Recent Developments in Arbitration in Ghana


In summary

This article sets out some of the key developments in arbitration practice in Ghana.


Discussion points

  • Status of the LCIA as a competent authority within the ADR Act
  • Enforcement of arbitral awards
  • Revocation of an arbitrator’s authority
  • Challenge of an arbitral award

Referenced in this article

  • ADR Act – Alternative Dispute Resolution Act, 2010 (Act 798)
  • New York Convention – Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958
  • LCIA – London Court of International Arbitration
  • FCC Rules – Federation of Cocoa Commerce Tribunal Rules

Introduction

Ghana’s Alternative Dispute Resolution Act, 2010 (Act 798, the ADR Act) came into force on 31 May 2010 repealing the Arbitration Act, 1961 (Act 38). Since then, the ADR Act has remained the key legislation regulating the practice and procedure of alternative dispute resolution methods, including arbitration, in Ghana. The ADR Act has not been amended since coming into force.

Ghana’s ADR Act is modelled largely after the UNCITRAL Model Law on International Arbitration of 1985, as amended in 2006. The ADR Act, in keeping with many other arbitration legislations, is hinged on party autonomy and gives disputants significant independence in framing the dispute resolution process to best suit their context. The ADR Act recognises the separability of arbitration agreements and provides in express language that the arbitration clause shall be treated as distinct from the main agreement.[1] Therefore, a defect with the main agreement does not compromise the express intention of the parties to have their disputes resolved by arbitration.[2] Agreements to arbitrate are not to be inferred. The ADR Act insists on the existence of a written agreement as proof of the intention of the parties to have their dispute resolved by arbitration.[3] Letters, telex, fax, email or other similar means of communication may suffice as written communication for the purpose of triggering into existence an arbitration agreement.[4] The exchange of a statement of claim, and defence in which the existence of an agreement is alleged by one party and not denied by another may suffice as a written agreement.[5] As a basic rule, not all matters are arbitrable. Matters relating to (1) the national or public interest, (2) the environment, (3) the enforcement and interpretation of the Constitution, and (4) any other matter that by law cannot be settled by an alternative dispute resolution method are therefore excluded. Section 1(d) leaves open the scope of the matters that cannot be resolved by arbitration with the attendant risk that matters that were previously considered as arbitrable may be subsequently rendered as not arbitrable.

In keeping with the need for arbitration agreements to be respected, and upheld, the ADR Act gives a party to an agreement prescribing arbitration as the dispute resolution method the right to timeously ask the court to stay proceedings and refer the matter to arbitration.[6]

Section 6 of the ADR Act allows a counterparty to a suit to which there is an arbitration clause to make an application to the court for the matter to be referred to arbitration upon entry of appearance (conditional).[7] The key consideration for the court in determining an application of this nature is whether there was a prior agreement between the parties for all arbitrable disputes to be referred to arbitration.[8]

An application under section 6 shall be on notice to the other party, who shall be accorded the right to proffer a response on why the matter ought not be referred to arbitration. If the application is granted, it will operate as an automatic stay of the proceedings in court.[9] However, all interlocutory orders made in that proceedings shall be made to stand except contested by a party to the proceedings.[10]

The timing of applications under section 6(1) of the ADR Act have been strictly scrutinised by the Ghanaian courts. A party waives their right to ask for a matter to be referred to arbitration once they file a defence to contest a case on its merits.

In De Simone Ltd v Olam Ghana Ltd,[11] the plaintiff sued the defendant for a breach of a contract, which contained a clause requiring the parties to settle disputes arising from the contract through arbitration. The defendant filed an application asking the court to refer the parties to arbitration in accordance with the terms of their contract, after pleadings had closed and the trial had commenced. The trial court and court of appeal refused this application. On further appeal to the Supreme Court, the issue the court had to determine was at which point a party waived its right to ask for a referral to arbitration. The court held that once a statement of defence was filed to contest the case on its merits, the defendant had waived its right to ask for a referral to arbitration.

A court, when faced with facts that the court believes is capable of being resolved by arbitration, may, with the consent of the parties, refer the matter to arbitration.[12] Section 7(5) of the ADR Act provides that where a court realises that an action is the subject of an arbitration agreement, the court is required to stay proceedings and refer the dispute to arbitration. From the language of section 7(5) of the ADR Act, the court’s duty is not to entertain any action containing an arbitration clause, and there is no time limit within which the court may refer the dispute to arbitration. The key event for the referral of the dispute to arbitration is when it comes to the court’s realisation. However, this literal and liberal view was watered down by the Supreme Court in De Simone Limited v OLAM Ghana Limited.[13] In this case, both the High Court and Court of Appeal took the view that the court’s duty was simply to refer the matter to arbitration on realising that there was an arbitration clause in place. However, on a further appeal to the Supreme Court, the court took the view that the literal interpretation of the section 7(5) was counter-productive, and risks not respecting the intention of the parties to waive their right to arbitrate – thereby undermining the party autonomy principle underlying the arbitration process. The Court noted that:

Section 7(5) of the Act may only be exercised where there has not been mutual waiver by the parties of their arbitration rights. To construe it otherwise would be to empower the court to overrun the freedom of the parties to annul their arbitration agreement and resort to the court to have their dispute resolved.

Arbitration continues to emerge and serve as a strong alternative to dispute resolution by national courts. Various national courts, including the Supreme Court, have affirmed the need to respect the wishes of parties seeking to resolve their disputes in other alternative forums. In BCM Ghana Ltd v Ashanti Gold fields Ltd,[14] the Supreme Court urged courts to ‘strive to uphold dispute resolution clauses in agreements’ since it is ‘sound business practice’ to do so. Similarly, the Supreme Court in Republic v High Court (Commercial Division, Accra) Ex-Parte: GHACEM Limited (AJ FANJ Construction & Engineering Limited as an interested party),[15] in recognition of the parties’ express choice to resolve their disputes outside of the court’s framework, urged restraint on the side of the courts in interfering with arbitral proceedings. According to Dotse JSC:

What must be noted is that the provisions in Act 798 on arbitral proceedings must be considered as alternative methods of resolution of disputes, and therefore, in our view, the intervention of the High Court, unless expressly provided for and in clear instances devoid of any controversy, must be very slow and cautious.

Overview of review

This review considers developments in arbitration in Ghana from a legislative and case law point of view. The first part of the review considers recent legislation, and how they affect the use of arbitration as a dispute resolution method. The second part of the review focuses on developments from the law courts.

Part one

Legislative developments

The ADR Act remains the primary legislation regulating the practice of arbitration in Ghana. That said, diverse legislation incorporates arbitration as a dispute resolution method. Depending on the legislation, the resort to arbitration may be compulsory or recommendatory. For instance, in the High Court (Civil Procedure) (Amendment) Rules, 2020 (CI 133),[16] courts are now required to ‘enquire from parties [at the time that issues are being set and agreed on for trial] if the parties are willing to attempt settlement of the case by alternative dispute resolution or other methods’, which includes arbitration.[17] Similarly, the parties may request at the time that issues are being agreed on to attempt settlement through arbitration.[18] In the case of matters pending before the commercial courts, CI 133 imposes a positive duty on courts to ‘encourage the amicable resolution of commercial claims and early settlement of pending commercial litigation by the voluntary action of the parties’.[19]

In what can be described as a significant leap for arbitration, Ghana’s recent Land Act, 2020 (Act 1036)[20] incorporates arbitration as a mandatory dispute resolution procedure in matters ‘concerning any land or interest in land’. Section 98(1) of Act 1036 provides that:

An action concerning any land or interest in land in a registration district shall not be commenced in any court unless the procedures for resolution of disputes under the Alternative Dispute Resolution Act, 2010 (Act 798) have been exhausted.

Section 98 is commendable to the extent that it compels parties to a land dispute to resort to arbitration (or any other ADR method). That said, section 98’s insistence on alternative dispute resolution (including arbitration) as a first step in resolving land disputes in registration districts poses some fundamental challenges. The lawmakers in drafting section 98 seem to have glossed over the fact that the ADR methods under the ADR Act are not interim or pre-litigation dispute resolution processes. On the contrary, these are full-fledged dispute resolution methods, and as a result, resort to arbitration automatically excludes the parties from having the merits of their case being heard in court (which may be their preferred means of dispute resolution). It is further an open question whether taking away the rights of persons to resort to national courts, with specialised land courts, is a desirable outcome. But for all its faults, section 98 of Act 1036’s insistence on alternative dispute resolution methods in complementing an area traditionally reserved for the national courts may be construed as proof of the growing acceptance of arbitration in the public space.

Part two

Enforcement of arbitral awards

The ADR Act sets out the conditions and steps that a person in whose favour an arbitral award has been made must comply with. These conditions and steps are contained in section 59 of the ADR Act.

First, the award must have been made by a competent authority under the laws of the country in which the award was made.[21] Second, a reciprocal arrangement must be in place between Ghana and the country in which the award was made or the award must have been made under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) or under any other international convention on arbitration ratified by Parliament.[22]

The ADR Act places an obligation on the party seeking to enforce the award to also (1) produce the original award or an authenticated copy of the award in the manner prescribed by the law of the country in which the award was made;[23] and (2) produce a copy of the agreement relied on by the parties to initiate the arbitration or a duly authenticated copy of the arbitration agreement.[24] The ADR Act further insists that there must be no pending appeal against the award in any court under the law applicable to the arbitration.[25]

These statutory steps must be complied with strictly and failure to do so will render an application to enforce an arbitral award unsuccessful.[26]

Further, the court will not grant leave to enforce an arbitral award if (1) the award has been annulled in the country in which the award was made;[27] (2) the party against whom the award was made was not given sufficient notice to enable that party to present its case;[28] (3) a party lacking legal capacity was not properly represented;[29] (4) the award deals with issues not submitted to arbitration;[30] or (5) the award contains a decision beyond the scope of the matters submitted for arbitration.[31]

From a review of section 59 (dealing with the enforcement rules and condition), a court may refuse to enforce an arbitral award for a variety of reasons, including the failure on the part of the applicant to prove the existence of an arbitral award, the legal or juridical basis for the award, or for more substantive concerns including an arbitrator exceeding his or her mandate and complaints of non-compliance with the rules of natural justice.

Developments in enforcement of foreign arbitral awards

Failure to demonstrate the existence of an agreement pursuant to which an award was made

In Dutch African Trading Company, BV (BATC) v West African Mills Company Limited,[32] the Commercial Court, Accra refused to enforce an arbitral award on the grounds that the applicant could not demonstrate that there was a written agreement pursuant to which the award was made as required under section 59(d)(ii) of the ADR Act. In this case, the parties had entered into 12 separate agreements all of which provided that the agreements were subject to the Federation of Cocoa Commerce (FCC) Tribunal Rules in London. Rule 1(1.3) of the FCC rules stated that ‘any dispute arising out of, or relating to, and any contract for the sale and/or purchase of cocoa beans and/or cocoa product . . . shall be referred to FCC arbitration.’ The High Court judge formed the opinion that the FCC rules as incorporated into the various agreements did not qualify as an ‘agreement pursuant to which the award was made’ and therefore, the statutory conditions for the enforcement of the arbitral award have not been met. According to the judge:

the Applicant’s failure to produce such an agreement is a clear vindication that no such arbitration agreement exists. That in the absence of the required arbitration agreement to afford the Court the opportunity to examine the agreement, the jurisdiction of the Court to even consider the application for leave for the enforcement of the award cannot be properly invoked. That the failure of the Applicant to show that the Award was made in accordance with the mandatory provisions of Section 57 and 59 of Act 798 is fatal to the application and same ought not to proceed further.

The authors understand that the High Court’s decision has been overturned on appeal. The High Court’s conclusion that the incorporation of the FCC’s rules did not suffice as an agreement pursuant to which the award was made was unnecessarily technical and did not consider the commercial reality that parties may prefer to simply incorporate secondary agreements into their primary agreements without necessarily reproducing the same. In any event, nothing in the body of the ADR Act specifically excludes the incorporation arbitral clauses in agreements.

Status of the LCIA as a competent authority under the laws of the country in which the award was made

Shakari Limited v The Broad Bank Home Limited[33] dealt with whether the London Court of International Arbitration was a competent authority within the ADR Act. The applicant was a limited liability company registered under the laws of Mauritius. The respondent was a Ghanaian company. The parties entered into an agreement under which the applicant agreed to arrange and provide a loan to the respondent. The main agreement entered into by the parties – a facilitation agreement – contained a dispute resolution clause. The arbitration clause required all disputes to be settled by arbitration under the rules of the London Court of International Arbitration.

The respondent breached its obligations under the agreement, and the applicant triggered the processes for the holding of an arbitration. A sole arbitrator was appointed. Both parties participated in the arbitration and an award was made in favour of the applicant. The applicant took steps to have the arbitration award enforced at the High Court, Accra.

The respondent opposed the application for leave to enforce the arbitral award. The thrust of the respondent’s opposition was that the application for leave to enforce the arbitral award was not compliant with section 59(1)(a) of the ADR Act. Section 59(1)(a) of the ADR Act requires the High Court before whom an application is placed for leave to enforce an arbitral award to satisfy itself that the award was made by a ‘competent authority under the laws of the country in which the award was made’. It was the respondent’s contention that the LCIA did not qualify as a ‘competent authority’ in this context, and as a result, its award should not be recognised. In response, the applicant pointed out the LCIA’s reputation as a renowned arbitral institution, and as a result asked the court to take judicial notice of the status of the LCIA.

The court dismissed the respondent’s opposition regarding the status of the LCIA and went ahead to grant the applicant leave to enforce the arbitral award. In the High Court’s view, ‘Pacta Sunct Non-Servanda means agreements must be honoured. The fact that both parties consented to and fully participated in the arbitration proceedings is . . . res ipsa. No tenable challenge has been mounted against the process.’

Waiver of right to arbitrate and applications for stay of proceedings

The right to arbitrate is preserved for those whose desire to arbitrate is evident and manifest in their conduct, and not those asserting this right in a cavalier manner, only ‘shouting’ arbitration as an afterthought and seeking a reference to arbitration as a way of putting a spanner in the works of the other party. At various levels, the court’s policy is not to grant a stay of proceedings to persons who do not act timeously. These persons are considered as having waived their right to arbitrate.

In Carbon Commodities DMCC v Trust Link Ventures,[34] the Court of Appeal was concerned with the circumstances under which a party to an agreement containing an arbitration clause could be said to have waived their right to arbitrate.

In this case, the parties entered into a contract for the sale and supply of fish. The supplier was Carbon Commodities. The recipient was Trust Link Ventures. Difficulties arose between the parties in the implementation of the contract. The plaintiff alleged it had fulfilled its side of the bargain. The defendant expressed dissatisfaction with the way the plaintiff provided the service. The defendant alleged that the plaintiff supplied the wrong fish species, and the quantities supplied were not in line with the contract for the sale and supply of the fish. The contract for the sale and supply of fish contained an arbitration clause that provided that any dispute arising out of or in connection with the agreement shall be submitted to an arbitral tribunal with a seat in Zurich.

The plaintiff, in obvious breach of the agreement, commenced an action in court. The defendant who was required to take the initial steps of moving to have the action referred to arbitration failed to do so. The defendant filed a motion for discovery (which was successful); a motion for security for costs (which was not successful); an initial statement of defence that did not challenge the jurisdiction of the court; participated in mediation sessions under the Commercial Court rules with the aim of arriving at a mutual settlement; sought leave of court to amend its statement of defence; and introduced a counterclaim. All these steps were taken before the defendant asked the court to stay proceedings and refer the matter to arbitration.

The question before the High Court and subsequently the Court of Appeal was whether the parties by their mutual conduct had waived their right to resolve their disputes in arbitration. The High Court thought so. On an appeal to the Court of Appeal, the Court of Appeal further agreed with the High Court that the defendant had waived its right, by virtue of its conduct, to have the dispute resolved by arbitration. The Court of Appeal noted that considering the actions and conduct of the defendant, the defendant could not legitimately have argued that it had not waived its right to arbitrate considering the numerous steps that it took.

Unlike the Carbon Commodities DMCC case, in Imperial Homes Limited v Victoria Bright & 2 Ors,[35] the first defendant brought the existence of the arbitration agreement to the court’s attention at the earliest opportunity, and both the High Court and the Court of Appeal upheld her right to have the matter referred to arbitration.

The plaintiff and the first defendant entered into an agreement for the development of residential properties. The first defendant provided the land, and the plaintiff was supposed to undertake the actual construction and pay the first defendant some money. Before the completion of the agreement, the first defendant terminated the agreement she had with the defendants. On the back of the termination, the plaintiff commenced legal action at the Land Division of the High Court, Accra. The first defendant immediately moved to have the matter referred to arbitration.

The plaintiff resisted the action on the grounds that there were other defendants to the action who were not party to the arbitration agreement between the plaintiff and the first defendant, and, as a result, it was inappropriate for the High Court to order for the referral of the suit to arbitration. The High Court agreed with the first defendant and referred the matter to arbitration. On an appeal to the Court of Appeal, the Court of Appeal upheld the High Court’s ruling that the present case was one that ought to be referred to arbitration in line with the parties’ explicit wishes and desires. On the question of whether it was appropriate to refer the dispute to arbitration considering that there were two other entities who were not parties to the agreement, the Court of Appeal noted that those two had not opposed the first defendant’s application for the referral of the suit to arbitration. According to the Court of Appeal, ‘the 2nd and 3rd defendants clearly must be aware of the 1st defendant/respondent’s application for an order to stay the proceedings and to refer plaintiff’s action to arbitration. They were perfectly entitled if they were so minded opposing the said application. They chose not to oppose the application.’

Challenge of an arbitral award

Section 58 of the ADR Act provides that ‘an arbitral award may subject to this Act be set aside on an application by a party to the arbitration’. From the ADR Act, the capacity to challenge an arbitral award is confined only to a party to the arbitration.

However, in Ivy Bruku Whalley v Bolton Portfolio Limited,[36] the Commercial Court, Accra took an interesting turn on the question of whether a non-party to an arbitration proceeding may take steps to have the arbitral proceedings set aside. The court answered the question in the affirmative. In this case, the arbitral award made various findings that affected the director position of the applicant who was not a party to the arbitration. It was on the back of the findings affecting his position as a director that the applicant sought to have the arbitral award set aside. In the view of the judge:

since the applicant herein even though a stranger to the arbitral proceedings stands affected and has evinced his desire to be heard, he is clearly clothed with capacity to have the arbitral award that affects him set aside and this he has done by hauling the two parties involved in this arbitral proceeding before this court to show cause why the award should not be set aside.

Even though the judge relied on general principles of civil procedure that permit a stranger to a dispute to set aside an unfavourable judgment, sub silentio the judge was suggesting that the applicant ought to have been made a party to the arbitral proceedings possibly by way of a joinder and therefore given the opportunity for his side of the matter to be dealt with.

Revocation of an arbitrator’s authority

In probably the first of its kind in Ghana, the Commercial Court, Accra was in Adamus Resources Ltd v Prof. Albert K Fiadjoe & 3 Ors[37] faced with an application seeking the revocation of the authority of an arbitral panel on the grounds of impartiality. Section 18 of the ADR Act sets out the grounds upon which an arbitrator’s authority may be revoked. A party to the arbitration proceedings may apply for the revocation of the authority of the arbitrator.[38] To successfully remove an arbitrator, one or more of the following conditions must be present: (1) there is sufficient reason to doubt the impartiality of the arbitrator;[39] (2) arbitrator does not possess the qualification or experience required under the arbitration agreement or as agreed by the parties;[40] (3) the arbitrator is physically and mentally incapable or there is justifiable doubt as to the arbitrator’s capability;[41] an (4) the arbitrator has refused or failed to conduct the arbitral proceedings properly or use reasonable despatch in conducting the proceedings or making an award.[42]

In the Adamus Resources Limited case, the applicant was unhappy with the conduct of the arbitrators – specifically some decisions that the arbitrators had made. These decisions included the decision of the arbitrators to grant interim measures against the applicant, effectively preventing the applicant from selling and exporting gold. In the view of the applicant, the grant of the interim measures was not necessary as damages would have sufficed. The applicant also alleged that the arbitrators compelled it to respond to a legal argument when it had explained to the arbitral tribunal that its lawyer was indisposed, and therefore was not available for the proceedings. The applicant further alleged that the arbitrators failed to stay proceedings even when the arbitrators were aware of proceedings to revoke their authority. The Commercial Court, running the applicant’s complaints through the test set out in section 18(2) of the ADR Act, concluded that (1) the applicant had failed to convince the court regarding its claim of impartiality against the arbitrators; (2) nothing on record showed that the arbitrators were incapable of conducting the arbitration; and (3) nothing on record suggested that the arbitrators had failed to conduct the arbitration proceedings properly.

The court recognised that while the applicant was unhappy with the way the arbitrators exercised their discretion, that was not sufficient grounds for the applicant to seek the removal of the arbitrators. In the words of the court, ‘the Applicant might have been aggrieved by the rulings in the proceedings, rightly or wrongly and his right to challenge is given the [ADR] Act. I however do not see a demonstration by the Arbitrators of prejudice against the Applicant, neither do I see them being biased.’[43]

Conclusion

Arbitration as a dispute resolution method continues to serve as a formidable alternative to dispute resolution offered by national courts. This growth is in some measure due to the symbiotic relationship between the traditional and formal dispute resolution methods. At the level of the national courts as well, deliberate attempts are being made to incorporate arbitration in the dispute resolution process – even in cases where the parties did not opt for arbitration. The ADR Act makes provision for the High Court to support the arbitral process in matters such as the taking and preservation of evidence, the grant of interim injunctions, and the appointment of a receiver.[44] The growth of the arbitration practice is further evidenced by the steady growth in case law and judicial pronouncements on a variety of points. These points include the challenge of arbitration awards, the revocation of the authority of arbitration, and the waiver or otherwise of arbitration agreements and clauses.


Notes

[1] Section 3 of the Act.

[2] ibid.

[3] Section 2(1) to (3) of the Act.

[4] Section 2(4)(a) of the Act.

[5] Section 2(4)(b) of the Act.

[6] Section 6(1) of the Act.

[7] Section 6(1) of the Act.

[8] Section 6(2) of the Act.

[9] Section 6(3) of the Act.

[10] Section 6(4) of the Act.

[11] Supreme Court decision with Suit No. Civil Appeal No. J4/03/20180) (delivered on 28 March 2018).

[12] Section 7(1) of the Act.

[13] (J4/03/2018) [2018] GHASC 22 (28 March 2018).

[14] (2005-2006) SCGLR 602.

[15] Civil Motion No. J5/29/2018, 30 May 2018.

[16] Which came into force on 9 November 2020.

[17] Order 32(1)(1B) of CI 133.

[18] Order 32(1)(1A) of CI 133.

[19] Order 58(4) of CI 133.

[20] The Land Act came into force on 23 December 2020.

[21] Section 59(1)(a) of the Act.

[22] Section 59(1)(b) and (c) of the Act.

[23] Section 59(1)(d)(i) of the Act.

[24] Section 59(1)(d)(ii) of the Act.

[25] Section 59(1)(e) of the Act.

[26] Boyefio v NTHC Properties Ltd [1997-98] 1 GLR 768–786.

[27] ibid.

[28] Section 59(3)(a) of the Act.

[29] Section 59(3)(c) of the Act.

[30] Section 59(3)(d) of the Act.

[31] Section 59(3)(e) of the Act.

[32] High Court decision with Suit No. CM/MISC/0384/2020 (delivered on January 2020).

[33] High Court decision delivered with Suit No. MISC/0183/2018 (delivered on 21 December 2019).

[34] Court of Appeal decision with Suit No. H1/63/2020 (delivered on 22 April 2021).

[35] Court of Appeal decision with Suit No. H1/114/2017 (delivered on 20 May 2021).

[36] High Court decision with Suit No. CM/MISC/0385/2021 (delivered on 23 June 2021).

[37] High Court decision with Suit No. CM/Misc/0740/2021.

[38] Section 18(1) of the Act.

[39] Section 18(2)(a) of the Act.

[40] Section 18(2)(b) of the Act.

[41] Section 18(2)(c) of the Act.

[42] Section 18(2)(a) of the Act.

[43] See pages 18 to 19 of the Adamus decision.

[44] Section 39 of the Act.

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