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Godfred Yeboah Dame — Minister of Justice and Attorney-General
Godfred Yeboah Dame — Minister of Justice and Attorney-General
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International Tribunal dismisses GCNet GH¢4bn arbitration against Ghana - Awards $2.2m costs for country

An international arbitration tribunal seated in London has dismissed the claims of Ghana Community Network Services Limited (GCNet) instituted against the Republic of Ghana, claiming compensation of GH¢4 billion.

The tribunal in a 202-page award last Monday ordered GCNet to pay Ghana $2.185 million in legal fees.

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This comprises $1.74 million in legal representation and $441,932.79 for fees and expenses of Ghana’s expert witness together with interest on the aggregate amount of $2.185 million, as simple interest from 30 days following the date of the tribunal’s Award until payment at the rate of USD SOFR + one per cent.

GCNet instituted the action under Article 18 of the Arbitration Rules of the United Nations Commission on International Trade Law of 1976 (the UNCITRAL Rules). 

Ruling

The tribunal unanimously decided that Ghana had validly terminated the Agreement on April 28, 2020, within the meaning of Article 11.3, and the termination was lawful.

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 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 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”.

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It, therefore, ordered that GCNet shall pay $2.185 million in legal fees.

GCNet was represented by an English law firm, 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 (A-G), led by the Attorney-General and Minister for Justice, Godfred Yeboah Dame.

It did not have recourse to foreign counsel, which also saved the nation legal fees.

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Background

By a notice of arbitration dated June 30, 2022, GCNet challenged the right of the government of Ghana to terminate a Service Agreement it had with the state 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 per cent of the Final Invoice Free On Board (FOB) value of all import transactions and 0.15 per cent of all export transactions which pass through the Customs Management System (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.

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Following its expiry in December 2012, the Minister of Trade and Industry, Hanna S Tetteh, by a letter dated 30 November 2012, extended the agreement for one year. 

Facts

Providing facts in defence, Mr Dame said in 2013, by an agreement dated August 26, 2013, the government, represented by the Minister of Trade and Industry, extended the life of the agreement for five years to end in December, 2018.

He said before the lapse of the five years, in October, 2016, another Minister of Trade and Industry extended the duration of the agreement by a further five years, to end in December 2023.

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The A-G explained that all the extensions made by the various Ministers of Trade were without the requisite statutory approval of the Public Procurement Authority (PPA) or recourse to any of the procedures for public procurement set out in the PPA law.

“The New Patriotic Party (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,” Mr Dame averred.

Arbitration

Following a breakdown of attempts by GCNet to reach an amicable resolution with the government, the A-G said GCNet commenced the arbitration proceedings pursuant to Article 13.2 of the agreement with Ghana.

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The company asserted that the contract was unlawfully terminated by the government and sought GH¢3.3 billion in damages from the government.

Mr Dame explained that the amount comprised compensation of GH¢2.11 billion for what the company alleged was the wrongful termination of the agreement, and over GH¢1.19 billion 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 GH¢2.02 billion and about $4 million in legal fees from the government if the tribunal ruled in its favour.

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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 A-G 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 for the application of common law principles on the measure and assessment of unliquidated damages.

The state also averred that by Article 9.4 of the agreement in the event of early termination by the government, it was required to compensate GCNet for any losses in accordance with a reducing scale of compensation, which did not exceed $ 6 million.

The state also 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 a termination determinable.

Regarding GCNet’s claim for losses occasioned by the government’s policy on exemptions granted to some importers, the state 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 state argued.

The A-G averred that Article 4 of the agreement permitted the government to exclude imports from GCNet’s services.

According to the A-G, 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 had expired,” he argued.

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 said. 

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.

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