it in any jurisdiction by its foreign contractors.
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