An international arbitration tribunal seated in London has in a 202-page award dated 18 November 2024, dismissed the claims of Ghana Community Network Services Limited (GCNet), instituted against the Republic of Ghana under Article 18 of the Arbitration Rules of the United Nations Commission on International Trade Law of 1976 (the UNCITRAL Rules).
The Tribunal ordered GCNet to pay Ghana US$2,185,983.21 in legal fees.
This comprises US$1,744,050.42 in legal representation and US$441,932.79 for fees and expenses of Ghana’s expert witness together with interest on the aggregate amount of US$2,185,983.21, as simple interest from 30 days following the date of the Tribunal’s Award until payment at the rate of USD SOFR + 1%.
GCNet was represented by an English law firm called Quinn Emanuel Urquhart & Sullivan, LLP and two Ghanaian firms – Beyou and Co. and ENS Africa. Ghana was represented by the Office of the Attorney-General led by the Attorney-General, Godfred Yeboah Dame.
It did not have recourse to foreign counsel saving the nation millions of US Dollars in legal fees.
Factual Background
By a notice of arbitration dated 30 June 2022, GCNET challenged the right of the Government of Ghana to terminate a Service Agreement it had with the Government by which GCNET was granted the exclusive right to develop, customise, update and operate an electronic system for processing customs payment and trade documents at ports in Ghana.
Under the agreement, GCNet was authorised to charge all users of the services a fee equivalent to 0.40% of the Final Invoice FOB value of all import transactions and 0.15% of all export transactions which pass through the CMS and TradeNet portion of the Services.
The agreement was initially entered into in 2000 and became effective in 2002. It was for an initial term of 10 years, up to 2012. Following its expiry in December 2012, the Minister for Trade and Industry, Hanna S Tetteh, by a letter dated 30 November 2012, extended the agreement for one year.
In 2013, by an agreement dated 26th August 2013, the Minister for Trade and Industry, Haruna Iddrisu, extended the life of the agreement for five (5) years, ensuring that it would end in December 2018. Before the lapse of the 5 years, in October 2016, another Minister for Trade and Industry, Ekwow Spio-Garbrah, extended the duration of the agreement by a further 5 years. Thus, the agreement was set to end in December 2023.
All the extensions made by the various Ministers for Trade working under the John Mahama administration were without the requisite statutory approval of the Public Procurement Authority or recourse to any of the procedures for public procurement set out in the PPA law.
The NPP administration which took office in 2017, terminated the GCNet agreement on 28 April 2020 after a comprehensive value-for-money assessment.
In the termination notice given to GCNet, the Government indicated that it would pay to the company the compensation stated in the agreement for early termination. GCNet rejected this offer, claiming compensation on various heads far above and beyond what is stated in the agreement.
Following a breakdown of attempts by GCNet to reach an amicable resolution with the Government, GCNet commenced the arbitration proceedings pursuant to Article 13.2 of the Agreement with Ghana.
The company asserted that the contract was unlawfully terminated by the Government of Ghana and sought 3.3 billion Ghana Cedis in damages from the Government.
The amount comprised compensation of GHC2,114,041,098 (over GHC2.1billion) for what it alleged was the wrongful termination of the agreement and GHC1,190,614,711 (GHC1.19billion) for past alleged breaches of the agreement when the Government granted exemptions and discounts to importers pursuant to government policy during the life of the agreement.
The company also sought to recover pre-award interest of GHC2.015billion and about US$4 million in legal fees from the Government if the tribunal ruled in its favour.
Ghana’s case
Ghana roundly rejected GCNet’s claims and invited the Tribunal to hold that the country had validly terminated the agreement between the parties.
The Attorney-General asserted that the Agreement between the parties included an express and exhaustive regime for assessing GCNet’s entitlements to damages after termination, and thus, provided no scope forfor the application of common law principles on the measure and assessment of unliquidated damages.
Ghana alleged that by Article 9.4 of the Agreement in the event of early termination of the Agreement by the Government, it was required to compensate GCNET for any losses in accordance with a reducing scale of compensation, which did not exceed US$ 6.0 million. Ghana argued that the Tribunal was supposed to give effect to the agreement between the parties and disregard all the exorbitant claims by GCNet.
In Ghana’s view, the interpretation it placed on the relevant provisions of the Agreement reflected the intention of the parties and was consistent with commercial common sense as it made the compensation payable by the Government in the event of termination, determinable.
Regarding GCNet’s claim for losses occasioned by the Government policy on exemptions granted to some importers, Ghana argued that GCNet had no contractual right that was violated. The mere fact that a government policy had negatively impacted a company’s profit does not mean the government has breached a contractual obligation.
The A-G argued that Article 4 of the Agreement permitted the government to exclude imports from GCNet’s services.
According to the Attorney-General, even if GCNet had a contractual right to be protected against the effect of the government policy on exemptions, GCNet had by its conduct, irrevocably waived that right and was precluded from basing a claim on it. Once a right is waived it cannot be revived, especially after the relevant limitation period allowed by Ghana law has expired.
The A-G asserted that by not giving notice of the retraction of the waiver before the statutory limitation period expired or the termination of the Service Agreement, GCNet remained bound by the waiver. Therefore, GCNet was precluded from obtaining relief in respect of its claims for lost fees as a result of the exemptions policy implemented by Ghana.
On GCNet’s claims for losses resulting from a discount policy operated by Ghana in favour of some imports, Ghana argued that just like the exemptions policy, the discount policy was subject to the laws of Ghana. The Discount Policy was applicable on all computations presented by importers in order to arrive at “a final assessed value”, and therefore was not discriminatory.
The A-G indicated that Article 174(2) of the Constitution of Ghana had given Parliament the power to waive or vary a tax exercised by any person or authority in Ghana. The Customs Act also supported the implementation of a policy of discounts on some goods in Ghana. Article VII of the World Trade Organisation’s General Agreement on Tariffs and Trade 1994 allows for adjustments to the price actually paid or payable and such adjustments include the applications of discounts in line with policies like the Discount Policy.
Ghana submitted that the Benchmark Value Discount Policy was intended to drive up the volume of imports at the ports and invariably increase revenues to the two parties – Ghana and GCNet, and therefore invited the Tribunal to dismiss the Claimant’s submissions on this head too.
Ghana finally urged the Tribunal to reject GCNet’s application for the award of compound intertest on any sum to be awarded against Ghana. According to the Attorney-General, awarding simple interest was an appropriate exercise of the Tribunal’s discretion because the Agreement between the parties is governed by Ghanaian law, which required that simple interest be adopted. The execution and performance of the Service Agreement was in Ghana, and the Claimant was obligated to perform services for the benefit of the Government.
The Attorney-General submitted that Ghana’s new Contracts (Amendment) Act, 2023 (Act 1174) forbids the application of compound interest in transactions to which Ghana is a party. Even though Act 1174 is not retroactive, it reflects a firm policy in Ghana against compound interest regarding contracts with the Government. He therefore submitted that simple interest must be awarded on any sum payable by any of the parties to the dispute.
The proceedings
The oral hearing was conducted over a period of one week in London in April, 2024 after which the Tribunal adjourned for filing of post-hearing briefs, submissions on costs and delivery of an award.
Determination by the tribunal
The Tribunal unanimously decided that Ghana had validly terminated the Agreement on 28 April 2020, within the meaning of Article 11.3, and the termination was lawful.
The Tribunal also unanimously decided that GCNet waived its rights to seek damages for the impact of the exemptions and discounts on its fees. The Tribunal found by a majority decision that the impact of the exemptions and discounts on GCNet fees did not breach the Service Agreement.
The Tribunal upheld Ghana’s submission that, as stated in the agreement, GCNet should be awarded compensation of $5.4 million for the Government’s early termination of the agreement.
The Tribunal also found that GCNet was the “unsuccessful party in the arbitration” and that Ghana had “expended money and time in defending a claim that the Tribunal has held to be ill-founded”. It therefore ordered that GCNet shall pay a total of Ghana US$2,185,983.21 in legal fees.
The Tribunal’s decision is a significant win for Ghana, saving it billions of Ghana Cedis.
Source: Www.kumasimail.com
