Balkan Energy chases Ghana’s $57m shares in AngloGold Ashanti

Business News of Monday, 10 July 2017



Anglogold AshantiBalkan Energy says the shares will satisfy the arbitration award it was entitled to

The failure on the part of the then governing National Democratic Congress (NDC) to settle a US$12million judgment debt it caused the country in the case of Balkan Energy Ghana Limited versus the Government of Ghana, has provoked the energy firm to turn its attention to a South African Court in Johannesburg to seek for redress.

The energy firm is seeking to attach Ghana’s six million shares in AngloGold worth US$57million to pay for the judgment debt it secured in the said case which has been outstanding since April 1, 2014.

These shares, according to Balkan Energy, would satisfy the arbitration award to which it was entitled to.

In addition to this, the energy firm is praying the court to have the arbitration award made an order of the High Court.

Reports in the Rainbow nation indicate that the South African connection in the litigation as remarked by Acting Judge Steven Kuny, had to do with the fact that the Government of Ghana owns shares in AngloGold Ashanti whose registered office is situated within the jurisdiction of the High Court.

In reaching this decision, the Court cited the 2013 Constitutional Court decision that allowed the seizure and sale of property in Cape Town owned by the Zimbabwe Government, to meet a costs order granted against Zimbabwe by the SADC tribunal – a forum based in Windhoek before it was disbanded.

In that case, according to South African media reports, the court held it was important to ensure that ‘lawful judgments are not to be evaded with impunity by any state or person in the global village’.

In granting the order, reported that Judge Kuny said he was aware that the application had been brought without notice to the Government of Ghana which had thus not had the opportunity to make submission to the court or oppose the order that Balkan wanted.

However, in terms of ‘well-established practice and principles’, Ghana has the right to approach the court to set aside or alter the order if it believed there were grounds to do so.

In addition, Ghana would have the opportunity to oppose the application that Balkan Energy will bring to make the arbitral award an order of court in South Africa.

Balkan Energy is living no stone unturned in its fight for the US$12million judgment debt awarded it.

In March 2017, Balkan Energy Limited petitioned the United States District Court for the District of Columbia seeking among other things an order:

Granting the petition;

Recognizing, confirming, and enforcing the Award in its entirety;

Directing that judgment be entered thereon in the amount of US$11.75million plus cost and interest as provided by the Award, plus any attorney’s fees, costs, and interest that may be recoverable in this proceeding; and

Granting such other and further relief that the Court deems just and proper.

The arbitral tribunal issued its Award on the Merits on April 1, 2014. The Award ordered the Government of Ghana to pay 11.75million plus cost and interest to Balkan Energy Ghana Limited. As of the time of filing for the confirmation and enforcement of the Award, the amount due had exceeded US$13.3million.

Background to the dispute

The present dispute concerns a Power Purchase Agreement (PPA) entered into by the Parties on July 27, 2007, with an effective date of October 31, 2007. Faced with a severe power shortage, in 2007, Ghana entered into negotiations with Balkan US for the refurbishment and commissioning of the Osagyefo Power Barge, a 125MW dual fired diesel Power Barge and associated facilities in Effasu in the Western Region of Ghana, which then unused.

Under the PPA, Balkan Energy was to commission the Barge within ninety working days of the Effective Date; convert it into a combined cycle power plant by the addition of certain facilities; upgrade the capacity of the Barge; and invest in infrastructure to enable natural gas to be supplied to the Barge.

For its part, Ghana was to ensure that all electricity necessary for the refurbishment and commissioning of the Barge was provided; facilitate the acquisition of government approvals, visas, and equipment; construct and install the transmission line required to connect to Ghana’s national grid and take and pay for all electricity thereafter generated by the Power Station.

Each party alleges that the other has failed to perform its obligations under the PPA. Balkan Energy contends that the Government of Ghana has failed to provide adequate site electricity; failed to provide a connection to the National Grid through a proper transmission line; and failed to comply with its obligation to facilitate the acquisition and installation of a piece of equipment known as Remote Terminal Unit (RTU) on the Barge.

Balkan Energy further contends that, under Clause 11.9 of the PPA, it is owed tolling fees since October 28, 2008, the date on which it alleges that the Power Station would have been completed but for the Government of Ghana’s failure to provide an adequate transmission line and interconnection facilities. The Tolling Fees are meant not only to cover the cost of electricity but also remunerate Balkan Energy for its investments.

Balkan Energy asserts that it has since November 25, 2008, sent the Government of Ghana invoices totaling over US$50million in respect of Tolling Fees.

For its part, the Government of Ghana maintains that it has fulfilled its obligations, and that the Power Station has never been operational because of breaches of the PPA by Balkan Energy. The Government of Ghana asserts that some of the arguments raised by the Claimant justifies the Claimant’s failure to complete the commissioning of the Barge.

By a letter dated August 28, 2009, Ghana’s Ministry of Energy stated that Ghana had provided Balkan Energy Limited with grid connectivity via the transmission line and interconnection facilities, and asserted that the fact that the Power Station was not operational was due to Balkan Energy Limited’s own inability to complete the facilities.

The Government of Ghana further claims that the upgrading of certain necessary equipment on the Barge was not undertaken by Balkan Energy Limited.

Relying on statements made by Balkan Energy Limited and document production in a lawsuit filed in a United States District Court against a subcontractor on the Barge (ProEnergy Services LLC), the Government of Ghana describes Balkan Energy Limited’s assertion that the Barge was operational as fraudulent. The Government of Ghana also disputes Balkan Energy Limited’s invoices for Tolling Fees referred to above.

Despite failing to comply with its own obligations, the Government of Ghana sent a notice to Balkan Energy Ghana on September 1, 2009, accusing Balkan Energy Ghana of breaching the PPA.

In the said letter, the Government of Ghana expressly invoked Clause 22.2 of the PPA and quoted the language stating that any disputes “shall be referred to binding arbitration” and recommended that the issue be referred to the Permanent Court of Arbitration for resolution.

Nevertheless, the Government of Ghana did not ultimately institute arbitral proceedings. Instead, Balkan Energy Ghana filed a notice of arbitration on December 23, 2009.

As provided by the PPA’s arbitration agreement, an arbitral tribunal was constituted by the Permanent Court of Arbitration in The Hague, Netherlands, and the parties, represented by counsel, proceeded to arbitration.

Despite the repeated assurances about the validity of the PPA, on June 25, 2010, the Government of Ghana obtained an ex parte injunction from the Ghana High Court purporting to restrain the arbitration pending a determination of whether the PPA was, in fact, subject to parliamentary approval under Article 181 (5) of the 1992 Constitution of the Republic of Ghana.

On December 22, 2010, after receiving briefs and oral argument, the arbitral tribunal issued its Interim Award addressing its jurisdiction to hear the dispute.

The Government of Ghana’s sole ground for contesting jurisdiction was the one it had raised in the Ghana Court – namely the PPA was subject to parliamentary approval. The tribunal rejected that argument and confirmed that it had authority to determine its own jurisdiction. It concluded that the arbitration agreement in the PPA was valid and enforceable and held that the injunction the Government of Ghana had procured from its own court did not alter those conclusions.

In so doing, the tribunal invoked the “bedrock principle” of arbitration law that an agreement to arbitrate is separable from the larger contract in which it appears. As a result, even though the PPA was a whole was governed by Ghana Law, that an agreement to arbitrate is separable from the larger contract in which it appears.

As a result, even though the PPA as a whole was governed by Ghana Law, the arbitration agreement was governed by the laws of the Netherlands – the country the PPA designated as the place of arbitration. Applying Dutch Law, the tribunal found no basis for refusing to enforce the arbitration agreement.

Following challenges raised by the Government of Ghana to the validity of the arbitration clause in the PPA, and generally, to the arbitrability of the dispute, the Tribunal issued an interim award on jurisdiction on December 22, 2010 in which it affirmed its competence to decide the present dispute.

Article 22.2 of the PPA sets forth an arbitration agreement by which the parties agreed to submit any dispute to arbitration before the Permanent Court of Arbitration in The Hague, Netherlands.

“If any dispute arises out of or in relation to this Agreement and if such matter cannot be settled through direct discussions of the Parties, the matter shall be referred to binding arbitration at the Permanent Court of Arbitration, Peace Palace, Carnegieplein 2, 2517 KJ in The Hague, Netherlands … Applications may be made to such court for judicial recognition of the award and/or an order of enforcement as the case may be. Arbitration shall be governed by and conducted in accordance with United Nations Commission on International Trade Law (UNCITRAL) of 1976.

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