Ghana - Market Insights

Beyond the standard clause: the general counsel’s guide to navigating the scope of arbitration clauses in Ghana

This chapter briefly examines the approach that Ghanaian courts take in referring matters to arbitration where there is no dispute or controversy between the parties.

The assumption among general counsel dealing with international commercial contracts is often simple: include an arbitration clause and any dispute will be resolved outside the traditional court systems. While arbitration remains a cornerstone of international commercial contracts (offering benefits like confidentiality and enforceability under the New York Convention), recent judicial scrutiny in Ghana calls for a more nuanced approach to drafting and execution, particularly in debt recovery cases.

Arbitration is fundamentally designed to resolve uncertainties. When liability is admitted, general counsel must recognise that litigation may offer a significantly faster path to recovery than mandated arbitration.

Precision in drafting: No dispute, no arbitration

The Alternative Dispute Resolution Act, 2010 (Act 798) (ADR Act) gives parties the latitude to agree in writing to submit their disputes to arbitration. While the wording of arbitration agreements varies, they mostly require parties to submit “disputes” to arbitration. Where the parties execute such an arbitration agreement, but a party proceeds to commence an action in court, the other party can promptly apply to the court to stay proceedings and refer the matter to arbitration. Once the court is satisfied that the matter is one to which an arbitration agreement applies, it shall refer the parties to resolve the matter through arbitration.

Ghana’s judiciary is demonstrably pro-arbitration, reinforced by the ADR Act and numerous decisions of the Supreme Court on the enforcement of arbitration agreements. However, there are limits. The Court of Appeal’s decision in Larry Ettah v. Wonda World Property Ltd (Suit No. H1/52/2023 delivered on 4 May 2023) provides crucial guidance: Ghanaian courts will not automatically refer matters to arbitration simply because an arbitration clause exists, especially where there is no genuine dispute or controversy. This nuance is vital for multinational corporations structuring transactions with Ghanaian counterparties, as understanding the precise scope of your dispute resolution clause can be the difference between swift recovery and costly delays.

Whether a matter proceeds to arbitration hinges entirely on the wording of the dispute resolution clause. Most standard clauses mandate arbitration for “disputes”. However, the Larry Ettah case illustrates the peril of this generalisation.

In Larry Ettah, the parties’ restructured agreement provided for “any dispute arising from the interpretation and enforcement” of the agreement to be resolved by arbitration. After making part payments, the Appellants defaulted in paying the outstanding amounts under the restructured agreement. The Respondent sued the Appellants in the High Court to recover the outstanding amounts or obtain a transfer of the title in the townhouses used as security. The Appellants applied to stay proceedings and refer the matter to arbitration in accordance with the arbitration clause in the restructured agreement and the ADR Act. The Respondent denied that there was any dispute and attached exhibits showing that the Appellants had admitted owing the Respondent and sought more time to repay the debt.

The High Court refused to refer the matter to arbitration. The Appellants appealed to the Court of Appeal. The Court of Appeal upheld the High Court’s ruling, reasoning that the parties only intended to refer disputes (and not non-contentious matters) to arbitration. Thus, the courts refused the referral, reasoning that no “dispute” existed as the evidence showed the appellants had admitted owing the debt and merely sought extensions of time to repay.

The Court of Appeal clarified that there was no crystallised rule that the existence of an arbitration agreement automatically required referral to arbitration.

Takeaways for legal practitioners

The decision of the Court of Appeal is commendable because it brings clarity to Ghana’s jurisprudence on the role of the courts in referring matters to arbitration. It also saves parties some time and expenses associated with referrals to arbitration, especially where there is an admission of debts by the other party. It also reinforces parties’ autonomy to enter into contract because it gives effect to parties’ intentions as reflected in the arbitration agreement. Parties should not be compelled to go to arbitration if they did not intend to resolve non-contentious matters through arbitration.

The Court of Appeal’s decision offers one key lesson: semantic distinctions can have profound practical implications. There are, therefore, a few points that companies and their legal advisors must note to navigate such issues.

First, pay attention to the wording of the dispute resolution clause during contractual negotiations. If the parties intend to refer all issues under the agreement to arbitration, they must expressly state so in the dispute resolution clause. Limiting the clause to “dispute” limits the scope of issues that may be referred to arbitration.

Second, be strategic in your use of pre-action protocols. Pre-action protocols and correspondence exchanged between the parties can help in clarifying their positions on the existence of a dispute. If your arbitration agreement refers specifically to “disputes,” your pre-action strategy must focus on securing clear admissions of liability from your Ghanaian counterparty. Send detailed demands that require the counterparty to either admit or deny specific factual and legal allegations. Document every communication showing acknowledgement of debt or liability.

These admissions will form the evidential basis for arguing that no dispute exists, enabling direct access to the courts even where an arbitration clause is present. For instance, in Larry Ettah, the ability to produce exhibits demonstrating the appellants had admitted the debt and only requested extensions of time was crucial in persuading the courts that no controversy existed.

Third, consider a more efficient enforcement mechanism. If there is no dispute about liability, it is more expeditious and less costly to resort to the courts. The claimant may then resort to a range of expedited procedures, including obtaining summary judgment or judgment on admission. These procedures can secure judgment in a matter of months, potentially avoiding the year or more that arbitration might require, along with the associated costs of constituting a tribunal and managing procedural complexities. Arbitration’s true value lies in resolving matters requiring detailed factual investigation, expert testimony, or complex contractual interpretation. For foreign companies, this efficiency is compounded by enforcement considerations. While the New York Convention facilitates the enforcement of arbitral awards internationally, if you have clear admissions of liability, a quickly obtained Ghanaian court judgment may serve your enforcement needs equally well, especially if the debtor’s assets are primarily located within Ghana.

By understanding the pro-arbitration stance but recognising its limits — that a fundamental lack of controversy undermines the basis for arbitration — general counsel can structure commercial relationships to maximise prospects of swift and effective enforcement when payment obligations are not met.

The strategic choice between defining your dispute resolution clause around “disputes” or around broader terms is essentially choosing between reserving expedited court access for admitted debts or committing all eventualities to the arbitral forum. This careful planning ensures that the dispute resolution mechanism always aligns with the desired commercial outcome.