The Permanent Court of Arbitration (PCA) in The Hague, The Netherlands, has dismissed a $55 million judgment debt against Ghana which was being sought by a Chinese company over a traffic management project.

The disputed project — the Accra Intelligent Traffic Management System (AITMS) — was signed between the government of Ghana (GoG) and Beijing Everyway Traffic & Lighting Technical Company Limited (simply known as Everyway Tech) in 2012.

Under the contract, Everyway Tech was supposed to install new traffic signal systems in Accra, improve existing systems and reduce traffic congestion in the capital city through a coordinated traffic signal system.

In 2022, Everyway Tech dragged Ghana to the PCA with a case that the GoG had cancelled the contract and unlawfully expropriated its investment in the country, in violation of the China-Ghana Bilateral Investment Treaty (BIT).

Among other things, the claimant (Everyway Tech) sought damages of $55m from the GoG for the money it had expended on the AITMS before the alleged abrogation and unlawful expropriation.

Under international law, a country can expropriate (take over) properties or investments of individuals or companies in its territory, provided the expropriation is done lawfully, is in the public interest and the country pays the required compensation to the affected entity.

No jurisdiction

In a unanimous decision last Monday, a three-member panel of the PCA dismissed Everyway Tech’s claim on the basis that the tribunal had no jurisdiction over the legality of the alleged expropriation of the company’s investment by the GoG.

It was the considered view of the arbitral tribunal that although the China-Ghana BIT allowed investor-state arbitrations to settle disputes, such arbitrations did not include the issue of legality of expropriation.

The China-Ghana BIT, the PCA held, rather gave jurisdiction to arbitral tribunals over the amount of compensation to be paid to entities affected by expropriation by the two states under the agreement.

“The China-Ghana agreement contains a provision for investor-state arbitration in Article 10(1) of the treaty which is limited to disputes concerning the amount of compensation for expropriation.

“As such, neither China nor Ghana intended to arbitrate and made no arbitration offer to investors of the other contracting state in respect of disputes concerning the entitlement of expropriation or the breach of equitable treatment and protection under the treaty,” the tribunal held.

The arbitrators of the tribunal were Prof. Stavros Brekoulakis (Presiding Arbitrator), V.K. Rajah SC and Prof. Richard Oppong.

A-G’s case upheld

The PCA gave the decision after it had upheld an objection raised by the Attorney-General and Minister of Justice, Godfred Yeboah Dame, challenging the jurisdiction of the tribunal to entertain the action.

“The tribunal upholds the respondent’s (GoG’s) objections to the tribunal’s jurisdiction and finds that it has no jurisdiction to decide the claimant’s (Everyway Tech’s) claims in this arbitration,” the PCA ruled.

Mr Dame had argued before the PCA that under the China-Ghana BIT, it was only the courts of the two countries that had jurisdiction over the legality of expropriation made in each country’s territory.

In that regard, per the argument of the A-G, since the dispute related to a contract in Ghana, only the courts of Ghana had jurisdiction to determine the legality of the expropriation, as alleged by Everyway Tech.

AITMS project

On December 16, 2011, Ghana signed a credit facility with the China Development Bank for a loan facility to develop 12 infrastructure projects in Ghana, including the AITMS project.

Based on the credit facility, Everyway Tech was awarded the AITMS project in April 2012 and it subsequently signed an engineering, procurement, installation and commissioning (EPIC) contract with the Ministry of Roads and Highways on September 17, 2012, valued at $100 million.

Under the EPIC contract, Everyway Tech was to “supply equipment and provide technical services to the GoG in respect of the planning, design, construction, supervision, operation and training for the AITMS project”.

Per the terms of the contract, Everyway Tech was to, among other things, construct traffic signal control sub-systems at 257 junctions in Accra, provide 394 comprehensive violation capturing sub-systems, provide traffic guidance display systems at 20 locations and traffic flow collection and speed capturing sub-systems at 425 locations.

The company was also to provide high-definition video monitoring sub-systems at 259 locations, 240km of fibre optic, 1,718 wireless magnetic detectors, road signs, lane markings and pedestrian handrails.

Everyway Tech was expected to commence work on August 26, 2019, with the work scheduled to be completed in 24 months.

Information available in the arbitral award shows that on December 22, 2018, Parliament approved the EPIC contract.

Case of claimant

Everyway Tech made a case that in November 2019, a delegation from the Ministry of Roads and Highways visited its factory in China and saw that it had manufactured equipment for shipment to Ghana for the AITMS project.

The company also claimed that in January 2020, the Department of Urban Roads granted it permission to ship the equipment it had manufactured and which had been inspected by officials to Ghana for the AITMS project.

“On February 21, 2020, about six months after the commencement of the AITMS project, the first installations at two intersections in Accra were switched on, indicating the official launch of the AITMS project in Ghana,” it said.

However, on November 19, 2020, the Parliament of Ghana rescinded its decision of December 22, 2018 to approve the EPIC contract.

It was the case of Everyway Tech that the EPIC contract was rescinded unlawfully, unjustifiably and at a period when it “had completed a substantial amount of work”.

The Chinese company then dragged Ghana to the PCA, with a case that the GoG had breached Article 4(1) of the China-Ghana BIT.

The respondent (GoG), however, argued that the decision of Parliament to rescind its approval of the EPIC contract was in the interest of the country’s national security. f

Furthermore, the PCA had no jurisdiction over the matter.