Balkan Energy Ltd. v. Republic of Ghana, No. 17-cv-00584 (D.D.C. Mar. 22, 2018) [click for opinion]
In 2007, the Republic of Ghana (“Ghana”) negotiated with Balkan Energy LLC for the refurbishment and commissioning of an unused power barge. As required by Ghanaian law, Balkan Energy LLC formed a local subsidiary to carry out the project: Balkan Energy (Ghana) Limited (“Balkan Ghana”). Balkan Ghana and Ghana subsequently entered into a Power Purchase Agreement (“PPA”), whereby the parties agreed to submit any disputes to arbitration before the Permanent Court of Arbitration in The Hague. The parties also agreed that the PPA was to be governed by Ghanaian law.
The Constitution of Ghana requires parliamentary approval for any international business or economic transaction to which the government is a party. In light of that requirement, the effectiveness of the PPA was conditioned on the requirement that Ghana provide assurances regarding its authority to enter into the agreement with Balkan Ghana. Accordingly, Ghana’s Attorney General and Minister for Justice provided Balkan Ghana with two legal opinions, opining that (1) because Balkan Ghana was a locally incorporated company, the PPA did not fall under the ambit of the aforementioned constitutional requirement and thus parliamentary approval would not be required; and (2) Ghana had the power and authorization to enter into the PPA.
When a dispute between the parties arose in 2009, an arbitral tribunal was constituted. Despite the Attorney General’s attempt to restrain the arbitral proceedings pending confirmation from Ghanaian courts that parliamentary approval was not necessary, the arbitral tribunal nonetheless issued an Interim Award addressing its jurisdiction to hear the dispute. It concluded that the arbitration agreement in the PPA was severable from the larger contract, 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. Applying Dutch law, the tribunal explained that the validity of the arbitration agreement is not affected by the Ghana Constitution, and that its jurisdiction would not be impacted by any decision that may be reached in the Ghanaian courts as to the validity or enforceability of the PPA.
After considering extensive briefing by the parties and holding a weeklong hearing, the tribunal issued its final Award on the Merits (the “Award”) in 2014 in favor of Balkan Ghana, specifically holding 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; and that (2) Ghana failed to comply with its obligations under the PPA. The tribunal ordered Ghana to pay Balkan Ghana a total of $11.75 million plus interests and costs. In 2016, Balkan Ghana assigned all of its rights and interests in the Award to a parent company, Balkan Energy Ltd. (“Balkan UK”).
In 2017, Balkan UK and Balkan Ghana filed this suit to confirm the Award. Ghana moved to dismiss, advancing four arguments: (1) the court lacked subject-matter jurisdiction because Ghana is entitled to immunity under the Foreign Sovereign Immunities Act (the “FSIA“); (2) even if the court had jurisdiction, dismissal would be appropriate under the doctrine of forum non conveniens because Ghana is the better forum in which to resolve the dispute; (3) neither Petitioner had standing to bring the Petition because the assignment of the Award from Balkan Ghana to Balkan UK was invalid; and (4) confirmation of the Petition should be denied because of various defenses under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 (the “New York Convention“).
The court rejected each of these arguments in turn. First, Ghana was not entitled to immunity under the FSIA because there is an exception to immunity for enforcing arbitration awards. Second, the doctrine of forum non conveniens does not apply to actions in the United States to enforce arbitral awards against foreign nations. Third, Balkan Ghana legally assigned its rights in the Award to Balkan UK and therefore Balkan UK had standing to bring this enforcement action under the New York Convention. Fourth and finally, none of the three defenses put forth by Ghana—namely, that (1) the arbitration agreement is invalid under Ghanaian law; (2) the parties did not agree to submit the question of the validity of the arbitration clause to the arbitral tribunal; and (3) recognition of the Award would be contrary to the public policy of the United States—had merit. Thus, in view of the federal policy in favor of arbitral dispute resolution, the court denied Ghana’s motion to dismiss and confirmed the Award.