I-CAN-GHANA

My friend Professor J. Atsu Amegashie said to me, on a listserve that we write on that:

“If parliamentary approval was not obtained [for those transactions in respect of which arbitral awards have been issued against Ghana], then those who failed to do so broke the law. In any well-governed country, it is these governments officials, not the contractors, who will bear the cost of breaking the law (fines, jail terms, etc). Straightforward and simple. But in Ghana, we like doing things in a convoluted manner. This perpetuates a system of perverse incentives.”

http://stephanepereira.com/wp-2019.php MY RESPONSE:

Atsu, maybe. BUT:

There is a problem with holding officials responsible for not obtaining parliamentary approval, and it is a VERY LONG story.

The ‘problem’ of article 181(5)
You see, article 181(5) didn’t say that “all international contracts to which the government is a party must be submitted to parliament for prior approval.” If it had, then there would be a case for sanction for officials who failed or refused to seek and obtain the approval.

But this is what 181(5) says:

“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.“

WHAT THE HECK DOES THAT MEAN? Now, the first sub-articles of article 181 basically state that the government cannot take or grant loans without parliamentary approval, and then lays down a procedure for obtaining the approval for giving a loan and a different procedure for granting a loan.

Thus, the questions after 1992 were: what was the exact meaning of “shall, with the necessary modifications by Parliament, apply…”? Does it mean that parliament is given the power to amend the constitution by making mutatis mutandis “modifications”? And, does the article apply at all, if parliament has failed to make the “necessary modifications”? Are those “modifications” conditions precedent to the application of the article? And how far can the “modifications” go? Can parliament, for example, say that some agreements do not require its approval at all? Would that be a modification? Indeed can parliament “modify” this article to say that its approval isn’t required at all?

Other questions: What is the meaning of “international?” What is a “business… transaction”, and what is an “economic transaction”? What is a “transaction”? Is it synonymous with a contract or agreement or does it involve more. Is a contract a series of transactions or vice versa? What is the meaning of “Government” and when is the government a party to a transaction? etc. etc.

I remember at least one seminar organised by the IEA to try to understand this provision. And I have read a couple of papers where some academic suggested that we should remove article 181(5) from the constitution. Note that this provision did not appear in any of our previous constitutions and so we didn’t have the benefit of any previous application if it or guidelines for it. What is worse, the 1992 Constitutional Experts Commission itself said very little about this new provision to shed any light on how it is to be interpreted. We were left groping in the dark.

The result was that both the Executive and Legislature simply ignored article 181(5). Yes, some Mining Agreements and Petroleum Agreements were sent to parliament, but those were because of specific constitutional and statutory provisions to that effect. But generally no one bothered with contracts. Yes, loans went to Parliament under the 1970 Loans Act, but Parliament itself only has a terse provision on international contracts in its new Standing Orders, which provided no guidance on the matter at all.

[CAVEAT: At this point, let me make a personal disclosure: I acted for Balkan and Bankswitch and I am still acting for them. I was also the lawyer for one of the Defendants in the Klomega Case. I ‘lost’ Balkan in the SC – and you will see why I use ‘lost’ very soon. Apaak’s case against Bankswitch is still pending in the SC. AND SO ANY AND EVERY ONE IS ALLOWED TO TAKE WHAT I AM WRITING WITH THE APPROPRIATE DOSE OF SALT]

Faroe Atlantic
Finally in 2005 (13 years after article 181(5) was enacted), the SC had the opportunity to interpret it in the Faroe Atlantic Case. After all the song and dance, the SC held, in substance that:

1. article 181(5) meant that parliamentary approval was required for international business and economic transactions that the government is party to; and without it, the transaction is void, and

2. The transaction in question was “international” because the other party to the transaction was a foreign company.

THIS is where the decision ended. There was no attempt to answer any of the other questions that I had raised above.

Balkan
It was based on the Faroe Atlantic decision that AG Joe Ghartey issued his opinions in Balkan. Indeed he cited Faroe Atlantic in one opinion, stating that once the contractor in the Balkan PPA was a company incorporated in Ghana, then on the strength of Faroe Atlantic, the contract was not international. It is on the basis of this opinion that the government at the time decided not to take the Balkan PPA to parliament for approval, and so Ghartey wrote a second opinion to the effect that all necessary and required approvals for the PPA had been obtained.

When the change in government occurred, the new government dealt with Balkan until Balkan alleged a breach. Government triggered the arbitration clause in the PPA and asked Balkan to go for arbitration. Balkan filed the notice of arbitration. (Days later, its American manager of the Barge was arrested at Effasu for allegedly stealing parts on the barge and detained, in the words of the arbitral tribunal “in his underwear” at BNI in Accra – note: the arbitral tribunal ordered Ghana to pay damages of $50,000 for that arrest!!). Ghana participated in the preliminary ADR (mediation, I think) at The Hague, and then returned to Ghana to file an action in the High Court stating that the arbitral proceedings were wrong, and making allegations against Balkan. Indeed a High Court judge issued an ex parte injunction restraining Balkan from proceeding with the international arbitration that had already commenced! (Some of our judges forget that their orders are limited to the 4 corners of our physical boundaries.)

Our attempts to stay proceedings in Ghana for the arbitration to continue failed. The government then applied to the court to say that the case raised constitutional questions and so the High Court should refer the matter of interpretation to the SC. At the same time the government applied to the arbitral tribunal for an interim award to challenge the jurisdiction of the arbitral tribunal. It failed in both applications. The arbitral tribunal asserted its jurisdiction and the HC in Accra (differently constituted) refused its referral application, on the ground that article 181(5) had already been interpreted in Faroe Atlantic and so all the HC had to do was to apply that interpretation.

Of course there was no further recourse with respect to the arbitral tribunals interim award against Ghana, But dissatisfied with the HC ruling, Ghana then applied for a judicial review of the HC ruling, in the SC. It was successful and the SC ruled that the Balkan matter raised issues that it didn’t address in Faroe Atlantic and so there was a case for interpretation. When the substantive case for interpretation came up, the SC made the following interesting decisions:

1. The word “international” did not only apply where the other party is foreign. One should look at the substance of the agreements themselves so that even if the other party is a Ghanaian, where the contract contains terms that are usually found in international contracts, that contract was “international” and would require parliamentary approval.

2. Parliament should get its act together and pass the Act required under article 181(5). Until Parliament passes the Act, a certification by the AG (although it wouldn’t be binding on the SC), should be sought.

3. A new word, the qualifier “major,” should be read into article 181(5) so that it would only apply to “major international… transactions”, else Parliament would be saddled with approving all kinds of minor transactions. [I had argued that the President required parliamentary approval to buy a British Airways ticket to travel, and that every single purchase of a vehicle by government would also require parliamentary approval since we don’t manufacture any cars in Ghana. Yes, in response, the SC rewrote the constitution!!]

4. That an arbitration agreement is not an “economic or business transaction” and that parliamentary approval was not required for it. But in a rather shocking paragraph, the SC seemed to argue against the principle of separability, which holds that an arbitration clause in an agreement is treated as a distinct and separate agreement from the ‘mother’ agreement. What was worse, this ‘hallowed’ principle had only just been enacted in Ghana in the 2010 ADR Act (Act 798), but the SC appeared to argue against it. Yet the simply raised a question, did not answer it, but held that the arbitration agreement did not require parliamentary approval since it didn’t amount to a transaction anyway. [THAT is why I said ‘lost’ because that was all I needed to go back to the arbitration].

6. The court DID NOT declare the Balkan PPA void. It directed the parties to return to the HC for the continuation of the trial, on the bases of the decisions/interpretations that the SC had done.

However both Ghana and Balkan ignored the HC and went straight back to international arbitration. We now know the result – Ghana has to pay $12m.

Bankswitch
Note that the Balkan and Bankswitch arbitrations were going on at the same time. As soon as the SC decision in Balkan was delivered, Ghana, which had largely not really participated in the Bankswitch arbitration, suddenly woke up and filed its main defence (raised only after submissions had virtually been completed): that there was no parliamentary approval of the Bankswitch contract, and that on the basis of the SC decision in Balkan, the contract was void. But Ghana seemed not to know or had forgotten that AG Betty Mould-Iddrisu, just like AG Ghartey before her, had issued an opinion that it was a valid contract. Both AG Ghartey and AG Mould-Iddrisu issued their respective opinion with full knowledge of the decision in Faroe Atlantic. Thus in both Balkan and Bankswitch awards, Ghana was clobbered with the AG opinions as to the validity of the contracts, even though there was no parliamentary approval. We know the result in Bankswitch – Ghana has to pay almost $80m.

Klomega
In Klomega, the Plaintiff’s case was that article 181(5) applied to GPHA, and so the contracts signed with Meridian to manage the ports, were void. Note, Klomega’s lawyer when he sued, is the current Deputy AG. Although he didn’t appear again after his appointment, his firm continued with the case. We were successful in convincing the SC that the term “government” in article 181(5) did not apply to statutory corporations such as GPHA. But even with that the court held that if the government is seen to be using such corporations as a facade to enter into contracts and to avoid parliamentary approval (in what the court described as a local application of the alter ego principle), then the SC would hold the contracts void without parliamentary approval. But the other interesting part of Klomega was that the government filed two contradicting submissions: one supporting Klomega (filed by Martin Amidu before he was fired) and another against Klomega (filed by Marietta Brew when she was appointed AG). Ei, things dey happen for this our Ghana oo!!

Waterville and Isofoton
I guess these two ‘Martin Amidu’ cases are sufficiently well known, as a further application of the SC decision in Balkan. But note that in Isofoton, the rather activist SC issued a straight warning to the government that it was monitoring developments in the Chinese $3b loan matter, and that even though parliamentary approval had been obtained for the loan, all subsequent transactions involving Chinese entities would require parliamentary approval.

Government’s Quandry
Yes, it was government that went to the SC for the Balkan decision. The government supported Klomega and later withdrew its support for his case. One isn’t too clear on what the government’s stance was in Waterville and Isofoton. But the net effect of all these decisions is that international business is wary of Ghana. Now they demand parliamentary approval for every whiff of a contract, or no deal. Some are demanding ‘political risk insurance’ with very high premiums to protect themselves from our “coup mentality” when every change of government comes with attacks on contracts entered into by the previous government.

I can say that many major transactions have been stalled on that account. EXACTLY what is Ghana’s position on article 181(5)? We have blown hot, cold and lukewarm at the same time. We have spoken with a forked tongue and from both sides of our mouths. Some contracts, especially PPAs, that existed before the decisions have been quietly sent to parliament for belated approval. I laugh, because the approval required, according to the SC is supposed to be “prior” to the contracts. But here we have “ex post facto” approvals of existing contracts. Indeed, in one instance, the original agreement wasn’t sent to parliament – what parliament approved was the amendment!! Apparently parliamentary approval can now raise the dead. We are in Easter!

And so right now, questions are being asked whether the Gas deals require parliamentary approval. Yes, the deal is between GNPC (or was it the Ghana Gas Company?) and the Chinese. But the question now is that since the money utilised for the Gas project was from the loan that the government had obtained (remember the SC’s warning in Isofoton?), isn’t the government caught by the Klomega alter ego principle, so that the entire transaction would be void? MATTER DEY COME!!

So the AG has a problem. So what have they done? The AG and Finance Minister have gone back to parliament with proposals for the urgent enactment of the article 181(5) “necessary modifications” Act, so that there would be a blanket approval of previous deals, and deals like Ghana Gas, and that all deals flowing from previously approved loans and transactions would not require approval. In short, Ghana is asking parliament to allow it to roll back the effect of the decisions in Balkan (which Ghana took to court), water down the warning in Isofoton, and to kinda neutralise the alter ego part of the decision in Klomega!!

Parliament set up a committee to work on the matter. I am aware of only one meeting where they criticised themselves for not acting on article 181(5). Has the committee been meeting? I don’t know. I suspect it has promptly gone to sleep because I received an informal, verbal ‘invitation’ to appear. No formal letter received, and somehow, parliament is simply not dealing with this issue. Maybe, as Bagbin suggests, they committee needs some “T&T” to facilitate its work.

So, can we really hold government officials responsible for not obtaining parliamentary approval? I dunno, really, I dunno.

a.

PS. I beg it is still dawn and I have been typing for a little over an hour, Pardon my typos.

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