Supreme Court to hear legal tussle between Balkan Energy and the Government

The Supreme Court (SC) on Thursday dismissed an application seeking to join Zenith Bank Ghana Limited in the legal tussle between the Government and Balkan Energy Ghana over the lease agreement on the Osagyefo Power Barge.

However, the SC asked Zenith Bank to submit briefs that was documents relating to the matter before it by March 9, and therefore, fixed March 20 for hearing.

At the court's sitting on Thursday, Nana Ato Dadzie, who represented Zenith Bank indicated that the bank had invested over 26-million dollars into the project (the Osagyefo Power Barge).

This, the bank did by guaranteeing an overdraft facility in the said agreement and therefore, should be allowed to be joined to the suit.

Nana Ato Dadzie said the application was not going to delay the trial before the SC.

Dr. Benjamin Kunbuor, Minister of Justice and Attorney-General, expressed worry over delays on the matter.

He said the SC should dismiss the application for abuse of purpose as that sought to delay proceedings.

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

It had raised two constitutional issues and prayed the Commercial Court to refer the issues to the SC for interpretation but the court declined the request.

However, the SC on November 2, 2011, ruled that by the lower court’s refusal to refer the issues to it for interpretation, it “Usurped the jurisdiction of this court” and breached Article 130 (2) of the 1992 Constitution.

The SC said the lower court missed the point when it presumed that there was no cause for the matter to refer, adding the lower court ought to have referred the issues to it to avoid usurpation of its powers.

It accordingly, referred the matter to itself for interpretation to ensure that the suit is expedited.

The SC consequently ordered the Commercial Court to stay proceedings in the substantive case pending the determination of the constitutional issues.

The issues for determination are whether the Power Purchase Agreement signed between the two on July 27, 2007 constituted an International business transaction under Article 181 (5) of the 1992 Constitution, and whether the arbitration provisions contained in the agreement constituted an international business transaction under Article 181(5).

Under the agreement, the 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 Power Purchase Agreement.

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

While Article 181(1 to 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”.

According to Balkan Energy, it was not an international business or economic transaction to which the government was a party and thus in need of 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”.

But the State disagreed, citing several factors which make transaction an international business transaction.

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

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