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Balkan Energy Limited v. Republic of Ghana

United States District Court, District of Columbia

March 22, 2018

BALKAN ENERGY LIMITED, et al., Petitioners,
v.
REPUBLIC OF GHANA, 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 date of the filing of the Petition, the amount owing from Ghana is approximately $13, 348, 720. Pet. ¶ 45; Pet., Ex. J, ECF No. 1-11.

         On August 22, 2016, Balkan Ghana and Balkan UK agreed to a deed of assignment wherein Balkan Ghana assigned all of its rights and interests in the Award to Balkan UK.[1] See Pet., Ex. I, ECF No. 1-10 [hereinafter Deed of Assignment].

         B. Procedural Background

         On March 31, 2017, Balkan UK and Balkan Ghana filed the instant Petition to confirm the Award. See generally Pet. Ghana moved to dismiss the Petition on August 24, 2017. Resp't's Mot. to Dismiss, ECF No. 17 [hereinafter Resp't's Mot.]. In its motion, Ghana “reserv[ed] its rights to answer the petition, conduct necessary discovery, and proceed onto the merits” at a later point. Id. at 13. Petitioners opposed the motion. Pet'rs' Mem. of Law in Opp'n to Mot. to Dismiss and Reply in Supp. of Pet., ECF No. 19 [hereinafter Pet'rs' Opp'n]. Ghana replied to the opposition, Resp't's Reply, ECF No. 22, and then proceeded to submit to the court a number of additional filings, including a “preliminary response” to the petition, in which it raised for the first time: (1) defenses under Article V of the New York Convention, see Resp't's Prelim. Resp., ECF No. 23; and (2) a declaration of a Ghanaian attorney, opining on Ghanaian law, Decl. of Anthony Akoto Ampaw, ECF No. 24 [hereinafter Ampaw Decl.]. Respondent also filed a notice concerning two foreign judgments entered against Balkan Ghana in the High Court of Ghana. Resp't's Notice of Foreign Garnishment Order & Foreign J., ECF No. 32. Petitioners responded to only two of these filings and did not respond to the defenses raised by Respondent under the New York Convention. See Pet'rs' Resp. to Notice of Suppl. Auth., ECF No. 28; Pet'rs' Resp. to Ghana's Notice of Foreign Garnishment & J., ECF No. 34.

         The dubiousness of Ghana's procedural maneuvering aside, [2] the court at oral argument presented Petitioners with the option to submit additional briefing before the court ruled on the arguments raised in Ghana's additional filings. Hr'g Tr., ECF No. 35, at 3-6. Counsel for Petitioners declined, citing Petitioners' desire for a summary resolution of the Petition as contemplated by the Federal Arbitration Act. Id. at 5.

         The issues raised in the Petition, the Motion to Dismiss, and the Preliminary Response to the Petition are therefore ripe for consideration.

         III. LEGAL STANDARD

         The New York Convention, which is incorporated in the Federal Arbitration Act (“FAA”), see 9 U.S.C. §§ 201-208, “is a multilateral treaty that, with exceptions, obligates participating countries to honor international commercial arbitration agreements and to recognize and enforce arbitral awards rendered pursuant to such agreements.” Enron Nigeria Power Holding Ltd. v. Fed. Republic of Nigeria, 844 F.3d 281, 283 (D.C. Cir. 2016).

         As the D.C. Circuit has recognized, “[c]onsistent with the ‘emphatic federal policy in favor of arbitral dispute resolution' recognized by the Supreme Court[, ] . . . the FAA affords the district court little discretion in refusing or deferring enforcement of foreign arbitral awards.” Belize Soc. Dev. Ltd. v. Gov't of Belize, 668 F.3d 724, 727 (D.C. Cir. 2012) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985)). Courts “may refuse to enforce the award [under the New York Convention] only on the grounds explicitly set forth in Article V of the Convention.” TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 935 (D.C. Cir. 2007) (quoting Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, Inc., 126 F.3d 15, 23 (2d Cir. 1997)); see 9 U.S.C. § 207 (providing that the reviewing court “shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the . . . Convention” (emphasis added)). Because “the New York Convention provides only several narrow circumstances when a court may deny confirmation of an arbitral award, confirmation proceedings are generally summary in nature.” Int'l Trading & Indus. Inv. Co. v. DynCorp Aerospace Tech., 763 F.Supp.2d 12, 20 (D.D.C. 2011).

         IV. DISCUSSION

         Ghana advances four arguments in support of dismissing and/or denying the Petition. First, it asserts that this court lacks subject-matter jurisdiction because Ghana is entitled to immunity under the Foreign Sovereign Immunities Act (“FSIA”). Second, Ghana contends that, even if this court has jurisdiction over this action, dismissal is appropriate under the doctrine of forum non conveniens because Ghana is the better forum in which to resolve the dispute. Third, Ghana maintains that neither Petitioner has standing to bring the Petition because the assignment of the Award from Balkan Ghana to Balkan UK was invalid. And finally, Ghana asserts that confirmation of the petition should be denied because various defenses under the New York Convention apply. The court addresses each argument in turn.

         A. Subject Matter Jurisdiction under the Foreign ...


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