Background

The Claimants are Eni and Vitol, companies incorporated and existing under the laws of Ghana while the Respondents are Ghana, a sovereign state, and GNPC, a Ghanaian state-owned company.

This arbitration was brought under the UNCITRAL Arbitration Rules and the Stockholm Chamber of Commerce Procedures for the Administration of Cases.

The dispute arose out of the Petroleum Agreement in respect of Blocks Offshore Cape Three Points Basin concluded on 2 March 2006, initially between the Republic of Ghana, Ghana National Petroleum Corporation or “GNPC” and Vitol Upstream Ghana Limited (formerly Heliconia Energy Ghana Limited (“Heliconia”) (the “Second Claimant” or “Vitol”), and Eni Ghana Exploration and Production Limited (the “First Claimant” or “Eni”).

At the center of the dispute lies administrative measures taken by the Ministry of Energy of Ghana (the “MoE”) through which the MoE ordered unitization of two oil fields known as the  Offshore Cape Three Points (“OCTP”) operated by the Claimants, and (ii) West Cape Three Points (“WCTP”) operated by a Ghanaian company, Springfield Exploration & Production Limited (“Springfield”).

CASE OF CLAIMANTS

ENI and VITOL are two multinational companies operating in Ghana’s oil fields. Their claim was that the government of Ghana had ordered it to merge its oil field, which had been  producing oil for a number of years, after investments exceeding $6 billion, with an oil bloc next door that has never produced oil and seen roughly $100 million of investments. They further claimed that government wanted them to also hand over roughly 55% of the combined entity to the owner of the said oil bloc next door.  

ENI & VITOL also contend that the unitization that Ghana imposed on them "violated fundamental procedural and substantive protections under Ghanaian law, the principles of fairness, transparency and reasonableness", as well as the Petroleum Agreement. They further contended that the unitization imposed by Ghana violated Ghanaian law as well as the Petroleum Agreement. A further submission they made was that the Unitization Directives ordered by the Ministry of Energy (MoE) contravened the Petroleum Act and the Petroleum Regulations, as well as the Ghanaian Constitution and international best practices.

They aver that it is common ground between the Parties that the Ministry of Energy has the authority to unitise oil fields in order to achieve efficient exploitation of the deposits. The Claimants argue, however, that the unitization measures were unlawful as they did not satisfy the substantive and procedural requirements under the applicable Ghanaian laws and regulations as well as international principles and best practices. They impugn the unitization measures as violative of the stabilization regime contained in the Petroleum Agreement. The Claimants were seeking damages primarily based on the loss of the future income under the Petroleum Agreement.

RELIEFS SOUGHT BY CLAIMANTS

The Claimants requested the Tribunal to grant the following reliefs: 

(a) DECLARE that the First Respondent breached the Petroleum Agreement by virtue of its conduct in issuing and/or refusing to withdraw or prevent reliance by third parties on the Unitization Directives;

(b) DECLARE that the Second Respondent breached the Petroleum Agreement by virtue of its conduct in support of the First Respondent's issuance and/or refusal to withdraw or prevent reliance by third parties on the Unitization Directives;

(c) ORDER that the First Respondent notify the High Court, Court of Appeal and Supreme Court of Ghana that the Unitization Directives were issued in breach of the Petroleum Agreement;

(d) ORDER that the First Respondent notify Springfield that the Unitization Directives were issued in beach of the Petroleum Agreement;

(e) ORDER the Respondents to pay damages in an amount of USD 915.8 million (or such other amount as the Tribunal sees fit) for the losses suffered by the Claimants arising out of the Respondents' breaches of the Petroleum Agreement;

(f) ORDER the Respondents to pay all of the costs and expenses of this Arbitration, including the fees and expenses of the Claimants' counsel and any witnesses and/or experts in the arbitration, the fees and expenses of the Tribunal and the fees of the SCC;

(g) ORDER the Respondents to pay compound interest on any and all sums awarded to the Claimants at a rate and at such rests as the Tribunal may consider appropriate, both in relation to the periods prior to and after the issuance of a Final Award;

 (h) DISMISS all relief sought by the Respondents; and

(i) DECLARE or ORDER such further or other relief to the Claimants as the Tribunal may consider appropriate.

CLAIM OF RESPONDENTS

The Respondents (The Republic of Ghana and the Ghana National Petroleum Corporation) opposed the claims. They argued that the unitization was substantively and procedurally justified as confirmed by competent Ghanaian courts. According to the Respondents, the Tribunal owes a considerable deference to the policy decisions of the Ministry of Energy and to the judicial determinations of the Ghanaian courts.

In addition, according to the Respondents, the Claimants’ damages claim is inadmissible as they have failed to prove that the unitization measures, which have not yet been enforced, caused any actual harm. In any event, the Respondents contend that the Claimants’ quantification of their alleged loss is based on unsupported assumptions and should be discarded as unreliable.

Finally, the Respondents counterclaim for violations of the Petroleum Agreement resulting from the Claimants’ alleged defiance of the lawful unitization measures.

RELIEFS SOUGHT BY RESPONDENTS

The respondents requested that the Tribunal declares that:

a. Respondents have not breached any obligation owed to Claimants and Claimants’ claims are denied in their entirety with prejudice;

 b. Should Respondents be found to have breached any obligation owed to Claimants;

(i) Claimants’ request for damages be denied with prejudice in its entirety because it is inadmissible or otherwise impermissible,

 (ii) Claimants’ request for damages be denied because Claimants have not met their burden to prove actual loss proximately caused by Respondents;

c. Claimants have breached the OCTP Petroleum Agreement;

d. As a result of Claimants’ breach of the OCTP Petroleum Agreement, damages are due to Respondents in an amount of US$ 84.15 million (or such other amount as the Tribunal sees fit) to compensate Respondents for the loss sustained as a result of Claimants’ breach;

e. Claimants are ordered to pay simple interest on any and all sums awarded to Respondents at the prevailing Bank of Ghana interest rate;

 f. Claimants are ordered to adhere to the Minister of Energy’s lawfully-issued directives, including the April 2020, October 2020, and November 2020 Directives;

g. Claimants are ordered to pay all costs and expenses related to this arbitration, including but not limited to the fees and expenses of the Tribunal, the administrative fees and expenses of the Stockholm Chamber of Commerce, and all costs of Respondents’ legal representation, witnesses, and expert assistance;

 h. Respondents are entitled to and granted any other or additional relief as may be appropriate under the circumstances or as may otherwise be just and proper; and

 i. All relief sought by Claimants is dismissed.

DECISION OF ARBITRAL TRIBUNAL

The tribunal observed that the costs claimed by the Parties appear reasonable considering the amounts at stake and the complexity of the dispute, including difficult factual, technical and legal matters. The tribunal states that while the Claimants’ costs are higher, there is no major disparity, and based on an overall assessment of all the relevant elements, the Tribunal considers it fair and appropriate that each Party bear its own costs.

For the Tribunal and SCC costs, the tribunal held that the respondents shall bear their portion of the costs, and the First Respondent shall pay 50% of the costs incurred by the Claimants.

“Accordingly, the First Respondent shall pay EUR 189,900 to the Claimants, which corresponds to 50% of the amounts advanced by the Claimants for the costs of arbitration.” The Tribunal notes that the Claimants request “compound interest on any and all sums awarded to the Claimants at a rate and at such rate as the Tribunal may consider appropriate.” It is the decision of the Tribunal that the Claimants have not sufficiently substantiated the basis and modalities of interest in respect of costs. Therefore, the Tribunal will not award interest.

The Tribunal thus;

i. declared that the Republic of Ghana breached the Petroleum Agreement by issuing the Unitization Directives in the circumstances in which they were issued;

ii. declared that each Party shall bear its own costs;

iii. Ordered the Republic of Ghana to pay to Eni Ghana Exploration and Production Limited and to Vitol Upstream Ghana Limited EUR 189,900 for the costs of the Tribunal and SCC;

iv. dismissed all other requests for relief by denying the Claimants all claims to monetary damages or compensation.

v. dismissed in their entirety the Claimants’ claims against GNPC regarding allocation of fees and costs. The Tribunal held that all the Parties would be required to pay their own legal fees and costs.