Ghana was saved from having to pay a sum of $55 million after a Chinese-based construction company dragged the country to the Permanent Court of Arbitration.
The company, Beijing Everyway Traffic & Lighting, was seeking arbitration from the international court over what it said was the termination of a contract awarded to them by the government of Ghana.
The court, in its final judgment on January 30, 2023, however, dismissed the arbitration instituted by Beijing Everyway Traffic & Lighting and upheld the preliminary objection proposed by Ghana’s Attorney General, Godfred Dame.
The lawyers that defended Ghana:
Ghana was represented by six (6) legal personalities headed by the Attorney General, Godfred Dame and deputy, Ms. Diana Asonaba Dapaah. The others were Dr. Sylvia Adusu, Ms. Helen Akpene Awo Ziwu, Ms. Grace Mbrokoh Ewoal, and Ms. Yvonne Bannerman, all members of the Office of the Attorney General of the Republic of Ghana, located at P.O. Box MB 60 Ministries, Accra, Ghana.
What was the China-Ghana contract about?
The contract was an Engineering, Procurement, Installation and Commissioning Contract signed on September 17, 2012 – (EPIC Contract) after it was awarded to the Chinese company in April 2012.
Under this contract, Everyway Traffic & Lighting agreed to supply equipment and provide technical services to Ghana for the planning, design, construction, supervision, operation, and training for the Accra Metropolitan Area Traffic Management Project (AITMS Project).
The parties agreed on a contract price of US$ 100 million and a 30% down payment.
On December 22, 2018, the Parliament of Ghana approved by resolution the EPIC Contract. The commencement date of the EPIC Contract was fixed at August 26, 2019, and the works were scheduled to be completed in 24 calendar months.
According to the claimant, between 12th and 15th November 2019, a six-member team of the Ministry of Roads and Highways of Ghana conducted a technical visit to its factory and warehouses in China to inspect the production and inventory of the equipment for the AITMS Project. During the visit, the Ghanaian delegation observed, inspected, and counted the manufactured equipment prior to shipment to Ghana.
In January 2020, the Department of Urban Roads of Ghana, under the instruction of the Ministry of Roads and Highways of Ghana, confirmed that Beijing Everyway could ship to Ghana the equipment inspected by the technical team in November 2019.
On January 15, 2020, the Department of Urban Roads of Ghana issued an onsite work permit to Everyway for the AITMS Project, covering the installation of new traffic signals, a communication network, and general civil works at signalized and non-signalized intersections in Accra.
On February 3, 2020, Everyway reported to the Department of Urban Roads of Ghana that it had loaded nineteen containers of equipment for shipment for the AITMS Project and asked it to prepare for import customs clearance in Ghana. On February 21, 2020, about six months after the commencement of the AITMS Project, the first installations at two intersections in Accra were switched on, indicating the official launch of the AITMS Project in Ghana.
During the course of the AITMS Project, the claimant issued two interim payment certificates totaling US$ 21,995,728 for work completed up to the date of each interim payment certificate. According to the Claimant, by the time of the Notice of Arbitration (i.e. 10 February 2021), Everyway had completed works with a contractual value of at least US$ 21,995,728.
According to the Claimant, on March 24, 2020, the Minister of Finance of Ghana requested the Vice President of Ghana convene a meeting to discuss the AITMS Project.
Two meetings among the Vice President of Ghana, Minister of Finance of Ghana, Minister of Roads and Highways of Ghana, Minister of National Security of Ghana, and Deputy Attorney General of Ghana were subsequently called in early April 2020, where it was agreed that two technical teams from the Ministry of National Security and Ministry of Roads and Highways of Ghana would be formed to supervise certain aspects of the AITMS Project. It was also further agreed that the Ministry of Roads and Highways of Ghana would remain responsible for certain other aspects of the AITMS Project.
On April 24, 2020, the Vice President of Ghana issued a decision letter to direct the Minister of Finance of Ghana to convey to the China Development Bank that the project would proceed as approved, with Everyway being the contractor and the Ministry of Roads and Highways of Ghana being the implementing agency on the part of Ghana.
However, on November 19, 2020, the Parliament of Ghana suddenly informed the Claimant of Parliament’s decision to rescind the approval of the EPIC Contract.
What Beijing Everyway Traffic & Lighting wanted from the court:
On December 30, 2021, Beijing Everyway served Ghana with a notice terminating the EPIC Contract on the ground that the Respondent had “either directly or indirectly, unlawfully expropriated” the Claimant’s investment because the Parliament of Ghana, inter alia, “rescinded approval for the valid and effective EPIC Contract under which Everyway had completed substantial amount of work with (a) no national security or public interest justification, (b) no due domestic legal procedure, (c) in a discriminatory manner, and (d) with no compensation whatsoever for the damages caused.”
The company also invoked the jurisdiction of the tribunal under a Treaty between the government of the People’s Republic of China and the Republic of Ghana concerning [the Encouragement and Reciprocal Protection of Investments concluded on October 12, 1989], seeking the award of damages amounting to “not lower than US$55 million”.
The Chinese company sought a declaration that the Respondent had breached Article 4(1) of the China-Ghana Investment Treaty. Furthermore, the Claimant argued that Ghana had breached its duty under the Treaty to observe obligations it has entered into with regard to investments made by Chinese investors (i.e., a breach of the Umbrella Clause).
Ghana, on the other hand, argued that it has not breached the Treaty because the decision of the Parliament of Ghana to rescind the EPIC Contract with the Claimant was taken in the interest of Ghana’s national security. Ghana further submitted that the Tribunal has no jurisdiction over the Claimant’s claims.
How Ghana argued:
Arguing the objection to the jurisdiction of the tribunal at a hearing conducted virtually on March 22, 2022, the Attorney-General, Godfred Yeboah Dame, submitted that the provision of Article 10(1) of the China-Ghana Agreement limits the tribunal’s jurisdiction to only the determination of the quantum or amount of expropriation and not the determination of the primary issue of whether there has been any expropriation at all.
The Tribunal thus had no jurisdiction to determine whether Ghana expropriated the Claimant’s investment in the AITMS Project pursuant to Article 4 of the Treaty or breached its contractual obligations with the Claimant under the EPIC Contract pursuant to the Umbrella Clause obligations applicable in this arbitration through Article 3(2) of the Treaty.
The Attorney-General further argued that, relying on Articles 4(1), 4(3), and 10(5) of the Treaty, it is Ghanaian courts that have jurisdiction over the question of the lawfulness of an alleged expropriation, not an arbitral tribunal. An investor bringing a claim for expropriation under the Treaty must therefore do so “under domestic legal procedure” and under Ghanaian law.
Mr. Dame submitted to the tribunal that the object and purpose of the Treaty were not only to protect foreign investments but also to encourage foreign investment and foster economic cooperation between the two contracting states.
Accordingly, this required a balanced approach to the interpretation of the Treaty’s substantive provisions, given that a focus only on the protection of foreign investments may dissuade host states from admitting foreign investments and, thus, undermine the overall aim of intensifying the Contracting States’ mutual economic relations.
Mr. Dame referred to about twenty (20) Bilateral Investment Treaties (BIT) concluded by China prior to the China-Ghana Agreement and pointed out that none of them provided that an investor could submit any dispute, regardless of its nature, to arbitration.
Rather, these BITs provide that investors may only refer the amount of compensation to arbitration, while the question of the existence and unlawfulness of expropriation is reserved for amicable settlement or domestic courts of the respective contracting states.
The same was the case for other BITs entered into by Ghana with other states. Accordingly, it was evident that neither China nor Ghana recognised the right of an investor to submit the question of the existence and lawfulness of expropriation to international arbitration prior to 1989.
Claimant’s case on the Tribunal’s Jurisdiction:
The Claimant opposed Ghana’s submissions and argued that the subject matter of the dispute fell under the jurisdiction of the Tribunal. The claimant argued that first, Article 10(1) of the China-Ghana Treaty provides that an arbitral tribunal has jurisdiction on “[a]ny dispute… concerning the amount of compensation for expropriation,” and second, the broad dispute resolution clauses contained in Ghana’s treaties with other countries apply in this dispute through the MFN clause contained in Article 3(2) of the Treaty.
According to the Claimant, Article 10(1) of the Treaty, when interpreted “in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose,” should be understood to include not only the question of the amount of compensation for expropriation (i.e., the question of quantum) but also the question of the unlawfulness of the expropriation of the Claimant’s investment (i.e., the question of entitlement).
The Claimant further argued that Articles 4(1)(a), 4(3), and 10(5) of the Treaty, read independently or jointly, do not require the Claimant to submit a claim for expropriation to the competent courts of Ghana. According to the Claimant, when the investment of a Chinese investor is expropriated by Ghana, Article 4(3) of the Treaty and Article 20(2) of the Constitution of Ghana simply give the investor an option (and not an obligation) to refer the matter to Ghanaian courts.
The Claimant argued that the object and purpose of the Treaty support the Claimant’s case that an arbitral tribunal, under Article 10(1) of the Treaty, has jurisdiction to determine the question of both quantum and entitlement of expropriation.
The Claimant submitted that, according to the “most favoured nation” principle, the dispute resolution provisions of Ghana’s investment treaties with the United Kingdom (Article 10) and Denmark (Article 10) apply in the dispute between the Claimant and the Respondent and thus the Tribunal had jurisdiction over the Claimant’s claims in this arbitration.
Tribunal’s final decision:
The Tribunal upheld the preliminary objection of Ghana’s Attorney General, Godfred Dame, and upon an application of relevant principles of international investment law, came to the final decision that it does not have jurisdiction to decide the Claimant’s claims for expropriation under Article 10(1) of the Treaty.
The Tribunal stated that the ordinary meaning of Article 10(1) of the Treaty cannot be read as meaning to include the question of entitlement of expropriation. In this respect, the Tribunal noted the important qualification of the term “the amount of” prior to the terms “compensation for expropriation” as placing clear limitations on the scope of questions which can be referred to arbitration.
The ordinary meaning of the phrase “concerning the amount of compensation for expropriation”, according to the Tribunal, does not include the question of entitlement or determination of whether expropriation has taken place in the first place.
Further, the Tribunal c considered that there is nothing in the China-Ghana Treaty to suggest that an investor would be precluded from referring the question of quantum to arbitration under Article 10(1) of the Treaty, once it had referred the question of lawfulness of expropriation to determination by a nation’s domestic court.
The Tribunal highlighted that it did not consider that a Contracting State may unilaterally preclude an investor from referring the matter of quantum of compensation for expropriation to international arbitration, after it has first referred the matter of entitlement to compensation or determination of expropriation, to national litigation.
The Tribunal held that the examination of the provision of Article 10(1) within the context of the China-Ghana Agreement suggested that the phrase “concerning the amount of compensation for expropriation” cannot be interpreted as vesting an arbitral tribunal with jurisdiction to decide the question of whether the expropriation is lawful or unlawful.
Thus, except for the limited scope of Article 10(1) concerning the quantum of compensation for expropriation, there is no provision which would give investors a distinct right to commence arbitration in respect of a breach of any substantive protection under the Treaty.
In conclusion, the Tribunal found that it did not have jurisdiction to decide the Claimant’s claims for expropriation under Article 10(1) of the Treaty. Also, the Tribunal considered that it did not have jurisdiction to decide the Claimant’s claims in the arbitration under Article 3 of the Treaty. The Tribunal also found that the most favoured nation provision in Article 3(2) of the Treaty cannot be used to extend the Tribunal’s jurisdiction to the Claimant’s claims in this arbitration.