In December 2015, a Norwegian newspaper published an article accusing the Ghanaian government of having signed a $510 million deal with a company called Ameri, whose CEO was a fugitive from justice in Norway.
The newspaper had solicited expert opinion on the deal and been categorically told that the transaction amount had been bloated to the tune of $290 million.
Whilst the Ameri deal had been noted in Ghanaian policy circles, few people had given it a second look. Ghana’s independent “policy observers” community is a tiny and highly under-resourced one. For every weird action taken by politicians that attract their attention, at least five hundred go unnoticed. Most of the activists and commentators in the organised civil society movement hold more than two jobs, and many do this work on a purely voluntary basis. So, the Ameri deal would most certainly have generated no controversy had the company not hired a shady CEO with ties to the Pakistani Mafia.
The report catapulted the Ameri matter to the front tray of IMANI’s crowded desk, and I personally took a lot of interest in it. I volunteer time as a strategic advisor at IMANI, and was previously a full-time executive.
Upon further scrutiny, it emerged that the deal was a Build-Operate-Transfer arrangement, so the $220 million price ticket of the power plant had to take into account the cost of financing. But this cost was certainly not $290 million!
Further probing showed that Ghana had been in discussions with APR energy, a respected key distributor for the manufacturers of the power plant, General Electric (GE). Indeed, all the technical documentation for the Ameri deal still bore the insignia of APR.
The question was why did Ghana start with APR, which has done several leasing and hire-purchase transactions around the world, and then suddenly decided that it needed a strange, obscure, middle man? Especially when similar deals driven directly by APR and GE were hundreds of millions of dollars cheaper than what Ameri was offering?
The argument that Ghana had no money to buy the plant upfront wasn’t sensible since the country was committing to pay more than $8 million a month and was, furthermore, also issuing, as collateral, a fat bank guarantee of $51 million (for a plant worth less than $220 million). Both the manufacturer and their principal distributors would have done a deal at a heartbeat.
Eventually the Ghanaian government opted for a deal where GE handed the power plant to APR, which in turn passed it over to Metka, a Greek company, which in turn assigned the job to PPR, its Turkish subsidiary, structured as a special purpose vehicle conveniently domiciled outside the EU.
This circuitous arrangement now in place, Ameri could sign a brokerage agreement with Ghana, immediately assign the contract to PPR, and pocket a cool $150 million (Metka had done all the engineering, and arranged all the financing to sort out APR).
IMANI’s position was that this was a preposterous arrangement and, further, that the government should do everything to claw back a good chunk of the $150 million. IMANI reviewed large amounts of data in technical reference databases and spoke to experts to double-check the Bill of Quantities provided in the Ameri contract and found massive inflation, obviously done to hide the $150 million brokerage fee.
It was obvious that Ghana didn’t have to pay any brokerage fee as the country was putting down more than $100 million a year, a fat bank guarantee, and was willing to buy its own fuel and mineral water, and provide free siting, for the power plant. GE or APR were completely willing to deal directly with the Ghanaian government, and had indeed been in detailed discussions in the period preceding the Ameri contract. Consequently, in IMANI’s view, the $150 million sweetheart agency fee needed a haircut.
Why did IMANI not recommend an abrogation of the contract? Simple: the agreement had been drafted with some of the most ironclad clauses known to man. Every eventuality had been foreseen. No way could the contract be cancelled without Ghana suffering massive penalties.
When the new Government came into office, it commissioned an expert report which concluded in the same manner that IMANI had: the agency fee was unjustifiable. The committee advised that the contract be terminated on the basis of fraud. I took to Facebook to point out that where international arbitration was the agreed dispute resolution process, even fraud is not enough to vitiate a contract without resorting to the arbitration clause in the agreement.
On Facebook, I campaigned for the government to withhold the monthly payments as a way to force Ameri to come back to the table for renegotiation.
We are aware that monthly payments were indeed suspended for a time as the Government sought legal advice from both the country’s Attorney General (AG) and its UK based solicitors regarding the legality of this tactic.
This week, the Attorney General’s opinion found its way into the Ghanaian press and then promptly, and seriously, misrepresented by hacks of the politicians that sponsored the deal. This post is to set the record straight.
It is important to note that separate from this opinion, the Government of Ghana has also solicited a second opinion on the matter. I have it on confidence that Ms. Vicki Bright, a Ghanaian Barrister, also issued an opinion. Unfortunately, I came across this document overseas in another context and I am not at liberty to share the content here, except in very broad terms.
Regarding the AG’s opinion, here is the low-down:
1. The Attorney General of Ghana has merely reinforced what we have all known from the beginning: the Ameri contract is NOT amenable to abrogation without massive financial damage. It is watertight. It was written to survive adversity. By persons very skilled at that craft.
2. Since the agreement only allows monthly payments to be withheld if Ameri’s agents (Metka/PPR) fail to deliver the power plant and keep it running with our fuel and facilities, there are no grounds to suspend monthly payments. Whether the price has been bloated or not, the plant is working. Full stop.
3. Whilst the Government of the day failed to follow due process when entering into the sole-sourcing arrangement for the delivery of the power plant, the procurement law has a loophole to cover this: the government can assert a national crisis and use that excuse. The electricity crisis then raging in Ghana was thus the perfect cover. Whether or not the emergency plant still took more than a year to show up, which indeed it did, is immaterial. At the time of the sole sourcing there were rolling blackouts across the country.
4. Furthermore, after having entered into the sole-sourcing contract, the Ministry wrote to the Procurement Authority, which pliantly, as institutions in Ghana are wont to do, blessed the prior impropriety.
5. Ameri had very cleverly hired a law firm in very fine standing with the Government of the day, Messrs Kwame Akuffo & Co. The well-known Principal of this law firm sits on the board of critical state institutions charged with the regulation of the downstream energy sector. In fact, the President of the Republic, the AG, the Chief Justice, and many prominent ruling elite grandees are alumni of an affiliate firm, Akufo-Addo, Prempeh & Co, where this Principal has practiced for many years. The firm is versed in regulatory matters. This law firm had already written to the Attorney General to threaten all manner of penalties against Ghana should payments continue to be withheld.
6. The AG’s legal opinion then goes further to lament what we all know about the agreement. Even after payments had commenced after legal close, the $51 million standby letter of credit (“bank guarantee”) was crazily allowed to remain operative. The absence of a proper power purchase agreement overwhelmingly tilts all the advantages to Ameri’s side.
7. Whilst the agreement signed is obviously very unfavourable to Government of Ghana, merely saying it is unconscionable does not provide a basis to wiggle out of it. In the eyes of the law, it is the same Ghanaian Government (notwithstanding a change of administration) that with its eyes wide open entered into the agreement. It knew it was unfavourable when it signed it. The government has never disputed any of Ameri’s invoices, and had indeed commenced some payments in 2016. It cannot all of a sudden scream “abuse!” and back out of its legal obligations.
8. Despite loud protests against the agreement, the Executive and Parliament both with their eyes wide open consented to an agreement that was clearly known to have excessive penalty clauses and exorbitant terms.
9. That the $150 million agency fee is not merited because Ameri had done no work is neither here nor there since the Government of Ghana ought to have known this fact when its agents freely, and being a government, in a superior bargaining position, consented to sign off that amount to Ameri.
10. The agreement does not allow the arbitral proceedings, should the government elect to enter arbitration, to happen in Ghana; they must take place in London. Government has the option to assert that there is fraud and corruption, but it will still have to go to arbitration subsequent to any move to terminate. Government also has the liberty to continue attempts to renegotiate the agreement.
So, as anyone with basic comprehension skills can attest, at no point in the opinion does the AG say that the agreement was sound, clean or good. It agrees that it is a one-sided and unfavourable agreement. But this was a legal opinion. It was not an opinion on the moral quality of the contract or the transaction. And as far as the law is concerned, a person, as well as a government, is free to enter into a one-sided agreement.
How the media could translate this to mean that the agreement or the transaction has been given a clean bill of health seriously baffles me. I won’t be surprised if the opinion wasn’t even read at all by the editors that signed off on those stories.
At any rate, the opinion offers nothing that wasn’t widely known already.
The decision to brave the risks of refusing to make monthly payments to Ameri, whilst still refusing Ameri access to the facility to shut it down per the penalty terms of the agreement, is a political one, not a legal one. That decision would have been very much the government’s prerogative prior to seeking legal advice, a course of action that is clearly naive. At this point it would not be wise to flagrantly ignore the government’s own legal adviser. What exactly was the Government expecting the Attorney General to say: flout the agreement and don’t pay? This is not the type of act for which one must seek legal blessing.
Going forward, the government of Ghana needs to tell its citizens the steps it is taking to prevent such poor and completely unconscionable agreements from being signed in the future. Ghanaian policy observers are now vigilant to the modus operandi:
A. Write to the Public Procurement Authority for blessing.
B. Sometimes, even secure parliamentary ratification of the transaction.
C. Put in place a watertight contract, with outsized penalties if Ghana tries to terminate.
D. Inflate your way to millions.
How does Ghana stop these kinds of situations from arising in the future?
As far as compelling Ameri to return to the negotiating table for that haircut is concerned, IMANI continues to maintain that it has always strictly been a matter of political tactics. No legal maneuver is readily available. Particularly as the government is in fact torn between two competing legal opinions, one of which I cannot discuss here.
The people of Ghana deserve a proper explanation from their Government about the status of this sad episode in their national life.