Dispute over traffic management contract: $55 million judgment debt dropped

 A Chinese business had filed a lawsuit against Ghana for a $55 million judgment debt related to a traffic management project, but the Permanent Court of Arbitration (PCA) in The Hague, the Netherlands, has dismissed the claim.

Traffic Light
The Accra Intelligent Traffic Management System (AITMS), the subject of the current dispute, was agreed to by the Ghanaian government (GoG) and Beijing Everyway Traffic & Lighting Technical Company Limited (also known as Everyway Tech) in 2012.

According to the agreement, Everyway Tech was tasked with installing new traffic signal systems in Accra, enhancing the city’s current ones, and implementing a coordinated traffic light system to lessen traffic congestion.

Everyway Tech brought Ghana to the PCA in 2022, claiming that the GoG had illegally expropriated its investment there and terminated the contract in violation of the China-Ghana Bilateral Investment Treaty (BIT).

The claimant (Everyway Tech), among other things, asked the GoG for $55 million in damages for the money it had spent on the AITMS prior to the claimed abrogation and illegal expropriation.
According to international law, a nation has the right to expropriate (take over) assets owned by people or businesses on its soil, as long as the expropriation is done legally, serves the public good, and the nation provides the appropriate compensation to the injured party.

No jurisdiction

A three-member PCA panel dismissed Everyway Tech’s claim last Monday in a unanimous verdict on the grounds that the tribunal lacked jurisdiction over the legitimacy of the GoG’s purported expropriation of the company’s investment.
The arbitral tribunal was of the opinion that while the China-Ghana BIT permitted investor-state arbitrations to resolve issues, these arbitrations did not address the legality of expropriation.
According to the PCA, the China-Ghana BIT really granted arbitral tribunals authority over the amount of compensation that must be given to entities harmed by expropriation by the two nations under the terms of the agreement.
“Article 10(1) of the China-Ghana Agreement contains a clause that restricts the use of investor-state arbitration to disagreements over the amount of expropriation compensation.

Because of this, the tribunal concluded that neither China nor Ghana intended to arbitrate and did not make any arbitration offers to investors of the other contracting state in regards to disputes involving the right to expropriation or the violation of the treaty’s provisions requiring equitable treatment and protection.

Prof. Richard Oppong, V.K. Rajah SC, and Prof. Stavros Brekoulakis served as the tribunal’s arbitrators.

A-G’s case upheld

The PCA issued the ruling after upholding an objection made by Godfred Yeboah Dame, the Attorney General and Minister of Justice, disputing the tribunal’s authority to hear the case.
The PCA concluded: “The tribunal determines that it lacks jurisdiction to decide the claimant’s (Everyway Tech’s) allegations in this arbitration and upholds the respondent’s (GoG’s) challenges to the tribunal’s authority.”
Mr. Dame had contended before the PCA that, according to the China-Ghana BIT, only the courts of the two nations had jurisdiction over the legality of expropriation carried out on the territory of each nation.
In that regard, the A-G argued that because the controversy concerned a contract in Ghana, only Ghanaian courts had the authority to decide whether the expropriation, as asserted by Everyway Tech, was lawful.

AITMS project

A credit facility for a lending facility to develop 12 infrastructure projects in Ghana, including the AITMS project, was signed between Ghana and the China Development Bank on December 16, 2011.
Everyway Tech received the AITMS project in April 2012 based on the credit facility, and on September 17, 2012, it inked a $100 million engineering, procurement, installation, and commissioning (EPIC) contract with the Ministry of Roads and Highways.
Everyway Tech was required to “provide equipment and provide technical services to the GoG in respect of the planning, design, building, supervision, operation, and training for the AITMS project” according to the terms of the EPIC contract.
According to the contract, Everyway Tech was required to build 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 install 425 sub-systems for collecting traffic flow and speed data.

In addition, the company was to supply 240 km of fiber optic cable, 1,718 wireless magnetic detectors, road signs, lane markings, and pedestrian railings at 259 places.

On August 26, 2019, Everyway Tech was supposed to start working, and the project was supposed to be finished in 24 months.

Parliament approved the EPIC contract on December 22, 2018, according to information found in the arbitral ruling.

Case of claimant

Everyway Tech said that during a delegation visit to its factory in China in November 2019, the Ministry of Roads and Highways saw that it had produced equipment for export to Ghana for the AITMS project.
The business further asserted that in January 2020, the Department of Urban Roads had given it permission to transport to Ghana for the AITMS project the equipment it had made and been inspected by authorities.
“The initial installations at two junctions in Accra were switched on on February 21, 2020, around six months after the initiation of the AITMS project, signaling the formal launch of the AITMS project in Ghana,” it stated.
The Ghanaian Parliament, however, reversed its December 22, 2018, vote to approve the EPIC contract on November 19, 2020.

Everyway Tech’s EPIC contract was terminated without authorization, without cause, and at a time when the company “had done a large amount of work.”

With the claim that Ghana had violated Article 4(1) of the China-Ghana BIT, the Chinese company then brought Ghana to the PCA.

However, the respondent (GoG) maintained that the country’s national security was served by Parliament’s decision to withdraw its ratification of the EPIC contract. f

Furthermore, the PCA lacked authority to handle the situation.

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