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Government Claims Win in ENI-Vitol Dispute, But It’s Not Exactly So

The International Arbitration Tribunal found that Ghana's Unitisation Directives breached the Petroleum Agreement. Ghana's Attorney-General claims it's a win, but industry experts maintain otherwise

The International Arbitration Tribunal has thrown out a $915 million claim by Eni Ghana Exploration and Production Limited and Vitol Upstream Ghana Limited against the Government of Ghana and the Ghana National Petroleum Corporation (GNPC) over a disputed oil field contract.

On August 30, 2021, ENI, an Italian oil company, took legal action against the Government of Ghana (GoG) for allegedly breaching their contract regarding the Sankofa oil field, a major offshore field that ENI operates. The company claimed that the government unlawfully tried to force it to merge its Sankofa field with Springfield’s Afina oil field, a move that ENI argued would compromise its interests.

The company sought five reliefs from the Tribunal, including a declaration that the government’s directives, issued by then Energy Minister John Peter Amewu, constituted a breach of contract under the Petroleum Agreement (PA).

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However, in a press release on July 8, 2024, signed by Ghana’s Attorney General and Minister for Justice, Godfred Yeboah Dame, the International Court of Arbitration dismissed the Claimants’ request.

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“The Tribunal dismissed the Claimants’ request that the Tribunal declare that Ghana breached the Petroleum Agreement by refusing to withdraw or prevent reliance by third parties on the Unitisation Directives,” Dame said.

According to Dame, the claimant initially sought $7 billion in damages but later amended their claim to $915 million by the end of the proceedings. The court ultimately dismissed this claim in its entirety.

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“The Tribunal denied the Claimants all claims to monetary damages or compensation. The Claimants claimed Seven Billion United States Dollars (US$7 bn). This was subsequently reviewed to Nine Hundred and Fifteen Million United States Dollars (US$915 M) plus interest by the end of the proceedings. This was dismissed in its entirety,” he said.

The tribunal also found that Ghana’s Unitisation Directives breached the Petroleum Agreement with Eni Ghana Exploration and Production Limited and Vitol Upstream Ghana Limited.

The tribunal determined that the directives, issued in specific circumstances, contravened applicable regulations and violated Article 26(2) of the Petroleum Agreement.

“In the circumstances in which they were issued, the Unitisation Directives breached the Petroleum Agreement, that is to say, the specific Unitisation Directives were contrary to the applicable regulations and thereby breached Article 26(2) of the Petroleum Agreement,” it said. 

As part of the final award by the Tribunal, it noted that despite arguments on various procedural and substantive issues, it prioritized analysis of key shortcomings.

It further ruled that the First Respondent (Government of Ghana) must rectify the breach of the Petroleum Agreement, but the Claimants failed to prove that not withdrawing the Unitisation Directives or preventing third-party reliance constitutes a separate violation.

“While the Tribunal considers that the First Respondent’s breach of the Petroleum Agreement places it under a continued obligation to remedy the breach, the Claimants have not sufficiently established that the failure to withdraw the Unitisation Directives or to prevent reliance of third parties on the Unitisation Directives constitutes a self-standing violation of the Petroleum Agreement,” excerpt of the report read.

Dame described the outcome as a victory for Ghana, emphasizing the government’s commitment to defending the country’s natural resources and contesting unnecessary judgment debts.

But civil society actors and energy experts are claiming otherwise. They maintain the decision by the International Arbitration Tribunal was short of an absolute win for Ghana as is being espoused by the Attorney-General. 

The tribunal did maintain that the Unitisation measures taken by Ghana’s Ministry of Energy were not implemented in a manner consistent with applicable legal frameworks, although ENI’s claims for declarations against Ghana’s refusal to withdraw third parties on the Unitisation Directives were not granted.

Civil society actors like Bright Simons contend it’s a total embarrassment for the country.

“The Attorney General of Ghana is trying desperately to spin serious embarrassment to the Republic of Ghana in an international tribunal using all the tools in his propaganda toolkit,” Simons wrote on his blog

There are also concerns that the current trajectory may bring little hope for Ghana’s energy industry, as petroleum experts like Dr. Theo Acheampong maintain the arbitration proceeding is a confirmation of mismanagement in the sector. 

“There was a lot of potential and prospects for the industry, but at the moment, that’s not the case because the investors that you want have all, more or less, run away from the country. ENI is next to Cote D’lvoire , drilling and bringing new fields on stream. The people we even bought from Norway, Aker Energy, and their likes, again, we changed petroleum laws to suit them, but eventually, they did not even develop the field. Our production has actually gone down from a peak of 190,000 or so barrels now to about 130,000 barrels,” he told the Accra Times, adding that politics continues to override public interest. 

The case of the ENI fallout, he argues, will eventually affect petroleum investments. 

“In this case, ENI will still operate their field for sure. But I am not necessarily sure that ENI would continue making some of the big investments that we maybe would have wanted to have done a few years ago, given the pressures of the transition. So I’m not honestly so sure what happened. What I know is that we had our cake, we wanted to eat it, and it blew in our face,” he said.

Read the full tribunal’s decision below;

2024.07.08 Eni Vitol V. GoG Final Award

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