Supreme court on Power Purchasing Agreement on Osagyefo Power Barge

The Supreme Court by a unanimous decision on Wednesday ruled that the Power Purchasing Agreement (PPA) on the Osagyefo Power Barge was an international business transaction, but the Arbitration Provisions did not constitute an international business transaction.

The seven-member panel chaired by Mr. Justice William Attuguba therefore directed the Commercial High Court to dispose off the case.

The other members were, Dr. Justice Date-Baah, Mr. Justice Julius Ansah, Mrs. Justice Sophia Adinyira, Mr. Justice Anni Yeboah, Mr. Justice Sule Gbadegbe and Mrs. Justice Vida Akoto-Bamfo.

The court's ruling was on the constitutional interpretation on the lease agreement of the Osagyefo Power Barge between the Government and Balkan Energy Ghana, whether the Power Purchase Agreement and Arbitration Provision were international business transactions.

The agreement was signed on July 27, 2007.

Dr. Justice Date-Baah reading the two-hour judgement, asked Parliament to enact a bill on what constituted international law in lease agreements in the country.

It said "Giving the complexity of international business transaction, our view is the substance and not the form”.

The State sued Balkan Energy Company LLC, Balkan Energy Ghana Limited and Mr. Philip David Elders at the Commercial High Court challenging the legitimacy of the Power Purchase Agreement that leased the Osagyefo Power Barge to Balkan Energy in 2007 to operate.

Under the Power Purchase Agreement, 125-megawatts Osagyefo Barge was leased to Balkan Energy Ghana, wholly owned by Balkan Energy Company LLC, to repair, rehabilitate and commission it within 90 days of the effective date as defined in the agreement.

However, the contract did not go through Parliament, which violated Article 181 of the Constitution which principally deals with Parliamentary ratification of loan agreements.

While Article 181(1-4) deals with Parliamentary ratification of loan agreements, Article 181(5) extends the requirement to “international business transactions’ to which the Government is a party.

It states that, “This article shall, with the necessary modifications by Parliament, apply to an international business or economic transaction to which the Government is a party as it applies to a loan”.

During the trial, the State led by Mr. Martin A.B.K. Amidu, then Attorney-General, raised two constitutional issues and prayed the Commercial High Court to refer the issues to the Supreme Court for interpretation but the court declined the request.

Mr. Amidu disagreed citing several factors which made an international business transaction.

He pointed out that the expression of interest in the commissioning of the Barge and negotiations for the PPA were conducted entirely by Balkan Energy LLC which entered into a memorandum of understanding and undertook to execute the project.

Mr. Amidu was seeking among other reliefs, a declaration that the agreement constituted an international business transaction to which the Government was a party and is unenforceable as infringing Article 181(5) of the Constitution.

However, the Supreme Court (SC) on November 2, 2011 ruled that, by the Lower Court’s refusal to refer the issues to the SC for interpretation, it “usurped the jurisdiction of this court” and breached Article 130 (2) of the constitution.

It said the Lower Court missed the point when it presumed that there was no cause for the matter to be referred, adding that, the Lower Court ought to have referred the issues to the SC to avoid usurpation of its powers.

The SC therefore referred the matter to itself and ordered the Commercial High Court to stay proceedings in the substantive case pending the determination of the constitutional issues.

The seven-member panel on December 6, 2011 asked the parties to address the questions of what international business transaction was in the context of Article 181(5) of the Constitution, and whether a government's contract with a Ghanaian legal person could ever be an international business transaction in their statement of case.

The defendants argued that the PPA was a valid contract between the Government and a Ghanaian company.

It was not an international business or economic transaction to which the government is a party and needed Parliamentary approval under Article 181(5) of the Constitution.

Citing the Companies Act (Act 179), they claimed that the nationality of a company is determined on the basis of where it is incorporated, adding that, under section 302(2) and Schedule 1, clause 1 of the Companies Act, an ‘external company’ is “a body corporate formed outside Ghana.”

They also referred to Section 315 and Schedule (1) clause (1), saying the term “non-Ghanaian company” was defined as “any association incorporated or to be incorporated outside Ghana not being an external company as defined in section 302 of this Act”.**