|
Constitutional law - invoking
the supervisory jurisdiction -
Interpretation - International
business - Economic transaction
to which the Government is a
party - Exercise the powers of
the High Court - Article 129(4)
of the Constitution - Memorandum
of Understanding – Arbitration -
Breach of a constitutional
provision - Non-compliance with
- Amicus curiae - Whether or not
the Power Purchase Agreement
between the Government of Ghana
and Balkan Energy (Ghana)
Limited constitutes an
international business
transaction within the meaning
of Article 181(5) of the
Constitution
HEADNOTES
the
Government of Ghana wanted to
generate electricity urgently
from a power barge The barge
needed rehabilitation and the
Government wanted to negotiate
with a private investor to
achieve this. With a view to
achieving this, Balkan Energy
LLC, the second defendant,
entered into a Memorandum of
Understanding (“MOU”) with the
Government of Ghana Because of
advice that was given to the
third defendant relating to the
statutory licensing requirements
in Ghana for power generation,
the investors in the business
opportunity decided to
incorporate the first defendant
in Ghana and to make it the
party to a Power Purchase
Agreement, the interpretation of
a provision in which constitutes
the subject matter of the
reference to this Court.
Accordingly, Balkan Energy
(Ghana) Limited, the first
defendant, which had been
incorporated in Ghana 11 days
previously, entered into a Power
Purchase Agreement (“PPA”) with
the Government of Ghana.
Subsequently, a dispute arose
between the parties to this PPA.
The Government of Ghana claimed
that the second and third
defendants had misrepresented to
it that they could make the
power barge operational within
90 working days and that it was
on the basis of this
misrepresentation that it had
entered into the MOU and the PPA.
However, this had not happened.
The dispute led to the first
defendant initiating, by a
Notice of Arbitration
proceedings against the
Government of Ghana under the
auspices of the Permanent Court
of Arbitration at the Hague, the
Netherlands. At these
proceedings, the Ghana
Government raised the point that
the PPA needed Parliamentary
approval under article 181(5) of
the 1992 Constitution, but that
this approval had not been
sought and therefore the PPA was
invalid, as having been executed
in breach of a constitutional
provision. The Government of
Ghana argued before the
arbitration tribunal that
non-compliance with the
constitutional provision made
the PPA invalid, including its
arbitration clause, and
consequently the arbitral
tribunal had no jurisdiction
over the dispute before it.
However, the arbitral tribunal
held that it had jurisdiction,
but expressed a willingness to
take account of this Court’s
interpretation of the
constitutional provision in
question. The learned High Court
judge refused an application
from the plaintiff to refer the
said constitutional issues to
this court. The plaintiff
accordingly
invoked
our supervisory jurisdiction
to quash the decision of the
learned High Court judge
HELD
All these
circumstances cumulatively lead
us to the conclusion that the
answer to the first question
referred to this Court is that
the Power Purchase Agreement
dated 27th July 2007
between the Government of Ghana
and Balkan Energy (Ghana)
Limited constitutes an
international business
transaction within the meaning
of Article 181(5) of the
Constitution.
On the other hand,
the answer to the second issue
referred is that the arbitration
provisions contained in clause
22.2 of the Power Purchase
Agreement dated 27th
July 2007 between the Government
of Ghana and Balkan Energy
(Ghana) Limited does not
constitute an international
business transaction within the
meaning of Article 181(5) of the
Constitution. This is because
applying the interpretation of
article 181(5) arrived at above,
it is clear that the
international arbitration
provision cannot, in and of
itself, constitute an
international business or
economic transaction. An
international commercial
arbitration is not by itself an
autonomous transaction
commercial in nature which
pertains to or impacts on the
wealth and resources of the
country. An international
commercial arbitration draws its
life from the transaction whose
dispute-resolution it deals
with. We therefore have
difficulty in conceiving of it
as a transaction separate and
independent from the transaction
that has generated the dispute
it is required to resolve. The
case is accordingly remitted to
the High Court for this Court’s
interpretation of article 181(5)
of the 1992 Constitution to be
applied in the proceedings
before it.
We would like to end
this opinion by repeating our
request to Parliament to enact a
Bill indicating what
modifications it wishes to make
to article 181(5) of the
Constitution. This step would
bring greater certainty and
clarity to the law.
STATUTES
REFERRED TO IN JUDGMENT
1992
Constitution
Arbitration act, 1961 (ACT 38)
Alternative
Dispute Resolution Act, 2010
(ACT 798)
CASES
REFERRED TO IN JUDGMENT
Daimler Co.
Ltd. V Continental Tyre and
Rubber Co. (Great Britain) Ltd.
[1916] 2 AC 307,
R v LCC, ex
p. London and Provincial
Electric Theatres Ltd. [1915] 2
KB 466
Re F.G.
(Films) Ltd. [1953] 1 All ER
615.
Morkor v Kuma
(No. 1) [1999-2000] 1 GLR 721 at
733
Heyman v
Darwins Ltd. [1942] AC 356
Attorney-General v Faroe
Atlantic Co. Ltd. [2005-6] SCGLR
271
United States
v Milwaukee Refrigerator Transit
Co. 142 Fed. 247, 225
Asare v
Attorney-General [2003-2004]
SCGLR 823,
BOOKS
REFERRED TO IN JUDGMENT
The Law and
Practice of International
Commercial Arbitration
(1986) Redfern & Hunter
Black’s Law
Dictionary (4th Ed.)
Chambers
English Dictionary
Halsbury’s
Laws of England, 4th
Edition, Re-issue (1991)
DELIVERING
THE LEADING JUDGMENT
DR. DATE-BAH
JSC:
COUNSEL
HON. BENJAMIN
KUMBUOR, ATTORNEY-GENERAL (WITH
HIM MRS. GRACE EWOOL) FOR THE
PLAINTIFF
ACE ANKOMAH
FOR THE DEFENDANTS.
NANA ATO
DADZIE AS AMICUS CURIAE
______________________________________________________________________
J U D G M E N
T
______________________________________________________________________
OPINION ON A
REFERENCE
DR. DATE-BAH
JSC:
The task of
this Court in this case is to
interpret
the phrase or term “international
business or economic transaction
to which the Government is a
party” as it is used in
article 181(5) of the 1992
Constitution. The
responsibility to interpret this
phrase has arisen as a result of
this Court deciding to refer to
itself
constitutional issues that
had arisen in proceedings before
the High Court (Commercial
Division).
The
learned High Court judge refused
an application from the
plaintiff to refer the said
constitutional issues to this
court. The plaintiff
accordingly invoked our
supervisory jurisdiction to
quash the decision of the
learned High Court judge not
to refer the issues to this
Court. This Court, in a
unanimous ruling delivered on 2nd
November, 2011, quashed the
decision of the High Court judge
not to refer the constitutional
issues. To avoid a multiplicity
of suits and to save time, this
Court decided to
exercise
the powers of the High Court,
which it has under
Article
129(4) of the Constitution,
to refer the following questions
to this Court:
1.
“Whether or not the Power
Purchase Agreement dated 27th
July 2007 between the Government
of Ghana and Balkan Energy
(Ghana) Limited constitutes an
international business
transaction within the meaning
of Article 181(5) of the
Constitution.
2.
Whether or not the arbitration
provisions contained in clause
22.2 of the Power Purchase
Agreement dated 27th
July 2007 between the Government
of Ghana and Balkan Energy
(Ghana) Limited constitutes an
international business
transaction within the meaning
of Article 181(5) of the
Constitution”.
The reference
itself is, of course, made under
article 130(2) of the
Constitution. Article 130
provides as follows:
“(1) Subject to the jurisdiction
of the High Court in the
enforcement of the Fundamental
Human Rights and Freedoms as
provided in article 33 of this
Constitution, the Supreme Court
shall have exclusive original
jurisdiction in -
(a) all matters relating to the
enforcement or interpretation of
this Constitution; and
(b) all matters arising as to
whether an enactment was made in
excess of the powers conferred
on Parliament or any other
authority or person by law or
under this Constitution.
(2) Where an issue that relates
to a matter or question referred
to in clause (1) of this article
arises in any proceedings in a
court other than the Supreme
Court, that court shall stay the
proceedings and refer the
question of law involved to the
Supreme Court for determination;
and the court in which the
question arose shall dispose of
the case in accordance with the
decision of the Supreme Court.”
Article 181
of the Constitution, within
which the phrase to be
interpreted is located, reads in
part, as follows:-
“(1)
Parliament may, by a resolution
supported by the votes of a
majority of all the members of
Parliament, authorise the
Government to enter into an
agreement for the granting of a
loan out of any public fund or
public account.
(2) An
agreement entered into under
clause (1) of this article shall
be laid before Parliament and
shall not come into operation
unless it is approved by a
resolution of Parliament.
(3) No
loan shall be raised by the
Government on behalf of itself
or any other public institution
or authority otherwise than by
or under the authority of an Act
of Parliament.
(4)
....
(5)
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....”
The Facts
The factual
context within which the Court’s
task of interpretation is to be
carried out is as follows: the
third defendant, Mr. Phillip
David Elders, a businessman
resident in Texas, USA,
identified a business
opportunity in Ghana and
persuaded the owner of the
second defendant to invest in
it. The business opportunity
was as follows:
the
Government of Ghana wanted to
generate electricity urgently
from a power barge located in
its Western Region. The barge
needed rehabilitation and the
Government wanted to negotiate
with a private investor to
achieve this and bring its
generating capacity urgently on
stream. With a view to
achieving this, Balkan Energy
LLC, the second defendant,
entered into a Memorandum of
Understanding (“MOU”) with the
Government of Ghana on 16th
May 2007. Because of advice
that was given to the third
defendant relating to the
statutory licensing requirements
in Ghana for power generation,
the investors in the business
opportunity decided to
incorporate the first defendant
in Ghana and to make it the
party to a Power Purchase
Agreement, the interpretation of
a provision in which constitutes
the subject matter of the
reference to this Court.
Accordingly, on 27th
July 2007, Balkan Energy (Ghana)
Limited, the first defendant,
which had been incorporated in
Ghana 11 days previously,
entered into a Power Purchase
Agreement (“PPA”) with the
Government of Ghana.
Subsequently, a dispute arose
between the parties to this
PPA. The Government of Ghana
claimed that the second and
third defendants had
misrepresented to it that they
could make the power barge
operational within 90 working
days and that it was on the
basis of this misrepresentation
that it had entered into the MOU
and the PPA. However, this had
not happened.
The dispute
led to the first defendant
initiating, by a Notice of
Arbitration dated 23rd
December 2010, arbitration
proceedings against the
Government of Ghana under the
auspices of the Permanent Court
of Arbitration at the Hague, the
Netherlands. At these
proceedings, the Ghana
Government raised the point that
the PPA needed Parliamentary
approval under article 181(5) of
the 1992 Constitution, but that
this approval had not been
sought and therefore the PPA was
invalid, as having been executed
in breach of a constitutional
provision. The Government of
Ghana argued before the
arbitration tribunal that
non-compliance with the
constitutional provision made
the PPA invalid, including its
arbitration clause, and
consequently the arbitral
tribunal had no jurisdiction
over the dispute before it.
However, the arbitral tribunal
held that it had jurisdiction,
but expressed a willingness to
take account of this Court’s
interpretation of the
constitutional provision in
question.
The
Attorney-General, the principal
legal adviser to the Government
of Ghana and the nominal party
expected to represent the State
in litigation before the
Ghanaian courts, in June 2010,
issued a Writ of Summons in the
Commercial Division of the High
Court, Accra, claiming a
declaration that the PPA is an
international business
transaction that needed
Parliamentary approval and was
unenforceable because it did not
have such approval. The
plaintiff also claimed that the
arbitration agreement contained
in clause 22.2 of the PPA was an
international business
transaction and was also in
breach of article 181(5) and
therefore unenforceable.
After the
institution of the suit, the
plaintiff applied to the High
Court to refer to this Court for
interpretation the two questions
already set out in this Opinion,
which for ease of reference are
repeated below:
1.
“Whether
or not the Power Purchase
Agreement dated 27th
July 2007 between the Government
of Ghana and Balkan Energy
(Ghana) Limited constitutes an
international business
transaction within the meaning
of Article 181(5) of the
Constitution.
2.
Whether
or not the arbitration
provisions contained in clause
22.2 of the Power Purchase
Agreement dated 27th
July 2007 between the Government
of Ghana and Balkan Energy
(Ghana) Limited constitutes an
international business
transaction within the meaning
of Article 181(5) of the
Constitution.”
When the High
Court refused to do so, the
plaintiff applied to this Court
to exercise its supervisory
jurisdiction over the High Court
to quash the decision of the
High Court.
As already indicated in this
Opinion, this Court in its
Ruling of 2nd
November, 2011 did indeed quash
the decision of the learned High
Court judge and referred the two
questions set out above to this
court. Furthermore, before the
oral argument on the two
questions before this Court, the
Court requested counsel for the
parties to address in their
Statements of Case the following
issues which are relevant for
the determination of the two
principal questions posed above:
1.
The definition of an
international business
transaction within the meaning
and context of Article 181(5) of
the Constitution
2.
Can a Government of Ghana
contract with a Ghanaian legal
person or entity ever be an
international business
transaction?
3.
If so, how are we to distinguish
an international business
transaction of a Ghanaian legal
person from its other contracts
with the Government of Ghana?
Are you able to formulate any
clear indices or criteria?
In
determining these issues, we
have been greatly assisted by
the painstaking Statements of
Case filed by the Plaintiff and
the Defendants. On the 1st
March 2012, Zenith Bank Ltd
applied to this Court to be
joined to this suit as an
interested party. Although its
application was dismissed, it
was granted leave to file an
amicus
curiae Statement of Case,
which it duly filed on 9th
March, 2012. This Statement of
Case is largely an endorsement
of the Defendants’ Statement of
Case.
The
Plaintiff’s arguments
The plaintiff
contends that two main criteria
may be used, either alone or in
conjunction, to define the term
“international”, in the context
of an international business or
economic transaction. The first
criterion relies on the
nature of the business or
economic transaction. On
the other hand, the second
focuses attention on the
parties: what is their
nationality or habitual place of
residence or, in the case of a
corporate entity, the seat of
its central control and
management.
International
nature of the business or
economic transaction
The plaintiff
cites, by way of analogy,
practice in the field of
international arbitration by
which the nature of the dispute
between the parties has been
used to decide whether the
mechanism for its resolution can
be described as an international
arbitration. The plaintiff
points out that the
International Chamber of
Commerce (“ICC”), which
established its Court of
Arbitration in Paris in 1923,
was quick to adopt the nature of
the dispute as its criterion for
deciding whether or not a
commercial arbitration was an
international arbitration under
its rules. He draws attention
to the fact that since 1927 the
ICC rules have defined
international arbitration to
encompass disputes which contain
a foreign element, even if the
parties are citizens of the same
country. He cites ICC Rules,
Article 1.1 which defines the
function of the Court of
Arbitration of the ICC as being
“to provide for the settlement
by arbitration of business
disputes of an international
character in accordance with
these Rules.” In para. 22 of
his Statement of Case, the
plaintiff states, in relation to
the ICC, that:
“It is
prepared to give a wide
interpretation to the term
“international” so as to
encompass arbitrations involving
any foreign element. If, for
example, the subsidiary of a
foreign company doing business
in a state was incorporated in
that state (as would often be
the case) any arbitration
between the company and the
state concerned would be
classified as international
under the ICC Rules.”
Nationality
of the parties as indicative of
the international nature of the
business or economic transaction
As already
mentioned, the second
alternative criterion proposed
by the plaintiff is that which
focuses on the parties. He
illustrates this approach by
citing the European Convention
on International Commercial
Arbitration of 1961, which
states its scope as follows (in
Article I):
“This
Convention shall apply:
(a)
To arbitration agreements
concluded for the purpose of
settling disputes arising from
international trade between
physical or legal persons
having, when concluding the
agreement, their habitual place
of residence or their seat in
different Contracting States;
(b)
To arbitral procedures and
awards based on agreements
referred to in 1(a) above.”
He further
illustrates the “parties”
approach by reference to the
statutory scheme embodied in the
English Arbitration Act, 1996.
He quotes a summary of this
scheme from
Redfern &
Hunter, The Law and Practice
of International Commercial
Arbitration (1986) as
follows:
“A domestic
arbitration agreement is an
agreement which does not
provide, expressly or by
implication, for arbitration
outside the U.K. and to which
there was no foreign party at
the time when the agreement was
made. A foreign party in this
sense is an individual who is a
national of, or habitually
resident in, any state other
than the U.K.; or a corporate
entity incorporated outside the
U.K. or whose central control
and management is exercised
outside the U.K. It is
sometimes suggested that this
definition means that, for an
arbitration to be domestic, both
parties must be of British
nationality. This is not
correct. Nationality is one,
albeit important, criterion used
in the definition. However,
where an individual Is
concerned, that individual’s
habitual place of residence is
also taken into account. More
importantly, where a corporate
entity is concerned, the
criterion is not simply its
place of registration or
incorporation – but that of the
place in which its central
management and control is
exercised.”
After praying
in aid of his argument, other
statutes on arbitration from
Singapore and Ghana, the
plaintiff concludes his
submission as follows:
“The
Applicant accordingly submits
that the foregoing analysis of
the nationalities of the parties
as indicative of the nature of a
domestic or international
business or arbitral transaction
shows that Ghanaian legal
persons are at liberty to enter
into either domestic or
international business
(including arbitral
transactions) with the
Government of Ghana. The
Applicant has already argued and
will contend further in this
statement of case that the
structure and substance of
Article 181(5) of the
Constitution does not proscribe
such transactions between a
Ghanaian legal person and the
Government of Ghana.
Furthermore, nothing in the
structure, scheme and substance
of the
Arbitration Act, 1961 or the
current
Alternative Dispute Resolution
Act, 2010 proscribes a
Ghanaian legal person from
entering into international
business or arbitral
transactions with the Government
of Ghana.”
In his quest
to cast light on the meaning of
international business
transaction, the plaintiff
conducts a review of the
literature on international
business. He states that
international business is an
important professional and
academic discipline and deals
with the special features of
business activities that cross
national boundaries. He
explains that international
business activities may be
through foreign direct
investments or portfolio
investments.
Drawing on
the materials assembled in his
Statement of Case, the plaintiff
concludes as follows:
“41. We have
sought to use the nature of the
business or commercial
transactions and the
nationalities of the parties to
business or commercial
transactions as criteria for
drawing a distinction between
international business or
commercial or economic
transactions and purely domestic
business or trade transactions.
This is by no means always a
clear-cut distinction in its
application as naturally
inevitable penumbra cases run
into each other and have to be
decided upon the peculiar facts
of the case. We have also tried
a review of the literature on
international business as a
field of study to show how
international business and
economic transactions may be
characterized, categorized and
formed for purposes of modern
international trade as distinct
from domestic trade.
42. The
foregoing exposition and
analysis demonstrates that there
are several circumstances in
which the Government of Ghana
may enter into international
business or economic
transactions with Ghanaian
physical or legal entities.
They also demonstrate that like
any natural or physical science
or social science phenomenon
penumbra cases make it difficult
to conclusively formulate in
advance any clear indices or
criteria for distinguishing
penumbra international business
transactions from domestic
business transactions.”
Plaintiff’s response to the
first issue referred to this
Court
The plaintiff
next proceeds to apply this
understanding, discussed above,
to the first issue referred for
interpretation. In doing this,
he stresses the fact that the
first defendant is a wholly
foreign-owned Ghanaian entity
whose central control and
management is outside Ghana. In
support of this fact, he adduces
the following evidence on the
record:
(a)
The first defendant was
incorporated only eleven days
before the execution of the PPA;
(b)
The first defendant is wholly
owned by Balkan Energy Limited,
a company incorporated in the
United Kingdom. Balkan Energy
Limited is in turn wholly owned
by Syntek West, a company
incorporated in the United
States of America;
(c)
Syntek West is wholly owned by
Gene Phillips, a national of the
United States of America; and
(d)
The managing-director of Balkan
Energy (Ghana) Limited, the
first defendant, is Philip David
Elders, the 3rd
defendant, who is resident in
the United States of America.
He also
identifies certain salient
provisions in the PPA which, in
his view, demonstrate that it is
an international business
transaction. In this
connection, he lists the
following clauses in the PPA:
i.
“2.6 GoG shall promptly
facilitate the acquisition of
all Government approvals for the
duty-free importation and
transportation of equipment to
the site, and for operating
permits, licenses and approvals
for the Project, and for visas
and work permits for foreign
personnel and for full
compliance with all local and
other regulations and GoG hereby
guarantees that BEC shall have
the exclusive right to generate
electricity from the site
subject to meeting the Milestone
in Schedule 3.”
ii.
Clause 12.1 provides that all
sums payable to Balkan Energy
(Ghana) Limited “shall be
payable in US dollars.”
iii.
Clause 15.4 provides that the
Government of Ghana “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
the personal injury, death or
property damage to third parties
... and resulting from any act
or omission of GoG or its agents
or employees.”
iv.
“22.2 If any dispute arises out
of or in relation to this
Agreement and if such matter
cannot be settled through direct
discussions of the Parties, the
matter shall be referred to
binding arbitration at the
Permanent Court of Arbitration,
Peace Palace, Carnegieplein 2,
2517 KJ in the Hague, The
Netherlands. Unless the Parties
to this Agreement agree
otherwise, the arbitrator shall
not have power to award nor
shall he/she award any punitive
or consequential damages
(however denominated), Each side
shall pay its own attorneys fees
and costs no matter which side
prevails and each Party shall
share equally in the cost of any
mediation or arbitration.
Applications may be made to such
court for judicial recognition
of the award and/or an order of
enforcement as the case may be.
Arbitration shall be governed
by and conducted in accordance
with UNCITRAL rules.”
v.
“24. To the extent that GOG may
in any jurisdiction claim for
itself or its assets or revenues
immunity from suit, execution,
attachment (whether in aid of
execution, before judgment or
otherwise) or other process and
to the extent that any such
jurisdiction there may be
attributed to the GOG or its
assets or revenue such immunity
(whether or not claimed) GOG
agrees not to claim and
irrevocably waives such immunity
to the full extent permitted by
the laws of such jurisdiction.”
vi.
“29.2 GOG represents and
warrants that:
‘(g) No
Taxes. There is no Tax
other than stamp duty at a
nominal rate imposed on or in
connection with:
(A)
the execution, delivery or
performance of this Agreement;
(B)
the enforcement of any of this
Agreement; or
(C)
on any payment to be made to
the BEC under this Agreement.
In connection with Letters of
Credit, no Government Authority
shall impose any reserve,
special deposit, deposit
insurance or assessment
affecting BEC.
No Foreign
Exchange Controls.
There are no foreign exchange or
other restrictions in effect in
the Republic of Ghana adversely
affecting the ability or right
of GoG to acquire and to remit
to BEC foreign currency to pay
and satisfy GoG’s obligations
under this agreement.”
Whilst the
plaintiff notes that in
Attorney-General v Faroe
Atlantic Co. Ltd. [2005-2006]
SCGLR 271 this Court interpreted
an international business or
economic transaction to include
a business transaction between
the Government of Ghana and a
company incorporated abroad, he
contends that there is no
provision in the Constitution
which proscribes Ghanaian
companies from entering into
international business or
economic transactions with the
Government of Ghana. He
therefore concludes that on the
facts of this case the PPA is an
international business
transaction. He supports his
conclusion with the following
argument, in paragraphs 57 and
58 of his Statement of Case:
“57. It
is further submitted that it
cannot be the case that the only
factor that must be taken into
account in determining whether
or not a particular business or
economic transaction to which
the Government is party is
international is the place of
incorporation of the
counterparty. It is submitted
that the transaction as a whole
and its characteristics must be
looked at in making this
determination. Characteristics
that expose the Government to
obligations or liabilities in
other jurisdictions or subject
to the laws of other
jurisdictions give a transaction
its internationality and must be
taken into account. These
characteristics are gleaned from
the provisions of the agreement
between the parties and include
the provisions already referred
to in these submissions as the
salient provisions of the PPA
which demonstrate at face value
that the PPA is a non-domestic
business transaction. These
features include those
provisions that require contact
by the Government and its assets
with other jurisdictions (such
as the choice of forum).
58. It
is also submitted that the
nationality of the counterparty
and its sponsors are relevant.
To require Parliamentary
approval in respect of a company
incorporated outside Ghana but
not to require it where the
company merely incorporates an
entity in Ghana effectively for
form’s sake is, with respect, to
subvert the constitutional
provision and its substantive
objective of promoting checks
and balances between the
executive and the legislature in
relation to the substance of
certain types of transactions.”
Moreover, the
plaintiff points out that there
are a few English cases which
establish that the nationality
of a company is not determined
necessarily or solely by the
place of incorporation of the
company, citing
Daimler
Co. Ltd. V Continental Tyre and
Rubber Co. (Great Britain) Ltd.
[1916] 2 AC 307, R v LCC, ex p.
London and Provincial Electric
Theatres Ltd. [1915] 2 KB 466
and Re F.G. (Films) Ltd. [1953]
1 All ER 615. He also cites the
dictum of Akuffo JSC in Morkor v
Kuma (No. 1) [1999-2000] 1 GLR
721 at 733 where she says:
“Notwithstanding the effect of a
company’s incorporation, in some
cases the court will ‘pierce the
corporate veil’ in order to
enable it to do justice by
treating a particular company,
for the purpose of the
litigation before it, as
identical with the person or
persons who control it. This
will be done not only where
there is fraud or improper
conduct, but in all cases where
the character of the company, or
the nature of the persons who
control it is a relevant
feature. In such cases the
court will go behind the mere
status of the company as a
separate legal entity distinct
from its shareholders, and will
consider who are the persons, as
shareholders or even as agents,
directing and controlling the
activities of the company.”
The plaintiff
accordingly urges that in the
light of the facts that the
first defendant is wholly-owned
by a foreign entity; formed at
the direction of that foreign
entity for the purpose of
entering into a contract with
the Government; managed by the
same officers as manage its
foreign parent; and the contract
was to be performed by foreign
contractors retained by the
company, rather than by domestic
employees or contractors, this
is a case where the formal
separate legal personality of
the first defendant is rendered
insignificant and irrelevant.
The plaintiff
concludes his submission on the
first issue referred to this
court by summarizing the factors
which make the PPA an
international business
transaction. He lists these as:
i.
The purported place of
incorporation and residence of
the project sponsor, Balkan
Energy LLC
ii.
The place of incorporation,
ownership and residence of the
sole shareholder of the Ghana
company
iii.
The management, ownership and
control of the first defendant
iv.
Fees payable to the first
defendant under the PPA are
required to be paid in foreign
currency and therefore bound to
be a charge on Ghana’s foreign
currency receipts
v.
The indemnity provisions of the
PPA potentially apply to foreign
persons
vi.
The relevance of the Ghana-UK
Bilateral Investment Treaty by
virtue of who is the sole
shareholder of the 1st
Interested Party
vii.
The provisions of the PPA
regarding international
arbitration and waiver of
jurisdiction.
The
plaintiff’s conclusion is thus
that:
“If all the
above factors can be disregarded
simply by incorporating a
company in Ghana, article 181(5)
would be rendered practically
nugatory. The better
interpretation is that the mere
fact that the legal entity with
whom the Government has entered
into a transaction is
incorporated in Ghana does not,
by itself, mean that the
transaction is not an
international business one
within the meaning of article
181(5). The constitution of the
parties, the provisions of the
transaction and its elements
must all be looked at in
determining whether or not the
transaction is an international
business one.”
Plaintiff’s
response to the second issue
referred to this court
The plaintiff
contends that the arbitration
agreement contained in the PPA
constitutes an international
business transaction within the
meaning of article 181(5) of the
Constitution. Because there are
authorities which hold that an
arbitration agreement is
separate, distinct and severable
from the agreement in which it
is embodied, except where the
primary contract is null and
void ab initio, the plaintiff
finds it necessary to argue that
in addition to, and regardless
of the PPA as a whole, the
agreement to go to international
arbitration which is contained
in clause 22.2 of the PPA itself
constitutes an international
business agreement which
requires Parliamentary
approval. This is thus the
plaintiff’s answer to the second
issue referred to this Court for
authoritative interpretation.
Obviously the
plaintiff’s general discussion,
already set out above, on what
constitutes an international
business or economic transaction
applies to this second issue as
well. Regarding the
unconstitutionality of the
arbitration clause, the
plaintiff makes the following
argument in paragraph 18 of his
Statement of Case:
“The question
of a possible breach of article
181(5) of the Constitution was
raised after the Balkan Group
had submitted this dispute to
arbitration on 23 December 2009
pursuant to the arbitration
clause contained in the PPA.
This is a fundamental
constitutional question because
should this Court hold that the
PPA to which the Government of
Ghana was a party is an
international business or
economic transaction which was
never operative because it had
not been laid before and
approved by Parliament the
consequence will be that the
whole transaction between the
parties was null and void ab
initio in accordance with
article 1(2) of the
Constitution. The further
consequence which will usually
flow as a matter of course from
an unconstitutional PPA is that
the arbitration clause contained
in such a null and void ab
initio agreement could never
have also become operative and
grounded a cause of action in an
international arbitration
expressly stated to be governed
by the laws of Ghana (See
Heyman v
Darwins Ltd. [1942] AC 356
at 370-371; and Article II(3) of
the New York Convention). This
position is consistent with the
decision of this Court in
Attorney-General v Faroe
Atlantic Co. Ltd. [2005-6] SCGLR
271 in which this Court, not
only declared the PPA as null,
void and without effect, but
also ordered the foreign company
to refund the monies it had been
unconstitutionally paid pursuant
to that contract. It would
appear absurd if an
international arbitral tribunal
could thereafter have assumed
jurisdiction, adjudicated an
alleged dispute and made a
binding award based on Ghanaian
law. As the Applicant’s
application for judicial review
already indicated, the 1st
Interested Party (sic, but more
correctly the first defendant)
has commenced international
commercial arbitral proceedings
against the Applicant and the
arbitral tribunal has purported
to assume jurisdiction while
expressing a willingness to take
account of the authoritative
determination of this Court
should the decision be made
before it concludes its work.
It is in this context that the
second question posed for this
reference becomes relevant to
deal with the assumption of
jurisdiction by the arbitral
tribunal which, in our
submission, is based upon the
erroneous premise that a PPA
declared by this Court to be
null and void ab initio in terms
of Articles 1(2) and 181(5) of
the Constiution can still be
survived by the arbitration
clause contained therein to
ground jurisdiction in an
arbitral tribunal to decide upon
its jurisdiction and settle a
dispute.”
This extended
quotation from the plaintiff’s
Statement of Case explains why
the second issue is before this
Court for interpretation.
The
defendants’ arguments
To the
excellent submissions made by
the Honourable Attorney-General
in his Statement of Case, the
defendants also filed a
well-argued and detailed riposte
in their Statement of Case. The
first point that the defendants
make is to question whether
article 181(5) requires
Parliamentary approval of
international business or
economic transactions to which
the Government is a party. They
argue that the text of article
181(5) needs to be interpreted
to establish whether the
“necessary modifications”
referred to in it are a
condition precedent to the
effectiveness of the article.
They suggest that, without those
modifications, article 181(5)
does not come into effect or has
effect only to the extent that
it authorizes Parliament to
undertake the required
modification. They urge, in
paragraph 33 of their Statement
of Case, that:
“My Lords, it
would appear that even a
consideration as to what amounts
to “an international business or
economic transaction” would fall
within Parliament’s legislative
determination under Article
181(5). It would also appear to
be within Parliament’s
constitutional remit to decide
how and by which procedure such
agreements would be authorized
and/or approved, and whether
some of such agreements would
not require any parliamentary
action at all.”
In
Attorney-General v Faroe
Atlantic Co. Ltd. [2005-6] SCGLR
271, Date-Bah JSC said (at p.
297):
“Even though clause 5 of article
181 enjoins Parliament to make
the necessary modifications to
article 181, I do not interpret
clause 5 as rendering that
clause ineffective until the
Parliamentary modifications to
article 181 have been made.
Such statutory modifications
are, to my mind, intended to
assist the clarity of clause 5
in the context of article 181,
but the clause has effect even
before Parliament carries out
its task.”
The defendants take note of this
interpretation, but nevertheless
raise the following issues in
their paragraph 34:
“Some questions that are
unanswered are as follows: (i)
what is that effect? And (ii) do
the different procedures in
Article 181(1)-(2) on the one
hand and Article 181(3)-(4) on
the other hand apply
automatically to all
international business or
economic transactions in the
absence of the necessary
modifications by Parliament, or
will only apply after Parliament
has made the authorised
modifications?”
The
defendants then go on to propose
a 3-stage test for determining
whether article 181(5) applies.
They say (at paragraph 37):
“Be that as
it may, My Lords, we
respectfully propose the
following 3-stage test with
respect to the application of
Article 181(5):
i.
Is the activity or venture a
“transaction” to which the
Government is a party?
ii.
If so, is it “business or
economic” in nature?
iii.
If so, is it “international” in
nature?”
They maintain
that it is only if all three
questions are answered in the
affirmative that Article 181(5)
would apply.
In relation
to what is a transaction, the
defendants note that the word
“transaction” is not defined in
the Constitution. They refer to
the definition in
Black’s
Law Dictionary (4th
Ed.) of transaction as an
“act of transacting or
conducting any business;
negotiation; management;
proceeding; that which is done;
an affair.” They also quote
that same Dictionary as
referring to “something which
has taken place whereby a cause
of action has arisen. It must
therefore consist of an act or
agreement, or several acts or
agreements, or several acts or
agreements having some
connection with each other, in
which more than one person is
concerned, and by which the
legal relations of such persons
between themselves is altered.”
The defendants state that
parties to a transaction may
choose to reduce their
agreements into a contract and
insert an “Entire Agreement”
clause into the contract so that
the contract and its terms would
constitute the relevant
transaction between the
parties. They point out that
the PPA has in its article 27
such an “Entire Agreement”
clause in the following terms:
“This
Agreement, including the
Schedules hereto contains all
the understandings and
agreements of whatsoever kind
and nature with respect to the
subject matter of this Agreement
and the rights, interests,
understandings, agreements and
obligations of the parties
relating thereto …All prior
written or oral undertakings,
offers or other communications
of every kind concerning the
subject matter hereof are hereby
abrogated and withdrawn and
shall not affect or modify any
of the terms or obligations set
forth in this Agreement.”
The
defendants, therefore, contend,
based on the considerations set
out above, that the relevant
“transactions” to be construed
are those contained in the PPA.
They stress that article 181(5)
makes it clear that its
provisions apply only to a
transaction to which the
Government is a party. They
argue, accordingly, that once
the Government is not a party or
privy to any other agreements,
understandings or arrangement
that the other party to the
transaction may enter into with
any other persons, the nature of
those other agreements,
understandings or arrangements
will not affect the nature of
the original transaction to
which the Government is a party.
As to what is
a business or economic
transaction, the defendants
again note that neither
“business” nor “economic” is
defined in the Constitution.
They refer to the definition of
“business” in Black’s Law
Dictionary as: “A commercial
enterprise carried out for
profit, a particular occupation
or employment habitually engaged
in for livelihood or gain” and
to its definition in the
Chambers English Dictionary as:
”dealings, commercial activity:
a commercial or industrial
concern.” They further state
that though Black’s Law
Dictionary does not directly
define the term “economic”, its
various uses of the term
indicate that it refers to “the
management or administration of
the wealth and resources of a
community, city, state, or
country.” Similarly, they
report that the
Chambers
English Dictionary says an
activity is “economic” if it
relates or pertains to the
management of a household; the
administration of the material
resources of an individual,
community, or country.” The
defendants therefore conclude in
paragraph 49 of their Statement
of Case that:
“Therefore,
where a transaction is
commercial in nature, or
pertains to or impacts on the
wealth and resources of the
country, it would be a “business
or economic transaction” and a
subject of interest in any
examination of Article 181(5).”
The
defendants also analyse the
meaning of “international” in
the provision under discussion.
Again, they note that the
Constitution does not define the
word. They point out, however,
that the word is used in
contradistinction to the word
“national” in Articles 21(1)(e),
36(9) and 37(5) and that it is
used to describe the
relationship between Ghana and
other nations in Articles 40 and
73. They then examine
provisions in the 1980 United
Nations Convention on Contracts
for the International Sale of
Goods, the 1956 Convention on
the Contract for the
International Carriage of Goods
by Road, the 1944 Convention on
International Civil Aviation and
the 1929 Convention for the
Unification of Certain Rules
Relating to International
Carriage by Air from which they
conclude that a transaction may
be considered international if:
i.
It is between two or more
countries;
ii.
Involves parties who are
nationals of or resident in two
different countries, and/or
iii.
It involves crossing national
borders.
They then
submit that the transaction
between the Government and the
first defendant does not meet
any of the criteria listed above
and is therefore not
international.
The
defendants oppose the
plaintiff’s argument that this
Court should lift the veil of
the first defendant’s
incorporation in Ghana. They
cite the words of Sanborn J in
United
States v Milwaukee Refrigerator
Transit Co. 142 Fed. 247, 225
that:
“If any
general rule can be laid down,
in the present state of
authority, it is that a
corporation will be looked upon
as a legal entity as a general
rule, until sufficient reason to
the contrary appears: but, when
the notion of legal entity is
used to defeat public
convenience, justify wrong,
protect fraud, or defend crime,
the law will regard the
corporation as an association of
persons.”
The
defendants rely on this
statement of the law to contend
that the concept of the lifting
of the veil of incorporation is
applied by the courts only where
the facts proved show some
misuse of the corporate entity,
or there is the need to lift the
veil in order to do justice.
They also cite the Ghanaian case
relied on by the plaintiff in
this connection, namely, Morkor
v Kumah (No. 1) [1999-2000] 1
GLR 721.
The
defendants contend that the
plaintiff has not been able to
show any illegal, fraudulent or
unfair purpose for the
incorporation of the first
defendant. Accordingly, the
concept of lifting the veil of
incorporation should not be
applied to it. In paragraph 64
of their Statement of Case, the
defendants make the following
submission:
“Our humble
submission is that incorporating
the 1st Defendant as
a private limited liability
company just before the
execution of the PPA was in
compliance with the Energy
Commission Act. The
incorporation was an act of
obedience to Ghana law, not some
last minute device to evade
parliamentary approval, as the
Plaintiff which was an active
party to all the events leading
up to the execution of the PPA
(and with full actual knowledge
of all the surrounding
circumstances), belatedly and
erroneously seeks to suggest.
The only way to lawfully
implement the provisions of the
anticipated transaction was to
incorporate a company in Ghana.”
The
defendants go on to assert that
for the plaintiff to succeed in
persuading this court to
disregard the obvious residence
of the first defendant in Ghana,
the onus rests upon it to prove
in which way the real business
of the first defendant is
carried on outside Ghana. They
insist that there is no evidence
that the real business and
central management and control
of the first defendant is
anywhere else but in Ghana.
In relation
to the third criterion for
testing internationality set out
above, the defendants point out
that a complete and careful
review of the PPA demonstrates
that the transaction does not
cross any national border. They
say (in paragraph 79):
“My Lords,
that is why out of the 34
clauses of, and 11 Schedules to,
the PPA (involving numerous
aspects of the transaction), as
well as the Lease Agreement
“Attachment”, the Plaintiff
embarks on a selective exercise
in ‘hunting and pecking’ at the
PPA, and then contends that this
Honourable Court should consider
only one clause and five other
sub-clauses of the entire PPA
(namely 2.6, 12.1, 15.4, 22.2,
24 and 29.2(g)), and hold that
on these bases, the PPA is an
international transaction. In
effect the Plaintiff is urging
your Lordships to decide that
the PPA is an international
transaction by ignoring every
other clause in the PPA, but
these that it has identified.
Yet the Plaintiff simply cites
these clauses without
demonstrating in what way or
manner these involve the
crossing of national borders,
thereby making the PPA an
international transaction. ..”
Finally, the
defendants respond to the
plaintiff’s argument that the
arbitration agreement between
the parties contained in clause
22.2 is, in and of itself, an
international business or
economic transaction which
requires Parliamentary approval
under article 181(5). Their
position, expressed in paragraph
93 of their Statement of Case,
is that:
“Our
respectful submission in
response is that even if this
Honourable Court was to hold
that the arbitration agreement
was ‘international’ in nature,
the agreement is not a “business
or economic transaction”. This
takes it out of the scope and
bounds of Article 181(5).”
The
defendants pray in aid of their
position the definitions of
“arbitration” and “arbitration
agreement” respectively,
contained in section 135 of the
Alternative Dispute Resolution
Act, 2010 (Act 798), which are
as follows: “the voluntary
submission of a dispute to one
or more impartial persons for a
final or binding determination
of a dispute” and “an agreement
to submit to arbitration present
or future dispute.” They also
refer to the definition of
“arbitration” in
Halsbury’s Laws of England,
4th Edition, Re-issue
(1991) at paragraph 601 in
the following terms:
“the process
by which a dispute or difference
between two or more parties as
to their mutual legal rights and
liabilities is referred to and
determined judicially and with
binding effect by the
application of law by one or
more persons (the arbitral
tribunal) instead of by a court
of law.”
They submit
that it is quite clear from
these definitions that an
arbitration agreement is nothing
more than parties to an
agreement determining beforehand
how their disputes arising from
that agreement are to be settled
by some quasi-judicial or
administrative process. Thus
the process of arbitration does
not of itself encompass any
business or economic dealings.
The defendants further argue
that because an arbitration
agreement is autonomous,
separate and severable from the
main contract in which it is
embodied, it does not derive its
nature from the main contract.
Accordingly, even if the PPA
were held to be an international
business transaction, that would
not, in the view of the
defendants, define the nature of
the arbitration agreement under
clause 22.2 as an international
business transaction.
Thus the
excellent arguments of the
Attorney – General (Honourable
Martin Amidu at the time of the
argument) are countered by
equally outstanding and
carefully considered submissions
by the defendants. The court’s
deliberations have been much
facilitated by the thoughtful
submissions made by both sides
to this suit.
The arguments
of the amicus curiae
In addition
to the arguments of the parties
summarized above, a Statement of
Case was filed on behalf of
Zenith Bank (Ghana) Ltd. The
bank had applied to be joined to
the suit as an interested party,
but this court dismissed the
application, but rather granted
it leave to file a Statement of
Case, as an amicus curiae. The
amicus curiae indicated in its
Statement of Case that it
associated itself with the
submissions made in the
Statement of Case of the
Defendants. It asserted that it
was strange to suggest that any
economic or business transaction
ordinarily entered into by a
Ghanaian legal person or entity
could be considered or treated
as an international business
transaction.
The averment
of the amicus curiae was that
after an irrevocable letter of
credit had been issued to the
first defendant by the Bank of
Ghana and this had been accepted
by the amicus curiae as
collateral for a loan
transaction with the first
defendant, the Bank of Ghana had
declined to honour the letter of
credit because of the dispute
between the Government and the
first defendant on the validity
of the PPA. It accordingly
threw its weight behind the case
of the defendants.
Our
Interpretation
The phrase
“international business or
economic transaction to which
the Government is a party”, if
purposively construed, should
not lead necessarily to the
result that only agreements
between entities resident abroad
and the Ghana Government can be
embraced within the meaning of
the term. Given the complexity
of contemporary international
business transactions, there
will be transactions of such a
clear international nature that
they should come within any
reasonable definition of an
international business
transaction, but which may have
been concluded with the Ghana
Government by an entity resident
in Ghana. In such a situation,
our view is that the substance,
rather than the form, should
prevail. What we have just said
begs the question of what
“international” means. In this
connection, we think that there
is the need to combine both the
nature of the business or
economic transaction criterion
and the parties criterion
proposed by the plaintiff in his
submission, in order to
formulate a test for determining
what transactions come within
the ambit of article 181(5) of
the 1992 Constitution.
However, the
complication which arises if a
transaction between a Ghanaian
company and the Ghana Government
is purposively construed to be
an international business
transaction is the need to
formulate a clear criterion for
distinguishing such a
transaction from other
transactions (with foreign
connections) between the
Government and Ghanaian
companies. On the other hand,
If an international business
transaction within the ambit of
article 181(5) is defined
exclusively as one between an
entity resident abroad and the
Ghana Government, one has a
ready rule of thumb for
determining at least one
dimension of what agreements
come within the scope of article
181(5). If this mechanical rule
is departed from, then one has
to confront the task of defining
a criterion or criteria for
distinguishing between
transactions entered into with
entities resident in Ghana where
such transactions are
nonetheless to be regarded as
international and other
transactions that are to be
regarded as non-international.
In spite of the entailed
implication of choosing
complexity over simplicity, we
think that this court has to
accept that substance should
rule, rather than form, and thus
grasp the nettle.
Once this
Court adopts the approach of
substance over form, the
following passage from the
defendants’ Statement of Case
(paragraphs 121, 122 and 123)
becomes poignantly relevant:
“121. My
Lords, therein lies, and with
utmost respect to the Plaintiff,
the inherent contradictions of
its arguments before this
Honourable Court. Taken to the
extreme, the Plaintiff would be
contending that even though
British Airways is registered as
an external company in Ghana,
the Government of Ghana cannot
purchase a ticket from that
airline for the President or any
public official to travel on the
airline’s plane, unless there
has been specific parliamentary
approval of the ticket
purchase. What is worse, even
the purchase of a ticket to fly
a Government official from Accra
to Kumasi would be an
“international business
transaction” if the local
airline has foreign
shareholders.
122. By
way of further hypothetical
illustration, if the Government
was to enter into a contract
with a Ghanaian individual for
the supply of paper to the
Government, and that individual
supplies the paper but has to
sue to recover unpaid monies,
the Government could, on account
of the supplier having imported
the paper into Ghana, come to
the Supreme Court for a
determination that the contract
to supply paper to the
Government was an “international
business or economic
transaction” that required
parliamentary approval, and that
in the absence of that approval,
the contract was invalid. It
would also mean, Your Lordships,
that every contract that the
Government enters into for the
supply of vehicles is an
“international economic or
business transaction” because it
is a notorious fact that nearly
all the cars plying our roads
are imported.
123. My
Lords, it was to avoid such
untenable and flawed posture and
arguments that the framers of
the Constitution, under Article
181(5) left the matter to
Parliament without even
attempting to define the phrase
“international business and
economic transaction”, thereby
leaving Parliament to decide
what it considers as an
“international business and
economic transaction” and how to
apply Article 181 to such
matters, by way of the necessary
statutory modifications.
Without those legislative
modifications that the
Constitution mandates, the
‘assumed’ interpretation of
Article 181(5) that
parliamentary approval is
required for such transactions
(even when the other party is a
Ghanaian) would lead to absurd
results. As things stand, the
Government chooses which
financial obligations to honour,
and which it would run to court
to challenge on account of the
Government’s own position that
parliamentary approval was not
required.”
This argument
that, without the legislative
modifications that the
Constitution mandates under
article 181(5), the provision is
inoperative and cannot be
enforced is erroneous and the
defendants are precluded by
stare decisis from re-opening
that issue. We have already
referred to the passage in
Attorney-General v Faroe
Atlantic Co. Ltd. [2005-6] SCGLR
271, where the Supreme Court
held that even before Parliament
acts on the modifications to
article 181(5) it is
enforceable. That position is
supported, not only by
authority, but also by
principle. The framers could
hardly have intended that
Parliament should be able to
stultify their purpose of
achieving transparency in the
Executive’s international
business deals through simple
inaction. Such an
interpretation of article 181(5)
would be unreasonable and not in
tune with the purpose of the
provision.
However, the
examples given by the defendants
in the passage quoted above
demonstrate the need to
articulate a criterion for
distinguishing between the
international business
transactions intended to be
scrutinized, and approved, by
Parliament and those which are
not. For, clearly it would be
impractical for Parliament to
scrutinize and approve every
single business transaction with
international ramifications
entered into by the Executive.
The hypothetical examples given
in the defendants’ Statement of
Case quoted above constitute a
reductio ad absurdum of one
perception of the principle
embodied in article 181(5). In
our view, to give effect to the
framers’ purpose, there is need
to imply into article 181(5) an
understanding that only major
international business or
economic transactions are to be
subject to its provisions. We
do, however, agree with the
defendants that Parliament needs
to exercise its legislative
power in relation to article
181(5) in order to clarify which
transactions are to be viewed as
major.
The
interpretation that the
international business or
economic transactions that come
within the ambit of article
181(5) should be limited to only
major ones is a purposive one.
It will be recalled that this
Court, speaking through me, in
Asare v
Attorney-General [2003-2004]
SCGLR 823, pointed out that
there is a distinction between
the objective and the subjective
purposes of a constitution or
statute. The court there said
(at p. 834):
“The
subjective purpose of a
constitution or statute is the
actual intent that the authors
of it, namely, the framers of
the constitution or the
legislature, respectively, had
at the time of the making of the
constitution or the statute.
The objective purpose is not
what the author actually
intended but rather what a
hypothetical reasonable author
would have intended, given the
context of the underlying legal
system, history and values etc.
of the society for which he is
making law. This objective
purpose will thus usually be
interpreted to include the
realisation, through the given
legal text, of the fundamental
or core values of the legal
system.”
One of the
values of the 1992 Constitution
is the promotion of probity and
accountability. In the
Proposals for a Draft
Constitution of Ghana
prepared by the Committee of
Experts appointed in 1992 under
PNDC Law 252 to draft the
proposals that were placed
before the Consultative Assembly
that formulated the 1992
Constitution, the Committee
makes the following important
point in the General
Introduction to its Proposals
(paragraph 6 on p. 5):
“With respect
to the developments within the
past 10 years, the guiding
principle was that the essential
attributes of institutions which
are compatible with a
constitutional order should be
retained, subject to
modifications as are
appropriate. The committee
feels that in this regard accent
should be on substance not
form. Thus, for example, the
social or political values of
accountability and probity and
fidelity to the public interest
should survive the inauguration
of the constitution….”
This passage
shows that the values of probity
and accountability were among
those that informed the
Committee’s decision-making in
the framing of its proposals.
These values clearly have a
relevance to article 181(5).
The sunlight of Parliamentary
scrutiny of major transactions
entered into by the Executive is
likely to be a powerful spur to
probity in such transactions.
That is why it is unlikely that
the framers would have intended
to give to Parliament the veto
power implied in the defendants’
interpretation of article
181(5). The purposive
interpretation we have given to
this provision is therefore in
accord with our reading of its
objective purpose. Indeed, the
framers’ commitment to probity
and accountability as a value of
the Constitution is reflected in
one of the Preambles to the
Constitution, which reads as
follows: “AND IN SOLEMN
declaration and affirmation of
our commitment to: Freedom,
Justice, Probity and
Accountability;…”. On the other
hand, the framers could not have
intended the obvious and
foreseeable paralysis from
overload in Parliament that
would ensue from interpreting
the provision as covering every
single business or economic
transaction with an
international dimension. The
implication into article 181(5)
of the attribute of being
“major” before a transaction
enters into its ambit would thus
seem to us to be necessary and
reasonable and within the spirit
of the provision.
Because of
the practical consequences of
determining that a transaction
comes within the scope of
article 181(5), an
interpretation of the provision
needs to result in practical
guidance to the Executive,
Parliament and parties to
transactions with government to
enable them to apply the
constitutional vision of the
framers. It is therefore
imperative that Parliament takes
up early the challenge of
framing the modifications to
article 181 needed to give
greater certainty and clarity as
to what categories of
international business or
economic transactions to which
the Government is a party come
within the ambit of article
181(5). In the interim, a
certification by the
Attorney-General that an
international business
transaction to which the
Government is a party is “major”
or not should be accorded great
weight by the courts, although
it cannot be conclusive. We are
here, of course, referring to
the Attorney-General’s
certification before a dispute
has arisen between the
Government and any party.
The
formulation of this criterion of
the implicit need for an
international business agreement
to be “major” before it comes
within the ambit of article
181(5) goes some way to
resolving what the plaintiff
referred to in his Statement of
Case as penumbra cases. In real
life, there will be difficult
borderline cases whose status
within or outside article 181(5)
will need to be determined.
Apart from
implying the attribute “major”,
as outlined above, this Court
needs to interpret
“international” in the context
of article 181(5) appropriately
in order to deal with issues
such the reductio ad absurdum
hypotheticals posed by the
defendants above. What then is
the meaning of “international”
in this context? We think that
a business transaction is
“international” within the
context of article 181(5) where
the nature of the business which
is the subject-matter of the
transaction is international in
the sense of having a
significant foreign element or
the parties to the transaction
(other than the Government) have
a foreign nationality or reside
in different countries or, in
the case of companies, the place
of their central management and
control is outside Ghana.
The word
“significant” is used in the
above definition to denote the
fact that the foreign elements
or contacts that lead to a
judgment of internationality in
relation to a transaction have
to be subjected to a qualitative
assessment before reaching that
judgment. The significance is
in relation to the purpose of
article 181(5). Thus, for
instance, the example given in
the defendant’s Statement of
Case “ that every contract that
the Government enters into for
the supply of vehicles is an
“international economic or
business transaction” because
“it is a notorious fact that
nearly all the cars plying our
roads are imported” would not
necessarily be correct because
the fact only of the importation
of the vehicles would not be
significant enough in relation
to the purpose of article 181(5)
to justify the transaction being
characterized as an
international business
transaction. The sale of cars
domestically to the government
would not be an international
trade transaction, in spite of
the incidental fact that the
cars sold were imported. The
fact of their importation, when
qualitatively assessed by a
court, may well result in a
decision by the court that their
importation is not a significant
foreign element in the
transaction in question. This
qualitative assessment is
important in separating business
transactions which are
international within the meaning
of article 181(5) from those
that are not. The defendants’
hypotheticals are only a sample
of many other transactions which
could literally be brought
under the semantic umbrella of
an “international business
transaction”, but which should
not be so construed for the
purposes of article 181(5).
Examples would be documentary
letters of credit and contracts
for the international sale of
ordinary goods or for the
carriage of goods by sea. In
our view, the framers did not
have in their contemplation,
subjectively or objectively,
transactions of this nature:
that is, transactions of
ordinary commerce.
As to the
meaning of business, we are
willing to accept the
defendants’ interpretation of it
that “where a transaction is
commercial in nature, or
pertains to or impacts on the
wealth and resources of the
country, it would be a “business
or economic transaction” and a
subject of interest in any
examination of Article 181(5).”
The
conceptual discussion thus far
as to what international
business or economic
transactions come within the
ambit of article 181(5) has been
without prejudice to a
determination, on the actual
facts of the present case, of
whether or not the PPA in issue
here was required to be
submitted to Parliament. Our
next task, therefore, is to
examine some of the
specificities of the PPA in
order to decide whether it is an
international business or
economic agreement to which the
Government is a party within the
meaning of article 181(5). Our
general impression, upon reading
the submissions of the parties,
is that the overall transaction
involved here was a foreign
investment by a US investor in a
power generation project to
supply power to the Ghana
Government and that the
Government was a party to this
transaction. We are viewing the
transaction in the round,
without resorting technically to
the piercing of the corporate
veil doctrine. We interpret
“transaction” in this context as
meaning a series of agreements
or acts united by their purpose
of attaining the project
objective of the parties to it.
We will now set out the
circumstances which support this
impression and whether a
transaction of this nature comes
within the ambit of article
181(5).
The PPA
between the Government and the
first defendant was the result
of negotiations between a
foreign investor (the third
defendant acting on behalf of
owner of the second defendant)
and the Government. This is a
significant foreign element in
the transaction. Secondly, the
first defendant, though a
Ghanaian company, is
wholly-owned by a foreign
entity, incorporated in the
United Kingdom. Thirdly, the
managing director of the first
defendant is a foreigner, the
third defendant, and control of
the management of the first
defendant is in foreign hands.
Fourthly, the PPA contains a
clause providing for
international commercial
arbitration. Lastly, there were
other clauses in the PPA which
are usually associated with
foreign investment transactions,
such as the waiver of sovereign
immunity clause and the
following clause set out in the
plaintiff’s Statement of Case:
“29.2 GOG
represents and warrants that:
‘(g) No
Taxes. There is no Tax
other than stamp duty at a
nominal rate imposed on or in
connection with:
(D)
the execution, delivery or
performance of this Agreement;
(E)
the enforcement of any of this
Agreement; or
(F)
on any payment to be made to
the BEC under this Agreement.
In connection with Letters of
Credit, no Government Authority
shall impose any reserve,
special deposit, deposit
insurance or assessment
affecting BEC.
No Foreign
Exchange Controls.
There are no foreign exchange or
other restrictions in effect in
the Republic of Ghana adversely
affecting the ability or right
of GoG to acquire and to remit
to BEC foreign currency to pay
and satisfy GoG’s obligations
under this agreement.”
All these
circumstances cumulatively lead
us to the conclusion that the
answer to the first question
referred to this Court is that
the Power Purchase Agreement
dated 27th July 2007
between the Government of Ghana
and Balkan Energy (Ghana)
Limited constitutes an
international business
transaction within the meaning
of Article 181(5) of the
Constitution.
On the other
hand, the answer to the second
issue referred is that the
arbitration provisions contained
in clause 22.2 of the Power
Purchase Agreement dated 27th
July 2007 between the Government
of Ghana and Balkan Energy
(Ghana) Limited does not
constitute an international
business transaction within the
meaning of Article 181(5) of the
Constitution. This is because
applying the interpretation of
article 181(5) arrived at above,
it is clear that the
international arbitration
provision cannot, in and of
itself, constitute an
international business or
economic transaction. An
international commercial
arbitration is not by itself an
autonomous transaction
commercial in nature which
pertains to or impacts on the
wealth and resources of the
country. An international
commercial arbitration draws its
life from the transaction whose
dispute-resolution it deals
with. We therefore have
difficulty in conceiving of it
as a transaction separate and
independent from the transaction
that has generated the dispute
it is required to resolve.
The case is
accordingly remitted to the High
Court for this Court’s
interpretation of article 181(5)
of the 1992 Constitution to be
applied in the proceedings
before it.
We would like
to end this opinion by repeating
our request to Parliament to
enact a Bill indicating what
modifications it wishes to make
to article 181(5) of the
Constitution. This step would
bring greater certainty and
clarity to the law.
(SGD) DR. S. K.
DATE-BAH
JUSTICE OF THE SUPREME COURT
(SGD) W. A.
ATUGUBA
ACTING CHIEF JUSTICE
(SGD) J. ANSAH
JUSTICE OF THE SUPREME COUR
(SGD) S. O. A.
ADINYIRA (MRS)
JUSTICE OF THE SUPREME COURT
(SGD)
ANIN YEBOAH
JUSTICE OF THE
SUPREME COURT
(SGD) N. S.
GBADEGBE
JUSTICE OF THE SUPREME COURT
(SGD) V. AKOTO –
BAMFO [MRS.]
JUSTICE OF THE SUPREME COURT
COUNSEL:
HON.
BENJAMIN KUMBUOR,
ATTORNEY-GENERAL ( WITH HIM MRS.
GRACE EWOOL ) FOR THE PLAINTIFF
ACE ANKOMAH
FOR THE DEFENDANTS.
NANA ATO
DADZIE AS AMICUS CURIAE. |
