An international arbitration tribunal in London has dismissed a G GH₵ 4 billion claim by Ghana Community Network Services Limited (GCNet) against the Government of Ghana, marking a significant victory for the country. The tribunal, in its 202-page ruling dated November 18, 2024, also ordered GCNet to pay Ghana $2.2 million in legal costs.
GCNet initiated arbitration under the UNCITRAL Rules after alleging wrongful termination of its service agreement by the government. The company sought over GH₵3.3 billion in damages, pre-award interest of GH₵2 billion, and legal fees of $4 million. GCNet claimed the government’s termination violated contractual terms and contested government policies on import exemptions and discounts.
Government, represented by Attorney-General Godfred Yeboah Dame, rejected GCNet’s claims and successfully argued that the agreement’s terms limited GCNet’s compensation to $6 million for early termination. The tribunal ruled that the government’s actions, including exemption and discount policies, did not breach the agreement. It further determined that GCNet had waived its rights to claim damages on these grounds.
The tribunal upheld Ghana’s defense, awarding GCNet only $5.4 million for early termination. Additionally, it ordered GCNet to cover $2.2 million of Ghana’s legal fees, including representation costs and expert witness expenses, with interest applied to the total until payment.
BACKGROUND
By a notice of arbitration dated 30 June 2022, GCNET challenged the right of the Government of Ghana to terminate a Service Agreement it had with the Government by which GCNET was granted the exclusive right to develop, customise, update and operate an electronic system for processing customs payment and trade documents at ports in Ghana. Under the agreement, GCNet was authorised to charge all users of the services a fee equivalent to 0.40% of the Final Invoice FOB value of all import transactions and 0.15% of all export transactions which pass through the CMS and TradeNet portion of the Services.
The agreement was initially entered into in 2000 and became effective in 2002. It was for an initial term of 10 years, up to 2012. Following its expiry in December 2012, the Minister for Trade and Industry, Hanna S Tetteh, extended the agreement for one year by a letter dated 30 November 2012. In 2013, by an agreement dated 26th August 2013, the Minister for Trade and Industry, Haruna Iddrisu, extended the life of the agreement for five (5) years, ensuring that it would end in December 2018. Before the lapse of the 5 years, in October 2016, another Minister for Trade and Industry, Ekwow Spio-Garbrah, extended the duration of the agreement by a further 5 years. Thus, the agreement was set to end in December 2023.
All the extensions made by the various Ministers for Trade working under the John Mahama administration were without the requisite statutory approval of the Public Procurement Authority or recourse to any of the procedures for public procurement set out in the PPA law.
The NPP administration which took office in 2017, terminated the GCNet agreement on 28 April 2020 after a comprehensive value-for-money assessment. In the termination notice given to GCNet, the Government indicated that it would pay to the company the compensation stated in the agreement for early termination. GCNet rejected this offer, claiming compensation on various heads far above and beyond what is stated in the contract.
Following a breakdown of attempts by GCNet to reach an amicable resolution with the Government, GCNet commenced the arbitration proceedings pursuant to Article 13.2 of the Agreement with Ghana. The company asserted that the contract was unlawfully terminated by the Government of Ghana and sought 3.3 billion Ghana Cedis in damages from the Government.
The amount comprised compensation of GH₵2,114,041,098 (over GH₵2.1billion) for what it alleged was the wrongful termination of the agreement and GH₵1,190,614,711 (GH₵1.19billion) for past alleged breaches of the agreement when the Government granted exemptions and discounts to importers pursuant to government policy during the life of the agreement. The company also sought to recover pre-award interest of GH₵2.015 billion and about US$4 million in legal fees from the Government if the tribunal ruled in its favour.
TRIBUNAL DECISION
The tribunal unanimously determined that the Government of Ghana validly and lawfully terminated its service agreement with GCNet on April 28, 2020, in line with Article 11.3 of the agreement. Furthermore, the tribunal ruled unanimously that GCNet had waived its rights to claim damages related to government exemptions and discount policies impacting its fees. By a majority decision, the tribunal concluded that these policies did not violate the service agreement.
Despite GCNet’s claims for substantial damages, the tribunal upheld Ghana’s assertion that the agreement capped compensation for early termination. Consequently, GCNet was awarded $5.4 million as per the contractual terms.
The tribunal identified GCNet as the “unsuccessful party” in the arbitration and emphasized the financial and time resources Ghana expended in defending what it deemed baseless claims. As a result, GCNet was ordered to pay $2,185,983.21 in legal costs to Ghana. This amount includes $1,744,050.42 in legal representation fees and $441,932.79 for expert witness expenses, with simple interest applicable until payment.
This ruling highlights Ghana’s legal strategy, as the government relied solely on local legal representation, saving millions in fees. The victory underscores the country’s commitment to upholding contractual terms and enforcing laws designed to protect its financial interests.
The decision is a major financial reprieve, preserving billions of cedis and setting a precedent for managing future disputes in international agreements.
