Balkan Energy Ltd. v. Republic Ghana

• Citation: 302 F.Supp.3d 144
• Decision Date: 22 March 2018
• Docket Number: Case No. 17–cv–00584 (APM)
• Parties: BALKAN ENERGY LIMITED, et al., Petitioners, v. REPUBLIC OF GHANA, Respondent.
• Court: U.S. District Court — District of Columbia

302 F.Supp.3d 144

BALKAN ENERGY LIMITED, et al., Petitioners,

v.REPUBLIC OF GHANA, Respondent.

Case No. 17–cv–00584 (APM)

United States District Court, District of Columbia.

Signed March 22, 2018

William James Cooper, Robert Kelsey Kry, MoloLamken LLP, Washington, DC, for Petitioners.

Creighton R. Magid, Dorsey & Whitney LLP, Washington, DC, Juan C. Basombrio, Dorsey & Whitney LLP, Costa Mesa, CA, for Respondent.

MEMORANDUM OPINION AND ORDER

Amit P. Mehta, United States District Judge

I. INTRODUCTION

Petitioners Balkan Energy Limited ("Balkan UK") and Balkan Energy (Ghana) Limited ("Balkan Ghana") bring this action to enforce a 2014 foreign arbitral award returned against Respondent Republic of Ghana ("Respondent" or "Ghana") by the Permanent Court of Arbitration at The Hague, Netherlands. Balkan Ghana was awarded $11.75 million plus costs and interest. Petitioners now seek to confirm the award under the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 201, et seq. , which codifies the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 (the "New York Convention").

For the reasons that follow, the court grants the Petition to Confirm the Arbitral Award as to Balkan UK and denies Ghana's Motion to Dismiss the Petition.

II. BACKGROUND

A. Factual Background

Faced with a severe power shortage in 2007, Ghana negotiated with Balkan Energy LLC, a company based in Texas, for the refurbishment and commissioning of the Osagyefo Barge, an unused power barge located in the Western Region of Ghana. Pet. to Confirm Arbitral Award, ECF No. 1 [hereinafter Pet.], ¶¶ 15–16. In order to carry out the project, and as required by Ghana law, Balkan Energy LLC formed a local subsidiary—Petitioner Balkan Ghana—on July 16, 2007. Id. ¶ 18. Balkan Ghana is a wholly-owned subsidiary of Petitioner Balkan UK, a company formed and registered in the United Kingdom and Wales. Id. ¶ 15. Balkan UK, in turn, is a wholly-owned subsidiary of Balkan Energy LLC. Id. Eleven days after its formation, Petitioner Balkan Ghana and Respondent Republic of Ghana entered into a Power Purchase Agreement ("PPA") memorializing the parties' agreement. Id. ¶ 18; Pet., Ex. C, ECF No. 1–4 [hereinafter PPA]. As laid out in the PPA, Balkan Ghana was to refurbish, equip, commission, test, and operate the barge. Pet. ¶ 18 (citing PPA, arts. 2.1–2.4). In turn, Ghana was to provide electricity onsite; connect the site to the national electrical grid; facilitate the importation of equipment and acquisition of permits, approvals, and visas; construct and install the transmission line required for connection to the national grid; and pay for all electricity generated by the barge during the contract term. Id. (citing PPA, arts. 2.5–2.10). Under the PPA, the parties agreed to submit any disputes to arbitration before the Permanent Court of Arbitration in The Hague, Netherlands. See PPA, art. 22.2. The parties also agreed that the PPA "shall be governed by and construed in accordance with the laws of the Republic of Ghana." PPA, art. 23.

Article 181(5) of the 1992 Constitution of Ghana requires parliamentary approval for any "international business or economic transaction to which the Government is a party." In light of this requirement, Article 7.2 of the PPA conditioned the effectiveness of the PPA on the requirement that Ghana provide assurances regarding its authority to enter into the agreement with Balkan Ghana without parliamentary approval, in the form of "a letter from the Government of Ghana that all the required approvals from the relevant authorities in Ghana have been obtained," as well as a "legal opinion of the Attorney General of the Republic of Ghana as to the validity, enforceability[,] and binding effect of [the PPA]." PPA, art. 7.2. Accordingly, on October 26, 2007, Ghana's Attorney General and Minister for Justice provided Balkan Ghana with two legal opinions. See Pet., Ex. D, ECF No. 1–5 [hereinafter 1st AG Opinion]; Pet., Ex. E, ECF No. 1–6 [hereinafter 2d AG Opinion]. The first opinion explained that because Balkan Ghana was a locally incorporated company, the project "involve[d] a local company in a local transaction with the Government," and thus the "PPA does not come under the ambit of article 181(5) of the 1992 Constitution" and "[p]arliamentary approval would not be required for the effectiveness of the [PPA]." 1st AG Opinion at 1. In the second opinion, the Attorney General assured Balkan Ghana that "[Ghana] has the power to enter into the [PPA] and to exercise its rights and perform its obligations thereunder, and execution of the [PPA] on behalf of [Ghana] by the person(s) who executed the [PPA] was duly authori[z]ed." 2d AG Opinion at 1.

After some time, a dispute arose between the parties. Balkan Ghana accused Ghana of failing to fulfill its obligations under the PPA—specifically, the requirements that Ghana provide adequate site electricity and connect the Barge to the electrical grid. Pet. ¶¶ 25–26; Pet., Ex. A, ECF No. 1–2 [hereinafter Award on the Merits], ¶¶ 279–81, 285–87. For its part, Ghana denied that it had breached the PPA. Ghana's Attorney General sent a Notice of Breach to Balkan Ghana in September 2009, asserting that the "dispute between the parties ... cannot be settled through direct discussions by the Parties." Pet., Ex. F, ECF No. 1–7, at 1–2. The Attorney General "invoke[d] clause 22.2 of the PPA" and "recommended that the [dispute] be referred to the Permanent Court of Arbitration for resolution." Id. The Attorney General never filed a notice of arbitration, but Balkan Ghana did so on December 23, 2009, pursuant to Article 22.2 of the PPA. An arbitral tribunal was constituted on April 1, 2010. Pet., Ex. B, ECF No. 1–3 [hereinafter Interim Award], ¶ 7.

On June 25, 2010, the Attorney General of Ghana obtained an ex parte injunction from the Ghana High Court restraining Balkan Ghana from proceeding with arbitration pending the court's determination of whether the PPA and its arbitration clause required parliamentary approval under Article 181(5) of the Ghana Constitution. Interim Award ¶ 45. The arbitral tribunal nonetheless issued an Interim Award addressing its jurisdiction to hear the dispute in December 2010. See generally Interim Award. The tribunal concluded that the arbitration agreement in the PPA was severable from the larger contract, id. ¶ 99, 106–08, and that while the PPA as a whole was governed by Ghanaian law, the arbitration agreement was governed by the law of the Netherlands, as the designated seat of arbitration, id. ¶¶ 151–52. Applying Dutch law, the tribunal explained that "the validity of the arbitration agreement is not affected by Article 181(5) of the [Ghana] Constitution," id. ¶ 159, and that it "d[id] not have any doubts as to its jurisdiction under the arbitration agreement ... irrespective of the decision that may be reached in the Ghanaian courts regarding the validity or enforceability of the PPA," id. ¶ 187.

Meanwhile, the Supreme Court of Ghana decided to "refer to itself" the central constitutional question presented to the Ghana High Court (Commercial Division) concerning the PPA. Pet., Ex. G, ECF No. 1–8 [hereinafter Ghana Sup. Ct. Decision], at 2. In a decision captioned The Attorney General v. Balkan Energy Ghana Ltd., et al. , and issued on May 16, 2012, the court stated that it had two issues to resolve: (1) "whether or not the [PPA] ... constitutes an international business transaction within the meaning of Article 181(5) of the Constitution"; and (2) "whether or not the arbitration provisions contained in clause 22.2 of the [PPA] ... constitutes an international business transaction within the meaning of Article 181(5) of the Constitution." Ghana Sup. Ct. Decision at 2–3. The Supreme Court of Ghana concluded that the PPA itself was indeed an "international business transaction" that should have been approved by Ghana's Parliament. Id. at 40–41. But it also held that, "[o]n the other hand," the "arbitration provisions contained in clause 22.2 of the [PPA] ... [do] not constitute an international business transaction within the meaning of Article 181(5)." Id. at 41. As to the latter holding, the court tersely explained that "it is clear that the international arbitration provision cannot, in and of itself, constitute an international business or economic transaction." Id. In so concluding, the Supreme Court of Ghana also observed the following:

An international commercial arbitration is not by itself an autonomous transaction commercial in nature which pertains to or impacts ... the wealth and resources of the country. An international commercial arbitration draws its life from the transaction whose dispute-resolution it deals with. We therefore have difficulty in conceiving of it as a transaction separate and independent from the transaction that has generated the dispute it is required to resolve.

Id. The Supreme Court then returned the matter to the High Court to apply the Supreme Court's interpretation of Article 181(5). Id.

The arbitral tribunal pressed on after the Supreme Court of Ghana rendered its decision. After considering extensive briefing by the parties and holding a week-long hearing in the matter, Pet. ¶ 36, the tribunal issued its final Award on the Merits ("Award") on April 1, 2014, in favor of Balkan Ghana. The tribunal found that: (1) Balkan Ghana had a reasonable expectation that Ghana had accepted the validity of the PPA, and was therefore entitled to rely on the PPA and expect that Ghana would fulfill its obligations thereunder, Award on the Merits ¶ 397; and (2) Ghana failed to comply with its obligations under the PPA, id. ¶ 437–42, 448–52. The tribunal ordered Ghana to pay Balkan Ghana a total of $11.75 million plus interest and costs. Pet. ¶¶ 41–42; see Award on the Merits ¶ 642. The tribunal also ordered that the PPA be terminated as of the date of the Award. Award on the Merits ¶ 642. Petitioners assert that, as of the...