An international arbitration tribunal in London has ruled that Ghana must pay $5.4 million to Ghana Community Network Services Limited (GCNet) following the early termination of their service agreement.
The tribunal’s ruling was contained in a 202-page document dated November 18, 2024.
Although the tribunal has ordered the government of Ghana to make the $5.4 million payment to GCNet, Ghana’s Attorney-General’s office says the ruling marks a significant victory for the government.
This is because the tribunal considers the termination lawful under the terms outlined in Article 11.3 of the contract.
In the case of GCNet seeking damages regarding the impact of government policy on exemptions and discounts affecting its fees, the tribunal also held that GCNet waived its right to seek such damages.
The tribunal ruled by a majority that such exemptions and discounts did not constitute a breach of the service agreement.
In addition, the tribunal ordered GCNet to pay Ghana $2.19 million in legal fees, according to a document issued by the A-G’s office.
The legal costs awarded to Ghana also include $1.74 million in representation fees and $441,932 for the fees and expenses of Ghana’s expert witness, plus interest from 30 days after the award at a rate of USD SOFR + 1%.
Background of the dispute:
The dispute between GCNet and the Government of Ghana began after the government terminated the service agreement that had been in place since 2000.
The agreement granted GCNet the exclusive right to develop, operate, and maintain an electronic system for processing customs payments and trade documents at Ghanaian ports.
Under the terms of the agreement, GCNet was entitled to charge users a fee on imports and exports.
Although the initial contract was set for a ten-year term, the agreement was renewed by the NDC governments that succeeded the Kufuor regime, including under the current administration, which terminated it in 2020 after conducting a comprehensive value-for-money assessment.
Ghana argued that the early termination was justified, citing the provisions within the contract for compensation in the event of early termination, and offered GCNet the compensation as stipulated.
GCNet, however, rejected the offer, claiming it was entitled to far higher compensation.
The company initiated arbitration proceedings in June 2022, seeking over 3.3 billion Ghana Cedis ($276 million) in damages, which included compensation for the alleged wrongful termination of the agreement and losses arising from exemptions and discounts on import transactions granted by the government.
In its defense, the Government of Ghana asserted that the termination of the agreement was valid, citing provisions within the contract that set out a clear and defined compensation structure.
Ghana further argued that there was no breach of contract regarding the government’s policy on exemptions and discounts, which it said did not violate any of GCNet’s rights under the agreement.
The government also emphasized that GCNet had waived its right to claim damages related to the exemptions and discounts by failing to act within the prescribed time frame.
The Attorney-General’s office argued that the policy of granting exemptions and discounts to certain importers was a legitimate government policy and did not infringe upon the terms of the contract.
Furthermore, Ghana contended that the claim for compound interest was inappropriate, given the country’s legal framework, which forbids the application of compound interest in contracts involving the government.
The tribunal ultimately sided with Ghana on this issue, awarding simple interest on the amounts owed.
GCNet has yet to issue any formal communication regarding the outcome of the arbitration.