Imagine that you represent a civil engineering company from a European country. Your company and Ghana’s Ministry of Roads negotiate on constructing Ghana’s first subway network. You sign a contract, and break the ground. Several months later, when work is eighty percent complete, a dispute comes up. Half of the contract sum remains to be paid to your company. The Ghana government refuses to pay any more money. Ghana’s Supreme Court decides that the contract is void because your company (and the government) failed to obtain the approval of Ghana’s Parliament before signing it. Therefore, you can’t receive the remainder of the contract sum. What’s worse, your company must pay back the first half of the money it’s already received from the Ghana government. This has been the story of several international contracts in recent times. Here are seven reasons so many of such contracts are being pronounced void by Ghana’s Supreme Court.
1. You didn’t ask for Parliament’s Approval
You’re a foreign company. Any business (or loan) contract you enter into with any agency of the Ghana government is void unless you first obtain the approval of the Ghana Parliament. It’s that simple. It shields the public purse from abuse. The courts have failed to declare that the Ghana government (together with its agencies) is responsible for obtaining the approval. Implicitly, it’s the joint responsibility of both the government side and the foreign party.
2. Your Ghana-Registered Company is not Ghanaian
If you incorporate a company in Ghana, it’s generally treated as Ghanaian. You’d have thought, wouldn’t you, that your company could enter into a ‘domestic’ contract with a government agency. Not necessarily, say the courts. If a ‘Ghanaian’ company is operated or controlled by non-Ghanaians, then it doesn’t have enough ‘Ghanaianness’. The lack of that essential element renders your company’s contracts with Ghana-government agencies international contracts. It still requires the prior approval of the Ghanaian Parliament.
3. Main Contract Approved? So Must Your Sub-Contract
Sometimes, the Ghanaian government (as borrower) and a foreign government (as lender) enter into a loan agreement. The loan is then used to finance contracts, which are performed by companies from the same country as the lender-government. The courts have held that even where the ‘mother’ loan agreement is valid (because it received approval), every contract financed by the ‘mother’ loan agreement must receive separate approval, otherwise it is void.
4. There’s No ‘Law’ Validating Your Contract
The requirement for Parliamentary approval has featured in Ghana’s Constitution since 1992. However, it’s a high-level provision, and the drafters of the Constitution expected Ghana’s Parliament to legislate more extensively on international contracts. Two decades later, no such legislation has been enacted. This has compelled the courts to resort to judicial lawmaking, with a fair amount scope-broadening with every new decision. Your international contract may be void because of the failure of the Ghanaian Parliament to enact a clarity-providing international-business-transaction law.
5. You Don’t Have the Attorney-General’s Certificate
A good lawyer once asked the Supreme Court: “without extensive laws, must every contract entered into between a government agency and a foreign entity be submitted to the Parliament for prior approval? Would that include every air ticket bought for government officials for example? Hotel bills? Rented cars?” You see where he’s going, don’t you? The court recognised the looming absurdity, and gave a quick fix. Only “substantial” contracts require Parliamentary approval. What does “Substantial” mean? Well, if you’re in doubt, says the court, submit the details of the intended contract to Ghana’s Attorney-General, who will certify whether it’s an international contract or not. If the Attorney-General thinks it’s an international contract, you’d better take it before Parliament.
6. You Won’t Even Be Paid Fair Compensation
This point isn’t exactly a cause of void international contracts – it’s an effect. So you didn’t obtain approval. So your contract is void. Ghana may have a practically functional subway (or power plant, or highway, etc) but you haven’t been paid for the work you’ve done. It would make sense, wouldn’t it, for you to be paid an amount which (though not the full contract sum) fairly compensates you for work done. The courts agree with you that Ghana would gain unfairly in such a situation. However, they consider it more important to preserve respect for the Ghanaian Constitution than to treat you with ‘fairness’. If you have done good work under a void international contract, you still won’t get paid.
7. It’s All Politics, Really
The courts apply the available law in the cases brought before them. But, who brings the lawsuits in the first place? With few exceptions (including one inimitable former Attorney-General), the legal battles on international business transactions have had subtle political undertones – surrogate tussles between the two main political parties in Ghana. When Party A wins an election, its followers bring lawsuits to declare contracts awarded under the previous government (of Party B) as internal business transactions, which are void for lack of parliamentary approval. In this way, it looks a bit hunt-and-miss whether your contract would be brought to court or not.
Does Ghana’s current law on international business transactions strike you in any particular way? Please leave a comment and let’s discuss it.