On twenty sixth January 2021, an arbitration panel sitting in London, dominated towards Ghana in a dispute between the nation and a subsidiary of Swiss vitality buying and selling big, Trafigura, about an aborted 107 MW energy plant.
Because the arbitration consequence itself was not appealable, the one method round it was to ask a courtroom to set it apart on the premise that the arbitral panel acted past the scope of their authority as conferred by the arbitration clause within the subsisting contract/settlement. The federal government failed to do that inside the prescribed time. Nevertheless, after the deadline had handed, it approached the Excessive Court docket in London for particular depart to convey a case to annul the arbitral resolution on two grounds. Regardless of having been granted a brief extension, it did not instruct its legal professionals on time and to adjust to courtroom orders resulting in the dismissal of its case.
Following the Excessive Court docket’s ruling, the arbitration award turned solid in iron. Ghana, due to this fact, entered into negotiations with Trafigura and, in September 2021, made an element cost of ~$34.35 million out of the full sum, which at the moment was about $138 million plus curiosity (accruing since November 2018) on the principal award sum ($134,348,661). The curiosity at the moment was about 6.2% (at this time, it might have been greater than 11%). Nevertheless, failure to clear the total quantity led Trafigura again to the Excessive Court docket in November 2021 for additional consequential orders.
The federal government then switched techniques to irritating service of the orders. In March 2022, after Ghana selected to pay solely $30 million of the excellent quantity, Trafigura initiated procedures to acquire the remainder of its cash by seizing and promoting Ghana’s property. It took about six months from the time of the Excessive Court docket’s orders earlier than Ghana was previously served by the British equal of Ghana’s International Ministry, the FCDO, in Could 2022. Ghana ignored the service.
In April 2023, the Excessive Court docket issued what is called “interim charging orders” towards Ghana’s property and directed that the orders be served by the Ghanaian Excessive Fee in London and by way of the e-mail addresses of the officers on the Finance Ministry that engaged with Trafigura relating to the sooner part-payment.
In Could 2023, the federal government employed White and Case, a legislation agency with robust ties to politically influential Ghanaians, to problem the proceedings. On twenty third June 2023, White & Case utilized to the Excessive Court docket to invalidate the Court docket’s earlier orders. The federal government’s place was primarily that below the legislation all authorized processes focused at a state in England and Wales should be served by diplomatic channels. Within the interim, the federal government paid $5 million to Trafigura.
In October 2023, the courtroom dismissed Ghana’s case. It held that while a contemporary motion initiated towards a state social gathering does require that the state be notified by diplomatic channels to grant it a good likelihood of responding, it might be unreasonable to anticipate each doc in reference to a case to be submitted by diplomatic channels. For an arbitral award enforcement case, the ends of justice can be poorly served by the ensuing delays. Ghana’s Excessive Commissioner in London nonetheless assured the nation that negotiations had been going properly and none of Ghana’s properties within the UK can be offered by Trafigura to defray the money owed.
The reality is that Trafigura had realised lengthy earlier than then that negotiations by themselves don’t transfer the Ghanaian authorities. What did was the accompanying energy of authorized threats. Thus, in March 2023, they’d already moved a District Court docket in Amsterdam to implement the arbitral award, in step with the New York Conference, a treaty that facilitates enforcement of arbitration awards in all signatory international locations. Ghana was not represented at Court docket. The Court docket refused the request, primarily as a result of Trafigura had not been too particular about which Ghanaian property within the Netherlands it sought to grab (or “connect”) and will due to this fact not be fully clear that any such property are usually not lined by the customary immunity loved by States.
Trafigura took the matter to the Court docket of Enchantment in Amsterdam. As soon as once more, the federal government was served with a discover to look but it surely didn’t take benefit to take action. This time, Trafigura tightened its case to deal with the popularity of an arbitration award that had already been granted and for which execution had even commenced within the seat of arbitration below the relevant legislation. Because the authorities of Ghana didn’t hassle to submit a defence, the Court docket had no problem ruling in July 2024 for Trafigura. The street was now clear for the corporate to seek out any Ghanaian property not protected below worldwide legislation to connect. As of now, there is no such thing as a proof that it has been discovered within the Netherlands.
In January 2024, Trafigura additionally initiated proceedings in the US to implement the award. By this time, regardless of the funds made by the federal government as much as that time, the nation nonetheless owed the commodities big almost $129 million, as a result of compounding impact of curiosity. True to kind, following one more courtroom motion, in February 2024, the federal government rushed to pay one other $19 million.
In the meantime, however the earnest assurances of Ghana’s Excessive Commissioner in London that negotiations had prevented any Ghanaian asset from being affected by the enforcement proceedings, one in all Ghana’s most necessary industrial properties, Regina Home, had truly been positioned in receivership and all financial pursuits in that asset, reminiscent of hire paid by tenants, are being redirected to Trafigura. The federal government has did not disclose this to the Ghanaian public.
In June 2024, Trafigura moved the US District Court docket within the District of Columbia to concern a default judgment. Its calls for on Ghana now totalled in extra of $111 million. On sixth August 2024, the US District Court docket agreed. So, equally to the London case, Trafigura might now go round searching for Ghana-owned properties in the US to implement towards.
Ghana has vital sums of its international reserves, together with sovereign wealth property, largely held in American banks. However inside the labyrinths of the US International Sovereign Immunities Act and the worldwide legislation of arbitration award enforcement, it isn’t clear to which extent these property are susceptible on the grounds that they’re “utilized in industrial exercise”. The overall rule appears to be that US Judges have vital discretion within the matter.
In current instances, state-owned entities, just like the GNPC, have been given possession of particular function autos (SPVs) just like the Jubilee Oil Holdings Restricted in arbitration-friendly jurisdictions just like the Cayman Islands. It will appear nevertheless that Trafigura has not discovered a lot by means of worthwhile property owned by Ghana within the UK aside from Regina Home, which has thus far netted lower than $2 million. Cocobod’s previous subsidiary in London is seemingly a husk. The straightforward fact is that small international locations like Ghana normally don’t have a number of juicy properties in enforcement-friendly international locations across the globe.
It is usually attention-grabbing to notice that almost 4 years because the arbitral award, Trafigura has made no effort in any respect to implement it in Ghana itself, the place governmental property abound.
Dragging out the inevitable
The above dialogue is already replete with hints of disorganisation in up to date Ghanaian governance.
First, it’s completely unclear why Ghana thinks it’s in its curiosity to tug out the cost schedule given the excessive rate of interest. Regardless of paying almost $100 million out of the unique judgment debt quantity of lower than $140 million, the excellent remains to be over $112 million at this time and rising day by day. The choice-making appears to lack sound evaluation.
Second, and maybe extra important, the chain of occasions resulting in the termination of the Trafigura contract and the federal government’s subsequent efficiency through the arbitration raises important issues in regards to the high quality of governance and accountability in Ghana, which is the principle topic of this quick essay.
A litany of errors
The contract on the root of this complete saga was signed in June 2015, and ratified by Parliament on twenty third July 2015, on the top of the facility disaster termed “dumsor” in Ghana. The federal government was out there for fast-track or “emergency” energy options that would assist ameliorate the state of affairs rapidly. While the dedication to hurry issues up and deploy these options nearly immediately was robust on the highest political ranges, rewiring the institutional setup to really ship on this purpose was past the management.
As an alternative of deployment in a couple of months, which was why the choice was taken to relocate a pre-existing energy plant in Italy to Ghana within the first place, it took nearly 17 months for the plant to reach on the port. Similar to what occurred with the well-known botched ambulance deal saga, the objects acquired caught on the port due to delays in securing tax exemptions as stipulated within the Settlement.
Despite the fact that the method of getting ready a website to host the plant commenced in February 2015, forward of signing the contract, it took greater than a yr earlier than, in March 2016, the VRA admitted to the federal government and the investor that the land wouldn’t be appropriate. A brand new location at Kpone was proposed the next month and development actions commenced. In August 2016, the VRA ordered a halt to the development for additional assessment. As of November when the plant arrived, that “stakeholder assessment” was nonetheless ongoing. Amid the paperwork, the December 2016 election ensued, and governments modified. All the things instantly unravelled.
New King New Mess
In late January 2017, VRA lastly communicated to Trafigura that they might not proceed to make use of the Kpone website. Unwilling to surrender, the Swiss firm discovered a spot on a website owned by one in all its associates in Ghana, Puma, and notified the federal government of ongoing clearing and development actions for delivering the plant. Clearly, by this time, the crushing burden of dumsor on the nation had lessened significantly. Thus, unknown to Trafigura, a authorities committee chaired by the Government Secretary of the Vitality Fee (PPA Committee) had been reviewing all of the emergency energy preparations to find out whether or not and which the nation ought to maintain.
In April 2017, the PPA Committee submitted a remaining draft of a report back to Ghana’s Cupboard wherein it claimed that the price of terminating the Trafigura plant can be simply $18 million and that this was extra wise than paying Trafigura $24.9 million a yr for 4 years, as per the subsisting contract, to supply energy that the nation didn’t want. The federal government refused to offer an unredacted copy of this report through the arbitration. It has by no means disclosed it to the general public both. As later occasions will present, this so-called skilled technical evaluation was fully bogus.
The PPA Committee’s recommendation however, authorities actors continued to interact with Trafigura within the development of the plant, egging it on at numerous factors. Agreements with each PURC, the facility pricing regulator, and Gridco, the nationwide energy grid operator, proceeded apace. Even after a Cupboard resolution was taken, ratifying the PPA Committee resolution, nobody acted to cease Trafigura from incurring additional prices. Quite the opposite, the Environmental Safety Company issued a allow for the development of the plant. The Ministry of Vitality notified Cupboard that the mission was continuing easily in direction of development and supported its utility for a technology license from the Vitality Fee, whose Secretary, recall, had chaired a committee recommending cancellation. The Ministry of Finance assured Trafigura that it might go forward and pay the import duties for the facility plant to the Ghanaian tax authorities (GRA) and get a refund later. Water was related to the positioning by the state-owned water utility, and a young to assemble a pipeline to convey fuel was launched.
Issues come to a head
Within the midst of all this, in August 2017, the Lawyer Normal’s Division (AG) issued a fateful authorized opinion recommending termination of the Settlement. The AG’s place was based mostly on a lot of positions: that Trafigura had no Vitality Fee and different required licenses, that it was utilizing second-hand tools, and that it had but to finish all circumstances set out within the Settlement.
Because the arbitration tribunal would later present, just about all these claims had been bogus because the authorities of Ghana had been absolutely concerned, as anticipated of it within the Settlement, within the numerous choices, and had offered full assurance that numerous licensing and allowing necessities shall be facilitated. The inter-agency dissonance and confusion that was so rampant all through the method couldn’t be blamed on an exterior investor. The federal government’s try to argue {that a} correct contract didn’t even emerge as a result of each events equally did not ship was confirmed to be false by a easy reference to the information on document.
The AG topped its bogus recommendation with the suggestion that Trafigura may very well be compelled to pay compensation to Ghana if the termination went forward. Unbelievable!
Regardless of all this happening within the background, in typical Ghanaian vogue, Trafigura was nonetheless being entertained by numerous authorities actors. The Vitality Fee acknowledged receipt of its utility and suggested that it was below energetic consideration. The Ministry of Vitality continued to encourage it to assemble the pipeline. One senior official even knowledgeable the Swiss firm that despite the fact that the President had ordered the termination of assorted energy agreements, the Trafigura one was exempt. The subsequent month, in November, the Vitality Fee set circumstances for approving the license: fuel acquisition and certification of the facility tools by the Vitality Ministry.
On the again of those exchanges, Trafigura quickened its tempo. China Petroleum was advised to start the fuel pipeline development and the Vitality Ministry was impressed upon to make the mandatory representations to the Vitality Fee for the license to be expedited. On 2nd February 2018, in correspondence with the Vitality Ministry, July 2018 was set because the commissioning timeline for the full-cycle plant.
Then the bombshell lastly dropped. On 18th February 2018, the Vitality Ministry wrote to terminate the Settlement. After strenuous protests by Trafigura, a Deputy Energy Minister offered assurances that the President had issued a reprieve and so they might thus resume operations. Thus, in April 2018, the corporate went again to website and doubled down on development. Nevertheless, in a completely twisted method, the identical authorities official, in July 2018, knowledgeable Trafigura of the federal government’s lack of ability to revive the terminated Settlement. The corporate was suggested to begin throughout and negotiate a model new contract. Naturally, they demurred. So, on thirteenth August 2018, they exercised their very own proper to terminate the Settlement and proceed to arbitration.
Intrinsically chaotic
At each stage, the operations of presidency and governance in Ghana uncovered by this case reek of disorganisation, lack of coordination, the absence of strategic coverage and administration construction on the coronary heart of presidency, and poor technical capability.
Because the fee simplified issues, the choice to cancel was based mostly on pure industrial logic: it might be cheaper to take action. The issue was that the underlying calculations had been pitifully unhealthy as a result of nobody had completed the work of truly verifying the investor’s prices so far.
At any fee, having taken such a purely industrial resolution, the purpose ought to have been to minimise danger by coming to phrases with the investor rapidly and in good religion to compensate them for his or her prices. The try to stiff the investor by counting on contorted arguments of breach was unconscionable, and the panel noticed by it.
The AG’s was flawed on just about each rating. It doesn’t even appear that the Division did the fundamental analysis to seek out out that the Vitality Fee was disabled from licensing over a sure interval, that allows had been certainly issued to Trafigura, and that failures it sought to ascribe to the investor had been clearly the fault of the federal government.
The AG’s shoddy preparatory work, so clear forward of recommending termination, was additionally in view forward of the arbitration. It so poorly ready its skilled witnesses that their complete testimony wilted below cross-examination.
Maybe, realizing that the case was a hopeless one, the AG didn’t go for the costly multimillion greenback billing worldwide legal professionals that in current instances we now have seen them rent. So clear was the federal government’s lack of enthusiasm that regardless of the presiding arbitrator within the authentic UK case being appointed in January 2019, and the panel’s phrases of appointment being signed off in June 2019, Ghana refused to pay its share of the preliminary charges deposit, regardless of repeated reminders, till December 2019. Lack of enthusiasm or not, the almost $800,000 spent on legal professionals and witnesses was wholly pointless given the whole lack of weight of the federal government’s case. This was clearly a contrived dispute that ought to by no means have been allowed to go earlier than an arbitral panel.
The largest insights from the entire fiasco are the next:
- Ghana wants a completely new regime to information officers when getting into into a world contract with excessive efficiency requirements. The interagency chaos needs to be minimised by some type of prior interagency committee as soon as the subject material of the contract foresees any interagency processes. Too many authorities employees have grow to be used to being “sorted” earlier than they “facilitate” any government-interfacing enterprise that requires the least quantity of effort. Officers benefiting from interagency chaos to compound the nation’s dangers has been a relentless characteristic in arbitral awards towards Ghana, courting again, at the least, to the late 80s when Antoine Biloune took Ghana to arbitration, additionally in Washington DC. Till this case is eliminated by higher operational design, extra of those worldwide judgment money owed will come.
- Technical evaluation involving industrial dangers in authorities of Ghana authorized engagements needs to be topic to assessment by unbiased analysts not beholden to the identical authorities.
- The sheer lack of transparency in most authorities enterprise breeds critical mediocrity.
- Good cash ought to by no means be thrown after unhealthy cash. Each time it’s clear {that a} authorities company is within the flawed, there should be some preventive mechanism inside the Presidency that may expedite settlement no matter which a part of the federal government is concerned. For instance, why is the federal government persevering with to tug out cost when it isn’t defending the case anymore, and thus permitting curiosity to pile? By the tip of this yr, Ghana is prone to have paid out an sum of money equal to the unique arbitral award, but the excellent legal responsibility wouldn’t have modified from the time the award was issued.
In any critical jurisdiction the place accountability issues, a lot of senior authorities officers, previous and current, would have been hauled to Parliament to reply robust questions on their judgement. It’s so unhappy seeing because the persevering with lack of accountability implies persevering with prices for Ghana. Trafigura is not going to cease prowling till it has flayed each morsel of its financial damages from the calloused palms of Ghana.