Ghana's latest judgement debt case study
The Ghanaian state is no stranger to international arbitration, or to judgement debts[1]. However, the 22 June decision issued against the government and in favour of the Ghana Power Generation Company (GPGC), by the UN Commission on International Trade Law (UNCITRAL), has ignited a passionate political debate. It also provides insight into the genesis of such awards and challenges around government’s capacity to deliver on such agreements and to present a cohesive case when such cases enter arbitration.
Significance – Claim and counterclaim
GPGC initially signed an emergency power agreement with the government of Ghana in June 2015 to provide 107MW of power, to be completed by mid-2018. The plan, devised during former president John Dramani Mahama’s National Democratic Congress (NDC) administration, and pivotally, during the 2014-16 power crisis known locally as dumsor, included the use of two refurbished gas turbines imported from Italy for a period of four years[2]. However, while the plants were shipped to Ghana in November 2016, they were never installed. A series of challenges led to two changes in the proposed siting of the project[3] and, despite significant preparatory work having been carried out by GPGC, the agreement was terminated by the government before the installation of the plants.
That decision followed an attenuation of the power supply crisis, a change in government and the creation of a Power Purchasing Agreement (PPA) Review Committee led by the then Executive Director of the Energy Commission, Alfred Ofosu-Ahenkorah. In April 2017, the committee recommended the continuation of some PPAs, the deferment of others and the cancellation of others still (of which the GPGC EPA was part). The PPA Committee believed that only USD 18 million would be payable in early termination fees as opposed to the excess capacity charges of USD 24.9 million for four years. The energy minister at the time, Boakye Agyakro wrote to the Attorney General (Gloria Akuffo) to suggest a deferment may cost the government less, but this suggestion was not accepted.
Following the cancellation of the agreement, GPGC sought arbitration through UNCITRAL. An initial award for just under USD 170 million including interest in favour of GPGC was made in January 2021. The attorney general’s department asked for several extensions to the time it was allowed to challenge the award though it eventually failed to do so, citing the Covid-19 pandemic, and recently held elections as reasons. The tribunal did not accept these and its lead judge, Justice Butcher called the government arguments “intrinsically weak.”
The initial signing of the contract, its abrogation, and the eventual award in favour of GPGC has the two main political parties playing a high profile blame game. The ruling New Patriotic Party (NPP) accuse NDC officials of signing an agreement that was not fit for purpose, whilst the NDC is accusing NPP of both abrogating a workable agreement and failing to follow through with the arbitration properly. There have also been accusations of internal struggle with Agyarko’s suggestion that Akuffo overruled him.
Away from the politics, any reading of the UNCITRAL judgement presents an error laded account of project management under both the then Mahama government and the current administration. During the implementation of the project, promises went unfulfilled, timelines were shifted and the consistency in messaging from the government was poor. This continued throughout the arbitration process.
Outlook – Risks to integrity and the bottom line
The question of how to handle expensive take-or-pay power agreements in Ghana has loomed over the heads of the finance and energy ministries since at least 2016. See: Ghana’s energy and stability, posturing versus policy. And more potential judgement debts lie on the horizon for Ghana, not only from the power sector but also oil and gas, traffic management and customs technologies. The associated economic and political costs are high. According to the most recent IMF estimates, debt-to-GDP ratio stands at 78% and the fiscal deficit is 15.5%[4]. The revenue raising measures introduced to rebalance public accounts are contributing factors for recent unrest. So too is the perception of inadequate oversight. See: Ghana protest turns deadly, and risks remain. The public discourse is dotted with accusations of agreements being signed just so that they may be later cancelled, and a judgement debt issued under a so-called policy of “create, loot and share”. In that context, public and private sector actors might view enhanced transparency[5] as a means of limiting risk..
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[1] The most infamous being the so-called Woyome case in which an NDC financier was awarded GHS 51 million.
[2] GPGC Limited v. The Government of the Republic of Ghana, PCA Case No. 2019-05.
[3] Initially planned to be in Aboadze, Western region - this site was found to be unsuitable due to the presence of an oxidization pond. The second site at Kpone, near Tema was deemed as fit by GPGC but they were told to halt work until all outstanding issues (tax exemptions and environmental permits) had been resolved. A final site was then identified by GPCG in the Tema Free Zones Enclave.
[4] IMF (2021). Ghana - IMF Staff Mission Concludes 2021 Article IV Discussions.
[5] The full management team and ownership of GPGC, for example, has never been made public and there were accusations of senior government figures being involved in Power Distribution Services.
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