How BoG won $478m Sibton Switch Ltd case

August 27, 2021 By 0 Comments

The London International Court of Arbitration’s (LCIA) constituted tribunal has dismissed all claims brought by Sibton Switch Systems Limited against the Bank of Ghana (BoG).

The Tribunal also ordered Sibton Switch to make a substantial payment to the Bank in respect of its legal fees and costs of the arbitration. As widely publicized by both local and international media, the claims were for the termination of the Master Agreement for the Ghana Retail Payment Systems Infrastructure in 2017.

What brought about the deal?

It all began when the BoG sought the establishment of an integrated and interoperable electronic national payment system in Ghana.

This was in line with its policy objective of averting the development of fragmented payment systems, which were believed not to be efficient in liquidity and also increase the cost of payment transactions.

As at that time, there was interoperability in the payment cards subsector in Ghana, facilitated by the gh-Link payment switch for locally branded payment cards on one hand, and on the other hand, an international payment switch for international payment card brands such as Visa and Master Card, among others.

Besides payment cards that were being provided by banks, BoG had licensed non-bank entities to operate as dedicated electronic money issuers (DEMIs), by enabling digital funds transfer using mobile phones as the payment device.

At that moment, there were four (4) mobile network operators, namely; MTN, Airtel, Tigo, and Vodafone that were operating in the electronic money issuance space.

However, the payment platforms of the operators were not interoperable, thereby fragmenting the electronic money ecosystem, resulting in suboptimal performance. It was in aligning the operations of the

Bank of Ghana

electronic money ecosystem to the payment system policy objective of BOG that the RFP was being implemented.

Intent for a tender

BoG, through that tender, sought a vendor to supply, implement, own, and operate an integrated and interoperable Mobile Payment Systems Infrastructure (MPSI), as a turn-key solution project – that is, all components must be supplied and/or integrated by the vendor to create a fully tested, working system meeting the requirements of this RFP.

The successful tenderer, according to documents sighted by The Chronicle, was to be awarded the contract by BoG to supply and implement MPSI, including hardware, systems software, and application software at the tenderer’s own expense, and own and operate the delivered system.

BoG was to use the system as a monitoring tool for payment system oversight, and the successful tenderer was to provide the technical training needed for staff of participating institutions, namely BoG, banks, and mobile money operators (MMOs), to be able to use and support the MPSI.

Invitation for Tenders

The BoG in the first quarter of 2016, invited sealed tenders from eligible suppliers or their authorized representatives for the procurement of Technical Services for the Implementation of Ghana Retail Payment Systems Infrastructure in Ghana.

The tendering was to be conducted through the Selective Tendering procedures specified in the Public Procurement Act, 2003 and in the Guidelines of the Procurement Authority of the Republic of Ghana.

A complete set of hard copies of the tender documents was to be available from May 27 to July 4, 2016, and the tenders were to be valid for a period of 90 days after the deadline for tender submission.

Operational Risk Management

Participants were expected to underwrite the settlement of their own MPSI positions. Positions were always to be collateralized either by cash in RTGS or securities in CSD pledged in support of the settlement. Such securities were to be capable of immediate liquidation. The total of these collaterals was to constitute a debit cap on the participant’s ability to send payments.

The debit cap was to be set automatically by reference to collateral held in BOG’s RTGS and/or CSD, as a guarantee in a failure to settle arrangement.

Funding and Financial Proposals

The total cost of implementing the project and the cost of on-going support were to be consistent with profitable operations at the volume of transactions to be processed and with reasonable assumptions about the acceptable level of fees in the Ghanaian market. This was to ensure that the system was able to generate enough revenue to recover the operational costs and also recover the implementation costs within a reasonable period without hampering Ghana’s financial inclusion agenda.

The Tenderers for the “Supply, implement and Operate” Contract were to provide a financial proposal which was to give a breakdown of hardware, system software, and application software costs to BoG, the System Operator, participants, and any other parties for each application, indicating, among others, where infrastructure may be shared.

Evaluation Criteria

There was a three (3) stage evaluation process, namely; Preliminary Examination for Substantive Responsiveness; Technical Evaluation; and Financial Evaluation.

The Preliminary Examination was to be conducted to ensure that the tender was substantially responsive in terms of all mandatory tenderer and product and service eligibility requirements; and that the tender met all the conditions stipulated in the RFP for acceptance for detailed evaluation.

A detailed technical evaluation was to be undertaken for the tenders that were accepted for further evaluation after the Preliminary Examination. Only the technically qualified tenders (i.e. tenders that receive a technical score of 80% or more) were to be shortlisted for financial evaluation.

The basis for final ranking of the tenders was Quality and Cost Based (QCB). And the weights given to the Technical and Financial Proposals were to be: Technical Proposal-80% Financial Proposal – 20%Total Weight – 100%.

The company at the center of this judgment, Sibton Switch, won the bid under the erstwhile John Mahama administration.

Change in management and Contract Review

Following the 2016 elections, which saw a change in government, and the appointment of a new management of the BoG, the Sibton Switch contract was reviewed by the new administration.

In reviewing the contract, the new management of the bank reached the conclusion that Sibton had neither acquired the licence nor fulfilled the condition precedent for the effectiveness of the rights and obligations of the parties.

The Agreement, which dealt with the grant of exclusive rights to Sibton Switch to build, operate and own the Ghana Retail Payment Systems Infrastructure, was therefore terminated on the basis that it never came into effect.

A statement from the Bank of Ghana said the contract awarded to Sibton Switch was one-sided in favour of Sibton Switch and was severely detrimental to the interests of the BoG.

For example, the Public Procurement Authority’s approval for the project provided that the Bank of Ghana’s maximum liability was to be GH¢300,000.

“Contrary to this approval, the corruptly-procured contract with Sibton Switch provided that the Bank of Ghana had a huge potential liability of USD $478 million (GH¢2.6 billion).

In addition, the tender price of Sibton Switch was more than 33 times more expensive than the next most expensive bid.”

Following the termination of the contract with Sibton Switch in 2017, the Bank of Ghana’s subsidiary, GhIPSS, was able to deliver mobile payment systems interoperability at a small fraction of the cost, saving the Ghanaian taxpayers billions of Cedis.

Vice President Alhaji Dr Mahamudu Bawumia, Head of the Economic Management Team

An Arbitration Award issued in favour of the Bank

The company, Sibton Switch, took legal action against the BoG for terminating the contract they had signed with Ghana.

The claimant, Sibton Switch, went to the LCIA seeking relief in the sum of USD 478 million from the respondent, Bank of Ghana. On 28th July 2021, a panel of three arbitrators issued an award in favour of the Bank of Ghana in the LCIA arbitration, dismissing all the claims brought by Sibton Switch Systems Limited.

According to a statement issued by the BoG, the claims were dismissed due to the failure of Sibton Switch Systems Limited to comply with the orders of the Tribunal.

It included an earlier interim award made by the Tribunal on June 25, 2019 in favour of the Bank of Ghana, which required Sibton Switch to make an interim award payment for security of costs.

The final award also ordered Sibton Switch Systems Limited to pay the BoG in full the cost of the arbitration, in respect of the BoG’s legal fees.

BoG Governor pleased with the outcome.

The Central Bank’s current Governor, Dr Ernest Addison, the statement added, said that he was pleased with the favourable outcome of these proceedings, and with the billions of Ghana Cedis saved by the Ghanaian taxpayer as a result.

BoG sacked official over deal

Meanwhile, the BoG in September 2019 relieved one of its officials of his duties for alleged involvement in the Sibton Switch Systems Limited contract.

The staff member, who was the Project Manager leading the interoperability project, was dismissed due to gross misconduct in relation to corrupt transactions and for accepting bribes in connection with the award of the contract.

According to the BoG in its press release, bank statements revealed that secret and corrupt payments of GH¢410,000.00 were made by the company and its parent company to the official at the Bank of Ghana via a shelf company, which was owned by the staff.

Investigations further revealed that the said official deliberately concealed from the BoG a payment of USD $500,000 (GH¢2.7 million) received and the “sham” contract with Sibton Switch Ltd by deleting email records.

With the actions, the statement further said the official breached the Code of Conduct for Bank of Ghana staff, and the BoG Senior Staff Rules and Conditions of Service, as well as the Bank of Ghana Code of Ethics.