Balkan Energy (Ghana) Limited v. Republic of Ghana

At a glance

Parties

Balkan Energy (Ghana) Limited v. the Republic of Ghana; in the US enforcement action, Balkan Energy Limited (UK) and Balkan Energy (Ghana) Limited v. Republic of Ghana

Case no.

PCA Case No. 2010-7; US District Court for the District of Columbia Case No. 17-cv-00584 (APM)

Forum and rules

Permanent Court of Arbitration (registry); UNCITRAL Arbitration Rules 1976; seat The Hague, hearings in London

Treaty

Contract arbitration under Article 22.2 of the Power Purchase Agreement of 27 July 2007 (governed by Ghanaian law)

Tribunal

Francisco Orrego Vicuña (President), Stephen M. Schwebel, Thomas A. Mensah

Sector

Electricity generation (Osagyefo Power Barge)

Outcome

Interim Award (22 December 2010) upheld jurisdiction. Award on the Merits (1 April 2014) terminated the PPA and awarded restitution for commissioning works; the tolling-fee and repudiation claims were dismissed. The US District Court confirmed the Award in favour of Balkan UK (22 March 2018).

Amount

Claimed: tolling fees of USD 238,059,973 (USD 248,993,202 with interest) up to 1 January 2014, plus up to USD 259,691,080 for the period after that. Awarded: USD 12 million restitution and USD 50,000 for the arrest of an officer, less USD 300,000 on Ghana's counterclaim (net USD 11.75 million), with interest at six-month LIBOR + 1% from 1 July 2009, compounded annually. Arbitration costs of USD 1,002,689.29 shared equally; Ghana to reimburse USD 30,000.

The dispute

Ghana faced a severe power shortage in 2007. Under a Power Purchase Agreement (PPA) of 27 July 2007, Balkan Energy (Ghana) Limited (BEL) was to refurbish and commission the unused 125 MW Osagyefo Power Barge at Effasu within 90 working days. BEL is a Ghanaian subsidiary of Balkan Energy Limited (UK), which is in turn owned by a US parent. Ghana was to supply site electricity, build the transmission line to the national grid, and take and pay for all electricity produced. BEL claimed that Ghana failed to provide adequate site electricity and grid connectivity, and sought tolling fees under Clause 11.9 together with repudiation, restitution and tort damages. Ghana denied any breach and blamed BEL for the failure to commission the barge. It also argued that the PPA and its arbitration clause were void because Parliament had not approved them under Article 181(5) of the Constitution, and it obtained an injunction from the Ghana High Court against the arbitration.

Key holdings

1. The arbitration agreement is separable from the PPA. Although Ghanaian law governs the PPA, the arbitration agreement is governed by Dutch law, as the law of the seat. Article 181(5) of the Ghanaian Constitution does not affect the agreement's validity, because an arbitration agreement is not an international business or economic transaction. Interim Award ¶¶ 152, 154, 159
2. The Ghana High Court's injunction does not affect the Tribunal's jurisdiction, and a stay was not warranted; the Tribunal distinguished the MOX Plant case. The Tribunal unanimously upheld jurisdiction. It rejected BEL's requests for an anti-suit injunction and for a confidentiality order, and held BEL to its undertaking not to pursue attachments of Ghanaian assets. Interim Award ¶¶ 187, 192, 194; dispositif
3. Both parties breached the PPA. BEL did not complete testing and commissioning, for reasons independent of Ghana. Ghana's failures on site electricity and grid connectivity were only a partial breach. The PPA is valid but can no longer be enforced, so it is terminated as of the date of the Award. Award ¶¶ 573–578
4. No tolling fees are due, because the Power Station never produced power and was not ready to deliver it. The Tribunal did not find Ansaldo's 'Full Speed No Load' certification credible. Repudiation damages were denied: neither party refused to perform, and applying to the courts on the PPA's validity is not repudiation. Award ¶¶ 592–595, 601–605
5. Unjust enrichment was not established. However, because Ghana bore partial responsibility, BEL recovers restitution of proven commissioning expenditures incurred up to mid-2009: USD 7 million and CEDI 7.5 million, together about USD 12 million. Financing interest and incidental damages were not separately awarded. Award ¶¶ 614–632
6. The claim of USD 2.586 million for replacing the seized DCS failed for lack of evidence. BEL receives USD 50,000 for the arrest of its officer Mr. Everhart. Ghana's counterclaim of USD 300,000 under Clause 14.2 is accepted. Under Clause 22.2, the parties share the arbitration costs equally. Award ¶¶ 633–641; dispositif ¶ 642
7. The US District Court confirmed the Award in favour of Balkan UK. It held that the FSIA arbitration exception applies because the arbitration agreement is severable from the PPA, and that forum non conveniens does not apply (TMR Energy). It found the assignment of the Award valid under English law and rejected Ghana's defences under Articles V(1)(a), V(1)(c) and V(2)(b) of the New York Convention. Memorandum Opinion, Parts IV–VI

Procedural history

1. 23 December 2009BEL files its Notice of Arbitration under Article 22.2 of the PPA.
2. 1 April 2010The Tribunal is constituted when the co-arbitrators choose Francisco Orrego Vicuña as President.
3. 25 June 2010The Ghana High Court issues an ex parte interlocutory injunction restraining BEL from proceeding with the arbitration. It confirms the injunction on 6 September 2010.
4. 22 December 2010Interim Award: the Tribunal upholds its jurisdiction.
5. 16 May 2012The Supreme Court of Ghana holds that the PPA required parliamentary approval but that the arbitration clause did not.
6. 24 April – 2 May 2013Hearing on the merits in London.
7. 1 April 2014Award on the Merits: the PPA is terminated and the net amount awarded to BEL is USD 11.75 million plus interest.
8. 31 March 2017Balkan UK and BEL petition the US District Court for the District of Columbia to confirm the Award.
9. 22 March 2018The District Court confirms the Award in favour of Balkan UK and denies Ghana's motion to dismiss. Judgment follows on 23 March 2018.
10. 17 July 2018The District Court grants Balkan UK's motion to authorize attachment and execution under 28 U.S.C. § 1610(c).

Tribunal, counsel and experts

Decided by

• Francisco Orrego Vicuña President — chosen by the co-arbitrators
• Stephen M. Schwebel Co-arbitrator — appointed by the claimant
• Thomas A. Mensah Co-arbitrator — appointed by the respondent
• Amit P. Mehta Judge, US District Court for the District of Columbia

For the claimant

NautaDutilh · Bentsi-Enchill, Letsa & Ankomah · Law Offices of Mitchell Madden · MoloLamken LLP

For the respondent

Attorney-General's Department, Ghana · Dewey & LeBoeuf LLP · DLA Piper LLP (US) · Reindorf Chambers · HaersolteHof B.V.

Experts

Peter A. Watson (respondent) · Peter A. Fairhurst (respondent) · Anthony Akoto Ampaw (respondent) · James Samuel George Hargrove (claimant)

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Keywords

• Osagyefo Power Barge
• power purchase agreement
• Article 181(5) Ghana Constitution
• parliamentary approval
• separability
• competence-competence
• law of the arbitration agreement
• anti-arbitration injunction
• estoppel
• tolling fees
• restitution damages
• termination of contract
• counterclaim
• New York Convention
• FSIA arbitration exception
• forum non conveniens
• assignment of award
• UNCITRAL Rules

Summary generated with AI from the published documents — refer to the award for the authoritative text.