Government ordered to pay US$69m after Gas contract termination

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    Ghana has lost yet another arbitration case, as the London Court of International Arbitration has ordered the country to pay the sum of over US$69 million to the West Africa Gas Limited as the Recovery Fee over the termination of a Gas Sales Agreement (GSA) made on 9th October 2015.

    Background

    Following the energy crisis that erupted in 2015, the Ministry of Energy entered an agreement with WAGL to supply Liquefied Natural Gas. After negotiations, the GSA was executed on 8th October 2015 for the supply of LNG at the Tema Port for five years.

    Given that there was no berthing facility at Tema, the WAGL was obliged under the contract, to bear all substantial infrastructure and other costs. However, the agreement set forth certain conditions as precedent to the obligation on both parties to sell and purchase the Gas. None of the two parties fully complied with these conditions.

    The West Africa Gas Limited subsequently terminated the agreement in a letter dated 22nd April 2019 after attempts to resolve the impasse were unsuccessful. The WAGL initially sought payment of over US$1bn as Recovery Fee. The figure was considerably reduced after a while.

    The Government however refused to pay the Recovery Fee, based on its interpretation of the agreement, and instead claimed damages by filing a counterclaim.

    Counterclaim

    The counterclaim was premised on the basis that the WAGL failed to respond to the government’s failure to fulfill the conditions by not suspending further work, an allegation that was found to be “somewhat inconsistent with GoG’s earlier argument that WAGL should have proceeded with the infrastructure works.”

    The government also alleged that West Africa Gas Limited failed to notify it of any pending alleged breaches. 

    Consequently, the government sought damages in the sum of US$87,926,839.69, believed to be the difference in value between the Gas to be purchased from WAGL under the agreement and the amount that the government ought to pay under its new arrangements.

    Ruling

    The government has been ordered to pay the sum of US$ 68,584,623.37 as the Recovery Fee under the GSA. 

    Government is also required to pay the simple interest on this figure from 22nd April 2019, at the annual rate of 6.5% until payment.

    Government is further required to pay the legal and other costs of the WAGL in the sum of £200,000, as well as the arbitration costs in the sum of £153,108.88.

    The Counterclaim raised by the Ministry of Energy has also been dismissed. 

    All other claims, including the claim for a declaration and counterclaims, are rejected.