Gov’t risks losing US$57m shares in AngloGold Ashanti

Balkan Energy has turned to a South African High Court to allow it to sell Ghana’s six million shares in AngloGold Ashanti to defray a US$12 million ‘judgement debt’ it was awarded against government, following a 2007 deal that went bad.

 Ghana’s shares in the mining firm is estimated at about US$57 million and the action by Balkan Energy comes after the Permanent Court of Arbitration in The Hague in April 2014 awarded US$12 million decision in favour of the energy firm.

After years of chasing government to pay up, the energy firm decided to go after government’s assets and eventually settled on government’s stake in AngloGold Ashanti.

 The energy firm subsequently sued government in a Johannesburg High Court and is praying the court to enjoin the sale of gov’t stake in the mining giant to defray the US$12 awarded it in 2014.

The Johannesburg High Court presided over by Acting Judge Steven Kuny granted that with AngloGold Ashanti being an entity registered under South African laws, it indeed has jurisdiction to hear the case.

News media in South Africa said the judge in making his decision said: “The only connection to the forum of the court in South Africa is the fact that (the government of Ghana) purportedly owns shares in a company whose registered office is situated within the jurisdiction of the court.”

To reach the conclusion that it had jurisdiction to grant the application the court revisited, among others, the 2013 Constitutional Court of South Africa’s decision that allowed the seizure and sale of property in Cape Town owned by the Zimbabwe government, to meet a costs order granted against Zimbabwe by the Southern African Development Community tribunal – a forum based in Windhoek, Namibia before it was disbanded.

In that case, the court held it was important to ensure that “lawful judgments are not to be evaded with impunity by any state or person in the global village.”

In granting the order, Judge Kuny said he was aware that the application had been brought without notice to the Government of Ghana which had thus not had an opportunity to make submissions to the court or oppose the order that Balkan wanted.

Nevertheless, in terms of “well established practice and principles”, there is still a window of opportunity for Ghana to approach the court to set aside or alter the order if it believed there were grounds to do so, a South African media house quoted the Judge as saying.

Deal gone badba

The dispute between Ghana and Balkan had to do with interpretation of a ‘vague’ constitutional provision to the effect that the Parliament of Ghana 'may' approve government loans and that the section should, “with the necessary modifications by parliament”, apply to “an international business or economic transaction” to which the government is a party.

Sources close to the deal said at the time the deal was struck with Balkan no-one thought parliamentary approval was needed because no 'modifications' had been made.

Moreover, as the deal was signed with Balkan Ghana, it did not come across as an 'international business transaction'.

However, when the relationship deteriorated, government invoked this section and the issue ended up at the Supreme Court.

The Supreme Court held that the deal was an international business transaction for which parliamentary approval should have been obtained.

Balkan Energy has turned to a South African High Court to allow it to sell Ghana’s six million shares in AngloGold Ashanti to defray a US$12 million ‘judgement debt’ it was awarded against government, following a 2007 deal that went bad.

Ghana’s shares in the mining firm is estimated at about US$57 million and the action by Balkan Energy comes after the Permanent Court of Arbitration in The Hague in April 2014 awarded US$12 million decision in favour of the energy firm.

After years of chasing government to pay up, the energy firm decided to go after government’s assets and eventually settled on government’s stake in AngloGold Ashanti. The energy firm subsequently sued government in a Johannesburg High Court and is praying the court to enjoin the sale of gov’t stake in the mining giant to defray the US$12 awarded it in 2014.

The Johannesburg High Court presided over by Acting Judge Steven Kuny granted that with AngloGold Ashanti being an entity registered under South African laws, it indeed has jurisdiction to hear the case. News media in South Africa said the judge in making his decision said: “The only connection to the forum of the court in South Africa is the fact that (the government of Ghana) purportedly owns shares in a company whose registered office is situated within the jurisdiction of the court.”

To reach the conclusion that it had jurisdiction to grant the application the court revisited, among others, the 2013 Constitutional Court of South Africa’s decision that allowed the seizure and sale of property in Cape Town owned by the Zimbabwe government, to meet a costs order granted against Zimbabwe by the Southern African Development Community tribunal – a forum based in Windhoek, Namibia before it was disbanded. In that case, the court held it was important to ensure that “lawful judgments are not to be evaded with impunity by any state or person in the global village.” In granting the order, Judge Kuny said he was aware that the application had been brought without notice to the Government of Ghana which had thus not had an opportunity to make submissions to the court or oppose the order that Balkan wanted. Nevertheless, in terms of “well established practice and principles”, there is still a window of opportunity for Ghana to approach the court to set aside or alter the order if it believed there were grounds to do so, a South African media house quoted the Judge as saying.

Deal gone bad

The dispute between Ghana and Balkan had to do with interpretation of a ‘vague’ constitutional provision to the effect that the Parliament of Ghana 'may' approve government loans and that the section should, “with the necessary modifications by parliament”, apply to “an international business or economic transaction” to which the government is a party. Sources close to the deal said at the time the deal was struck with Balkan no-one thought parliamentary approval was needed because no 'modifications' had been made. Moreover, as the deal was signed with Balkan Ghana, it did not come across as an 'international business transaction'.

However, when the relationship deteriorated, government invoked this section and the issue ended up at the Supreme Court. The Supreme Court held that the deal was an international business transaction for which parliamentary approval should have been obtained.

Source: Business and Financial Times Ghana