Agreement btn GoG & Balkan Energy is an Int’l transaction -SC declares

By Ivy Benson

The Supreme Court (SC), by a unanimous decision, ruled that the Power Purchase Agreement (PPA) dated July 27, 2007 between the Government of Ghana and Balkan Energy Ghana Limited that gave the former a lease agreement on the Osagyefo Power Barge, is an international business transaction.
The court, presided over by Justice William Attuguba, yesterday, gave the landmark ruling after it assumed its original jurisdiction of interpreting what the meaning of “international business transaction,” in accordance with Article 181(5) of the 1992 Constitution that had become a bone of contention, a case in which the state had sued Balkan Energy Company LLC, Balkan Energy Ghana Limited, and Mr. Philip David Elders, an American, at the High Court (Commercial Division)
The ruling, read by Justice Date-Baah, also viewed the arbitration provisions contained in clause 22.2 of the Power Purchase Agreement (PPA), dated July 27, 2007, between the Government of Ghana and Balkan Energy (Ghana) Limited, as not constituting an international transaction.
The rest of the panel members who sat on the case, include Justices Julius Ansah, Mrs. Sophia Adinyira, Annin Yeboah, Sule Gbadegbe, and Mrs. Vida Akoto-Bamfo.
According to the court, the transactions entered into has elements that made it an international transaction, noting that Balkan Energy Ghana Limited is a wholly-owned subsidiary of Balkan Energy Company LLC, incorporated in the United Kingdom, and established by Mr. Philip David Elders, an American investor.
Additionally, the court indicated that the amount involved in such transactions are significant and quoted in foreign currencies, with the principal partners resident abroad.
It further asked Parliament to enact a bill indicating what constitutes and International Business Transaction, in order to set parameters that would be followed in any such transaction.
The ruling, in essence, nullifies the transaction entered into in 2007, since it had not got Parliament approval, as pertains in International Transactions prescribed under the Constitution.
The court, therefore, ordered the Commercial Court to dispose off the case before it in accordance with its ruling.
The state had issued a legal suit against Balkan Energy Company LLC, Balkan Energy Ghana Limited and Mr. Philip David Elders at the Commercial Court, challenging the legitimacy of the Power Purchase Agreement (PPA) that leased the Osagyefo Power Barge to Balkan Energy in 2007 to operate.
Before the state could seek legal redress, Balkan Energy had gone to the International Court of Arbitration (ICA) in The Hague, following government’s default on a Memorandum of Understanding (MoU) signed between the parties.
The state, however, challenged Balkan Energy’s appearance before the ICA, indicating that the transaction entered into with the government in 2007, was not an International Business Transaction, since the transaction was not placed before Parliament for approval, and therefore, a nullity.
The state raised Constitutional issues and requested the trial High Court to refer the issues to the Supreme Court (SC) for interpretation, but the court declined the request.
However, the SC, on November 2, 2011, ruled that the refusal of the lower court to refer the issues to it for interpretation “usurped the jurisdiction of this court” and breached Article 130 (2) of the 1992 Constitution.
The SC, thereafter, took over the issue for interpretation to ensure rule of law, noting that the High Court had missed the point when it presumed that there was no cause for the issue to be referred for interpretation.
Proceedings were, therefore, stayed at the trial High Court, pending the determination of the constitutional issues before the SC.
The issues for determination are whether the Power Purchase Agreement signed between the two on July 27, 2007, constituted an International Business Transaction under Article 181 (5) of the 1992 Constitution, and whether the arbitration provisions contained in the agreement constituted an international business transaction under Article 181(5).
Under the agreement, the 125-megawatts Osagyefo Barge was leased to Balkan Energy Ghana, a wholly-owned by Balkan Energy Company LLC, to repair, rehabilitate and commission within 90 days of the effective date, as defined in the Power Purchase Agreement (PPA).
However, the contract did not go through Parliament, which the state claims violated Article 181 of the Constitution, which principally, dealt with Parliamentary ratification of loan agreements.
While Article 181(1 to 4) deals with Parliamentary ratification of loan agreements, Article 181(5) extends the requirement to “International Business Transactions’ to which the government is a party.
It states: “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.”
According to Balkan Energy, it was not an international business or economic transaction to which the government was a party, and therefore, there was no need of Parliamentary approval under Article 181(5) of the Constitution.
Citing the Companies Act (Act 179), Balkan Energy claimed that the nationality of a company was determined on the basis of where it was incorporated, adding that under section 302(2) and Schedule 1, clause 1 of the Companies Act, an ‘external company’ is “a body corporate formed outside Ghana.”
They also referred to Section 315 and Schedule (1) clause (1), saying the term “non-Ghanaian company” was defined as “any association incorporated or to be incorporated outside Ghana, not being an external company as defined in section 302 of this Act.”
But, the state disagreed, citing several factors which make the transaction an international business transaction.
According to the state, the expression of interest in the commissioning of the barge, and the negotiations for the PPA, were conducted entirely by Balkan Energy LLC, which entered into a memorandum of understanding for the project, and undertook to execute the project.
The state was, therefore, seeking among other reliefs, a declaration that the agreement constitutes an international business transaction, to which the government was a party, and was unenforceable, as infringing Article 181(5) of the Constitution.

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