In practice - the Bankswitch and Klomega cases
Bankswitch Ghana, an IT services provider based in Accra but 60% Swiss-owned, signed a contract with Ghana in 2007 providing an electronic platform to process and value imported goods. When Ghana cancelled the contract in 2010, Bankswitch initiated proceedings in the Permanent Court of Arbitration in the Hague, claiming US$300m.
In its award, the tribunal upheld Bankswitch’s argument that the principle of estoppel prevented Ghana from alleging invalidity of the contract, ordering Ghana to pay approximately US$87 million to Bankswitch.
Ghana subsequently filed proceedings in the Supreme Court of Ghana, requesting that it declare the contract with Bankswitch void as an unapproved “international business transaction”. It appears that Ghana have now rowed back from this, probably for economic/political reasons, with recent reports suggesting that Bankswitch was in negotiations with the Ghanaian government on alternative payment arrangements regarding the amount awarded.
In the Klomega case, Felix Klomega, a Ghanaian citizen, challenged the validity of a concession agreement and associated shareholders’ agreement for the design, construction and operation of the container terminal at the port of Tema, Ghana, for 20 years. The concession had been granted to Ghana Ports and Harbours Authority (“GPHA”) and a Ghanaian company which was part of a joint venture with an English company.
Mr Klomega relied on Article 181(5) of the Constitution, arguing that “government” included a state entity such as GPHA and that, as a result, the concession agreement and shareholders’ agreement were void for lack of parliamentary authorisation.
The Supreme Court of Ghana held that “…to subject statutory corporations…with commercial functions to the parliamentary approval process prescribed in Art. 181(5) would probably increase the weight of Parliament’s responsibilities in this regard to an unsustainable level. Accordingly, it is reasonable to infer that the framers of the Constitution did not intend such a result”. The Supreme Court did also note, however, that its decision did not lay down an absolute rule, and that Article 181(5) may still apply where a central government was found to have made a particular statutory corporation its alter ego.
As to the “international” nature of the concession and shareholders’ agreement, the Supreme Court stated that “Although these other issues raised by the parties are tantalisingly interesting, we will refrain from commenting on them or deciding them, since that is not necessary for the determination of the case”.
It is therefore likely that, if a party is going to contract with the “government” and the particular contract is an “international business transaction”, parliamentary approval will still be required and that such approval which will need to be factored into any contractual timeline.
PPP and tender processes
The draft PPP Bill published in May 2013 and approved by the Ghanaian cabinet in December 2015 does not appear to clarify Article 181(5) of the Constitution. Certain commentators believe that the Article 181(5) requirement will apply to any material concession agreement where a Ghanaian SPV is owned and controlled by international parties.
Section 15(e) of the draft PPP Bill states that “Parliament shall be the final approval authority in all cases where the PPP Agreement … in respect of international business transactions or economic transactions, where the estimated project cost is above the stated threshold in the Regulations or applicable enactment in compliance with Article 181(5) of the Constitution …”.
Both foreign awards and foreign judgments could still face stiff challenges in Ghana when the state is involved, and much will depend on the political and economic situation at the time of enforcement.