Judgment debt looms as Chinese company brings claim against Ghana
12 February 2021
A Beijing-based construction company has brought one of the first Known claims by a mainland Chinese investor against an African country, seeking $55 million from Ghana.
Beijing Everyway Traffic and Lighting Tech Co Ltd said its contract to develop an intelligent traffic management system for Accra was cancelled and it was replaced by other Chinese contractors.
The company served a notice of arbitration on the government of Ghana on February 10, kicking off an ad hoc arbitration procedure under the China-Ghana bilateral investment treaty.
Everyway is represented by Zhong Lun Law Firm in Beijing, with the team led by partner Wei sun, a well-known construction arbitration specialist and secretary general of the Permanent Forum on China Construction Law.
While the lawyers believed the claim was the first against an African state by a mainland Chinese investor, GAR has recently learned there is another such claim under way, believed to be against Nigeria.
Both claims are likely to be watched with interest given the extent of Chinese foreign direct investment in Africa in recent years. According to the China Africa Research Initiative, this soared from $75 million in 2008 to $2.7 billion in 2019 and surpassed declining US investment in Africa in 2014.
Everyway says it entered an engineering, procurement, installation and construction contract with the government of Ghana’s Ministry of Roads and Highways in 2012.
The contract provided for the Beijing company to design and build the Accra Intelligent Traffic Management System Project and to supply the equipment needed for this purpose.
The project – which involved the installation of CCTV and automatic number plate recognition systems to catch traffic violations – was funded by a loan from China Development Bank.
In December 2018, Everyway says the Ghanaian parliament approved the contract and It came into effect in July 2019.
Since then, the company says it has been carrying out works under the contract but has yet to receive any payment from Ghana.
In November last year, Everyway says Ghana rescinded its approval of the contract and approved a new contract for the completion of the project, with two other Chinese contractors, Huawei Technologies Company and the China National Import and Export Corporation.
Among other treaty breaches, Everyway alleges that Ghana has unlawfully expropriated its investment in the project, failed to accord it fair and equitable treatment or reasonable protection and breached the umbrella clause of the China-Ghana BIT (applied through the most-favoured nation clause).
According to a Ghanaian news report from November 7, last year, the chairman of the finance committee of parliament Mark Assibey-Yeboah justified the change of contractor to the house on the basis that background checks conducted on Everyway by the Ministry of National Security had called the company’s reputation into question and suggested that it lacked overseas experience and manpower to carry out the project.
Opposition politician Govern Kwame Agbodza objected to the change, warning that the termination of Everyway’s contract was illegal and if parliament approved the new deal “we may be setting this country up for [a] judgment debt sooner or later.”
On the same day, another publication reported Agbodza saying that if Everyway was not suitable to perform the contract this should have been established through due diligence in 2018 and questioning why the matter had been taken from the Ministry of Roads and Highways and passed to the National Security Ministry. “What has the synchronisation of traffic in Accra got to do with National Security?” he asked.
In a report dated 9 November the chair of the defence and interior committee of the Ghanaian parliament, Seth Acheampong, defended the decision, suggesting the deal with the new contractors differed from the original deal and was in line with conditions imposed by “the people who are offering us the facility, the Chinese”.
The new contractors had to be Chinese, he said.
The China-Ghana BIT was the first entered between China and an African country, in 1990, and provides that the tribunal which hears the dispute shall determine its own procedure and “may…take as guidance” the rules of the SCC Arbitration Institute or ICSID.
It says that each party in the dispute should appoint its own arbitrator within two months of the notice of the arbitration and that they then have further two months to select a national of a third state with diplomatic relations with both China and Ghana as chair of the tribunal. If the tribunal is not constituted within four months, either party may invite the chair of the SCC Arbitration Institute to make the necessary appointments.
There have been only a handful of previous investor-state arbitrations filed by mainland Chinese investors, though claims by Hong Kong or Macao investors are slightly more common (and have included a claim against Tanzania brought by the Macao-registered Standard Chartered Bank).
The first known claim by a mainland investor was brought by Beijing Shougang Mining Investment Company against Mongolia in 2010. Insurance company Ping An brought a claim against Belgium in 2012 and Beijing Urban Construction Company filed against Yemen in 2014 – the only other claim to feature a construction contractor.
There has also been a case against Greece, brought in 2019 by solar power investors Wuxi T Hertz Technologies and Jetion Solar, and late last year investors linked to business group DCH filed a claim against Ukraine over a blocked aerospace deal.
The Shougang and Ping An claims ended with Jurisdictional awards unfavourable to the Chinese investors, while Bejing Urban Construction Company settled with Yemen following a favourable jurisdictional award.
Wuxi T Hertz and Jetion withdrew their claim in late 2019 for undisclosed reasons, and the DCH claim has only recently begun.
On 9 February GAR reported on a “billion-dollar treaty claim” brought by Chinese property investors against an African state, in a story about the promotion of London-based Robert Kovacs to Special counsel at Withers. Kovacs is working on the case, which GAR understands to be against Nigeria.
Contacted by GAR, Withers’ co-head of international arbitration Hussein Haeri confirmed that the firm is representing a mainland Chinese investor against an African state but would give no further details. He would not confirm that the claim is against Nigeria.
In 2014, GAR reported on another arbitration arising from Chinese investment in Africa, brought by a state not an investor under ICC rules. In this case, the central African state of Chad sought $1 billion from the China National Petroleum Corporation for failing to pay a fine for alleged environmental damage caused by oil dumping. The claim settled in late 2014, a few months after being filed.
Source: Ghana Crusader