Sunday, 3 September 2023

America’s gun pandemic: how “originalists” failed the Republic

 

Students and faculty of University of North Carolina at Chapel Hill gathered Wednesday night at the Dean Smith Center to pay their respects to the professor shot and killed this week on campus. Credit: AP

Last Monday, August 28, 2023, there was yet another incident of gun violence in the US. This time, a faculty member at the University of North Carolina at Chapel Hill was shot dead on campus. A graduate student has been charged for the murder. This is yet another reminder of how unregulated guns continue to impact American society.

 While some states have made decent attempts at regulating guns, the posturing of the US Supreme Court compounds the problem. Two consequential regulations failed to survive judicial intervention in District of Columbia v Heller (2008) and New York State Rifle & Pistol Association, Inc., v. Bruen (2022). The Supreme Court declared the District of Columbia regulation requiring persons to obtain registration certificates for handguns and the New York State regulation of public carry of handguns  unconstitutional on grounds that they conflict with the Second Amendment to the Constitution of the United States (the “Constitution”) which provides for the right to “keep and bear arms”.

 The reasoning of the Court in Heller (written by Justice Scalia) and Bruen (written by Justice Thomas) is troubling, considering the significant public interest or public policy justifications for the regulatory attempts, in my view.

 First, Justice Scalia's “originalist” thinking in Heller seems subjective and offers no objective test with which to approach the issue. In his view, the rationale for the Second Amendment stems from the concerns of Antifederalists that the Federal Government would disarm the people in order to disable the States citizens’ militia; enabling a politicized standing army or a select militia to rule. Hence, the Second Amendment was to deny Congress the power to curtain the ancient right of individuals to keep and bear arms, so that the ideal of a citizens’ militia would be preserved. While Justice Scalia relies exclusively on history in his analysis, he ignores the fact that history is no effective barometer with which to assess the right to keep and use guns in the context of modern day circumstances. None of the historical concerns that informed the framers’ thinking on the Second Amendment are present in modern day America.  

 Secondly, Constitutions all over the world containing elaborate Bills of Rights recognize the power of the State to restrict certain rights where the state can show sound public interest or public policy justification. Of course, the state's power to restrict rights is not absolute, just as no right is. Even the right to life is restrictable in modern constitutional democracies. Therefore, where there is a conflict between an individual right (such as the right to “keep and bear arms”) and a larger public interest, the Court must have an objective test for doing a necessary balancing act. The “originalist” Justice Scalia fails to do any such balancing act and relies exclusively on history; an inadequate and often subjective tool.

 Curiously, we see Justice Scalia undertake a balancing act in Vernonia School District v Acton (1995) when a Student Athlete Drug Policy (the “policy”) which authorizes random urinalysis drug testing of students is challenged on constitutional grounds; that it conflicts with, amongst others, the Fourth Amendment which prohibits unreasonable searches and seizures. Justice Scalia gives judicial blessing to the policy. In the words of the Court, “The Fourth Amendment does not protect all subjective expectations of privacy, but only those that society recognizes as “legitimate’”. The school had a sound public policy justification for the random tests: to address a drug problem amongst students.

 Given the facts and circumstances of Vernonia, Justice Scalia’s reasoning was persuasive. However, a comparative analysis of Scalia's opinions in Vernonia and Heller—both involving individual rights (privacy and the right to “keep and bear arms”) shows a certain lack of consistency in his judicial approach. In Vernonia, he undertakes a balancing act, and rightly so. In Heller, he relies on history. 

Decided earlier in time, Justice Thomas dwells on Justice Scalia’s “originalist” thinking in Heller to inform the Court’s opinion in Bruen, even though Bruen posed a more nuanced question concerning the right of a citizen to carry a gun in public. 

Of course, at the time of deciding Heller in 2008, Justice Scalia was fully aware that gun violence was a “serious” problem in the US—a “pandemic” even, to borrow his words in Vernonia. But Scalia concluded “…it is not the role of the Court to pronounce the Second Amendment extinct”. Heller and Bruen still leave many questions unanswered about the scope of state regulation of guns that is allowable under the Constitution. However, these consequential precedents would predictably inform the Court’s decisions in cases to come, however narrowly the legal questions are framed. 

In his dissenting opinion in Bruen, Justice Breyer sets out the bare facts: “In 2017, there were an estimated 393.3 civilian-held firearms in the United States, or about 120 firearms per 100 people. That is more guns per capita than in any other country in the world”. “…in 2020, an average of about 124 people died from gun violence everyday”.

Of what use is constitutional design if it cannot be leveraged to address a major national pandemic?

 

 

Monday, 15 May 2023

A Practical Guide to Real Estate Investment Trusts (REITs)

 

A diagram on the structure of REITs. Credit: Tam Ging Wien

The popularity of Real Estate Investment Trusts (REITs) is on the rise globally and Ghana is no exception. This is driven by investors’ need for a more financially flexible way to invest in various segments of the real estate market. In Ghana, investors are also turning to REITs instead of traditional investment products following an unprecedented sovereign debt default which has had ripple effects throughout society. The National Pensions Regulatory Authority (NPRA) for instance now considers REITs as a permissible investment for pension funds, according to its Guidelines on Investment of Pension Scheme Funds.

This article explains how REITs work, explores the benefits and risks of investing in REITs; and highlights how REITs are regulated, particularly in Ghana.

How REITs work

A REIT is a public company that invests in real estate assets to generate recurrent income (rental and interest) from operating, owning, or financing income-producing real estate and real estate-related investments.

REITs invest directly in diverse real estate assets such as residential properties, warehouses, shopping malls, and more. These assets are professionally managed, and revenues—primarily rental income— are distributed at regular intervals as dividends to REIT holders. In simple terms, when you invest in a REIT, your money is pooled together with that of other investors in a collective investment scheme that invests in a portfolio of real estate assets to generate income. Some REITS do not directly own or operate real estate assets. Rather, they invest in real estate-related securities. For instance, some mortgage-giving banks, in a bid to reduce their liquidity challenges, often bundle together a bunch of mortgages and sell them as bonds which REITs invest in and distribute their returns to REIT holders as dividends. You can invest in REITs the same way you would invest in stocks— through a broker.

The key structures of REITs

The Securities Industry (REITS) Guidelines, 2019 (the “Guidelines”) SEC/GUI/001/01/2019 issued by the Securities and Exchange Commission (the “SEC”) require that every REIT must have a Custodian (a trustee). The Custodian is a licensed bank or a trustee company, or a subsidiary of a bank which  holds the assets of the REIT on behalf of the REIT holders/ beneficiaries . As a fiduciary, the Custodian must act solely in the interest of the REIT holders and is responsible for, inter alia, supervising the activities of the REIT Manager. A Custodian is required to meet certain minimum unimpaired paid-up capital requirements, currently pegged at GHS 50,000,000 by the SEC.

The Guidelines also require a REIT to have a Manager. The Manager is a company incorporated in Ghana that is independently audited and has personnel with the experience and skill set to manage the REIT. The REIT Manager is responsible for the acquisition, management, and disposal of the assets of the REIT. As a fiduciary, the Manager is also required to exercise due diligence in investing the assets of the REIT and must act solely in the interest of REIT holders. The Manager is also required to meet certain minimum capital requirements to be determined by the SEC.

The Benefits of Investing in REITs

Benefits of investing in REITs include:

        Diversification:  The risk arising from investing in one property is diluted when you invest in a pool of properties through a REIT.

        Affordability: As an individual investor, you may not be able to afford a direct investment in a large asset such as office buildings or shopping malls. By investing in a REIT, you can invest in these large assets in bite-size chunks.

        Liquidity:  It is easier to buy and sell units in a REIT than to buy and sell properties. REITs are required to list on the stock exchange. This makes it easier for an investor to trade units in a REIT throughout the trading day.

        Transparency and Flexibility:  You can access information on REIT prices and trade units in a REIT throughout the trading day on the stock exchange. Investors can also gain transparency in the management of assets because as fiduciaries, both the Manager and the Custodian have a duty to account to shareholders.

The Risks of Investing in REITs

Like all investment options, REITs equally have risks. The key risks are summarized below:

        Market Risk: REITs are traded on the stock exchange and the prices are subject to demand and supply conditions. The prices generally reflect investor confidence in the economy, interest rates, the property market, etc.

        Liquidity/Income Risk: Distributions (dividends) are not guaranteed and are subject to fluctuations in the REIT’s income. A REIT’s rental income may be affected if the occupancy rate falls.

        Concentration Risk: If a substantial portion of the REIT’s value is from one or a few properties, REIT holders face a greater risk of loss should something happen to any of the properties.

 

How REITS are regulated

In Ghana, REITs are regulated by the SEC. Given the general lack of knowledge and understanding of financial products and markets by the investing public (consumers), the SEC’s primary role as a regulator is that of a “consumer protection agency”; to protect the unsophisticated investor from market exploitation. In doing so, the SEC, amongst others, demands of public companies (sellers) to make honest and comprehensive disclosures (prospectus et al) to investors (purchasers) at the time of issuing securities or suffer penalties for false disclosure. The very nature of securities makes it difficult for investors to reasonably examine their financial soundness. In the words of American securities lawyer, Alan B. Levenson, “…a security is quite unlike a melon, an automobile, or other tangible consumer goods which can be immediately tested and quality controlled. The investor qua consumer cannot judge a security by the paper upon which his interest is evidenced—he must look to and rely upon material disclosure information regarding the issuer of the security.”

To regulate the licensing and activities of REITs, the SEC issued the  Guidelines. By the terms of the Guidelines, an applicant for a REIT licence must be a  a public company or an external company with a place of business in Ghana and must  have the financial and technical ability to carry on the business of a REIT competently. The SEC also investigates whether the directors of the company have previously taken part in any fraudulent business practices or contravened any relevant laws protecting investors against financial loss. In addition to having a custodian and a REIT Manager which are independent of each other and licensed by the SEC, the Guidelines require that the REIT must meet certain minimum capital requirements to be determined by the SEC.

Further, the registered constitution of the REIT must contain provisions that expressly indicate, amongst others, that the company shall derive at least seventy-five (75%) of its revenue from rents, mortgage interest and investment income from indirect property ownership. The registered constitution must also indicate that at least seventy-five (75%) of the REIT’s total assets shall comprise of real estate; that it shall distribute at least 80% of its distributable profit to shareholders; that the REIT shall list on the stock exchange within 3 years of operation; and that it shall not invest more than 40% of its capital in a single property. All these requirements are aimed at protecting the investor (consumer) from market exploitation or financial loss.  

Conclusion

As shown in this article, REITs offer a more financially flexible way for individual investors to invest in various segments of the real estate market. However, it is important for investors to consult a stockbroker, a banker, a lawyer, or another investment professional for appropriate advice before making an investment decision. 

Monday, 20 February 2023

The Attorney-General’s unsolicited advice to the Auditor-General: Why the Attorney-General gets it wrong




The Attorney-General (the “AG”), Godfred Dame, has taken issue with the publication of a special audit report on the government of Ghana’s COVID-19 expenditures covering the period March 2020 to June 2022 by the Auditor-General. In a letter dated February 8, 2023, addressed to Auditor-General, Johnson Akuamoah Asiedu, the AG argued that the publication of the audit report was improper and wrongful in law and advised the Auditor-General to withdraw the report from its website. The Ghana Center for Democratic Development (CDD-Ghana) in response, published a press statement on February 10, 2023, describing the AG’s position as “shocking”. In a press statement dated February 15, 2023, the AG appears to have taken issue with CDD-Ghana too.

In this piece, I shall catalogue the key arguments the AG canvasses in his publications and address them for the purposes of public education.

In his letter to the Auditor-General, the AG argues that

1. “…It is only after satisfying the constitutional requirement of submitting the Auditor-General’s report to Parliament, the subsequent debate by Parliament thereon and conclusion of work by the appropriate committee of Parliament, that the report of the Auditor-General may be considered final and relevant action may be taken thereon.”

2. That “…In light of the constitutional provisions pertaining to the duty of the Auditor-General after the preparation of audit reports, I consider a publication of the COVID-19 audit report or indeed any audit report particularly when same has not been either considered by Parliament or referred to a committee of Parliament, premature.”

Response:

One, by statutory design, the Auditor-General is required to publish audit reports on public accounts “as soon as the reports have been presented to the Speaker to be laid before Parliament” (Section 23 of the Audit Service Act, 2000 (Act 584)). Nowhere in the Audit Service Act or any other law, including the Constitution, is it even suggested that the Auditor-General must wait until his report has been laid before or debated by Parliament before he may make it public. A report laid before Parliament is a public document to which the public cannot be denied access

Two, the Attorney-General appears not to fully appreciate the nature of auditing processes and the stage at which an audit is finalized. His suggestion that the Auditor-General’s report is finalized only after it has been debated by Parliament following the conclusion of the Public Accounts Committee’s (PAC) work is not supported by the law or even accounting practices. The Auditor-General is neither required by law (statute or Constitution) nor international best practice to wait for the outcome of hearings initiated by PAC before he can make public an audit report. Further, the international audit standards are clear. As part of the audit process, an auditor is required to communicate in writing to the management of auditee-entities any observations and or significant deficiencies in internal controls identified. Based on the responses from the management of auditee-entities, the audit report may be modified where necessary.

Three, unlike the Internal Audit Agency (IAA) which is part of the Executive branch and acts as its “internal auditor”, the Office of the Auditor-General, is by constitutional design, an “external auditor” assigned by the Constitution, not Parliament, to audit public accounts. The duty placed on the Auditor-General in article 187(5) of the Constitution to submit his report to Parliament within six (6) months after the end of each financial year is to enable Parliament to ascertain whether public funds have been used in accordance with law (the Appropriations Act, et al). The requirement for the Auditor-General to submit his report to Parliament cannot, under any circumstances, be interpreted to mean he must wait for the outcome of hearings initiated by PAC to make public an audit report. Such an interpretation would be inconsistent with the protections the Constitution gives the Office of the Auditor-General as an independent constitutional body (article 187(7)(a) of the Constitution).

Four, if persons implicated in the Auditor-General’s report feel aggrieved, Parliament is not the appropriate forum to seek redress. The Courts are.. Similarly, any  person surcharged by the Auditor-General pursuant to an audit report can seek redress at the Court. The appropriate procedure for challenging any disallowance or surcharge issued by the Auditor-General has long been established by statute and given judicial blessing . (Occupy Ghana v. Attorney-General [2017-2018] 2 SCLRG 527).

In his press statement directed at CDD-Ghana, the AG also argues that

3. “Contrary to the strange view of CDD-Ghana, the letter and spirit of laws governing the work of the Auditor-General make him part of the Audit Service of Ghana and, therefore, a regular member of the public services of Ghana to whom the Attorney-General can give advice pursuant to his mandate under article 88 of the Constitution.”

Response:

This assertion by the AG is not only strange but exposes a shocking lack of understanding of the constitutional architecture of the Office of the Auditor-General as an Independent Constitutional Body (ICB).

First, the Auditor-General of Ghana is established under the 1992 Constitution (the “Constitution”), as under the antecedent constitutions (1957 and 1969), as a unipersonal office; the office and its occupant are, in the eyes of the Constitution, one and the same. This fact distinguishes the office of the Auditor-General from the other ICBs such as the Electoral Commission (EC), the National Commission for Civic Education (NCCE), and the Commission on Human Rights and Administrative Justice (CHRAJ), all of which are multi-member bodies with the mandate and functions of the body reposed in the body and its members acting together. Ghana, in effect, follows the “sole commissioner” model when it comes to the office of the Auditor-General. 

Under the terms of Article 187(2) of the Constitution, the power and duty to audit and report on the public accounts of Ghana is reposed exclusively in that one officeholder called Auditor-General who is appointed pursuant to Article 70(1) (b) and who, “before entering the duties of his office,” took and subscribed to the Oath of the Auditor-General set out in the Second Schedule to the Constitution.” (Article 187(16)).

Secondly, the Audit Service, established separately under Article 188(1) of the Constitution, exists to provide the Auditor-General with the professional and administrative staffing and support he needs to discharge his duties effectively. Instructively, the Constitution reposes no auditing responsibility or power in the Audit Service or any other person independent of the Auditor-General. The reason is simple: The Audit Service is the instrumentality with and through which the Auditor-General is expected to perform his functions and exercise his powers. Just as the Judicial Service exists to serve the Judiciary in the performance of its functions, so does the Audit Service exist to assist and serve the Auditor-General to ensure the effective and efficient discharge of his constitutional mandate. The Framers were careful to arrange the relationship between the Auditor-General and the Audit Service in such a manner as to avoid divided responsibility or divided accountability for the supreme audit function. Notwithstanding the existence of administrative Deputy Auditors-General in the Audit Service, the Auditor-General of Ghana remains constitutionally a one-person office, with all the constitutional powers and prerogatives of the office vested in that one person appointed to the position of Auditor-General in accordance with Article 70(1) (b) of the Constitution.

In Transparency International v Attorney-General & 2 Others [Petition No 388 of 2016, 16th February, 2018], the High Court of Kenya, the superior court clothed with original jurisdiction to hear and determine constitutional suits under the Constitution of Kenya has occasion to pronounce on the unipersonal status of the Office of the Auditor-General. At issue in Transparency International was the constitutionality of certain provisions of Kenya’s Public Audit Act, 2015. Section 12 of the Public Audit Act, 2015, had created the position of “Acting Auditor-General” and authorized the President of Kenya to designate, upon the recommendation of the Public Services Commission, the senior most person in the Auditor-General’s office as the “Acting Auditor-General” to exercise the full powers of the Auditor-General in the absence of the Auditor-General. Section 15 of the Act also created a position of “Senior Deputy Auditor-General”. Like Ghana’s, the Constitution of Kenya (2010) provides for the appointment of an Auditor-General (in accordance with a prescribed constitutional procedure) but purposely makes no provision for a Deputy Auditor-General.  Plaintiffs in Transparency International challenged as unconstitutional the creation by statute of both the new “Acting Auditor-General” position and the position of Senior Deputy Auditors-General.   The Court held that the Constitution of Kenya establishes and recognizes as Auditor-General only that one person bearing that designation who is appointed to that office in accordance with the Article 229(1) of the Kenyan Constitution. In the words of the Court:

‘. . . the petitioner argued that the position of Acting Auditor General is unconstitutional because only one person is recognized by the Constitution as Auditor General and I agree. The Constitution uses the word “an” Auditor General, meaning an individual and not individuals. The Constitution does not mention other substantive positions. Although the Constitution allows the Auditor General to recruit his own staff and in doing so, must develop staff organizational structure for the performance of his functions and exercise of powers...’

The AG also argues that

4. “A proper reading of the Constitution, especially the provisions on the Public Services of Ghana, leads to the inescapable conclusion that the Attorney-General is fully vested with the constitutional function of giving legal advice to all the Public Services specifically listed in article 190(1) of the Constitution, including the Audit Service, and such other public services as will be established by law.”

Response:

While the AG is clothed with the responsibility of instituting and conducting all civil cases on behalf of the state, the Supreme Court has held that to avoid conflicts of interest and to preserve the principles of separation of powers and checks and balances, Independent Constitutional Bodies (ICBs) are entitled to hire, retain, and act on the advice of their chosen counsel. They can also sue and be sued in their own name (Amegatcher v Attorney-General [2012]). Therefore, while the AG may seek to provide unsolicited advice to the Auditor-General, such advice can, and in this case must be disregarded as being legally flawed. 


Sunday, 2 October 2022

Can chiefs allocate unto themselves law making and pseudo criminal law enforcement powers?

 

     Photo credit: Evans Ahorsu


In the recent past, some actions taken by chiefs or traditional authorities including purporting to issue directives,  banishment orders, etc. and to impose sanctions on some private citizens and corporate institutions for non-observance of local customs have generated public discussions, particularly on the legal propriety of these actions.

This piece catalogues some of these actions and addresses them from a legal and governance policy perspective for public education purposes.

On or about August 20, 2022, the founder of the United Progressive Party, Akwasi Addai (‘Odike’), was reportedly ‘banished’ from the Manhyia Traditional Area by the Kumasi Traditional Council over comments he allegedly made about chiefs in the Ashanti Region on Oyerepa FM, a private radio station in Kumasi, regarding their alleged involvement in illegal mining. Subsequently, Oyerepa FM was also reportedly ordered by the Kumasi Traditional Council to stop broadcasting ‘until further notice’ following the occurrence of the above-mentioned event. In another case, the Ada Traditional Council, on or about August 11, 2022, reportedly ‘banned’ Radio Ada, a private radio station in the Greater Accra Region, from covering or reporting on the recent ‘Asafotufiam Festival’, over some alleged uncomplimentary remarks made about some chiefs of the Ada Traditional Council by some journalists of the radio station. In related but separate events occurring sometime in October 2021, some chiefs in the Central and Ahafo Regions publicly threatened to ‘banish’ any person found to be engaging in non-heterosexual conduct. The chiefs in question issued the threat in an apparent show of public support for the Promotion of Proper Human Sexual Rights and Ghanaian Family Values Bill, 2021 (‘anti-gay bill’) currently being considered by Ghana’s Parliament. Further, sometime in January 2022, some chiefs in Upper West Region were reported to have sanctioned the public flogging of two persons for allegedly publishing a sex video on social media. Most recently, the traditional council of Oyibi in the Greater Accra Region issued a public notice purporting to declare Friday, September 30, 2021, a holiday for residents of Oyibi as part of the Oyibi Yam festival (‘Oyibi Yele Yeli’).

These incidents, which are only representative of the kinds of actions chiefs have been taking over a period of time, demonstrates that some chiefs, continue to prohibit certain conduct and threaten sanctions against violators in the nature of a penal or criminal ban, without any lawful authority to do so. Regrettably, their actions have been allowed to fester with the tacit indulgence and or approval of state actors (mostly political leaders) and institutions.

It is important to note that while chiefs (or the chieftaincy institution) are recognized by the 1992 Constitution (‘the Constitution’) as important players in the grand national scheme of promoting social cohesion and social order, they are not insulated from the normal operation of the contemporary constitutional regime. Therefore, their actions must conform to the strictures set out in the Constitution. They are neither clothed with authority to make law nor enforce same, including customary law, under the Constitution. Other than Parliament and institutions acting under the authority of Parliament or a power given by the Constitution, no person or  institution can purport to make law, be it directives, banishment orders, fiats, howsoever described (Article 11(1)(b) and (c) of the Constitution)

Similarly, other than law enforcement institutions such as the Police, no chief or traditional authority has the power to enforce banishment orders or directives against private persons or corporate bodies.  As a mater of fact, chiefs have no legal means of enforcement; they have no police force or prisons, as was the case in the colonial era.

Chiefs do not have judicial authority either. In Adjei Ampofo v Attorney-General &  President of the National House of Chiefs [2011] 2 SCGLR 1104, the Supreme Court noted, rightly, that although individual chiefs in fact settle numerous disputes through customary arbitration (with the consent of the parties)—just as any private person could—chiefs have no formal judicial power except in the limited area of adjudicating chieftaincy disputes in judicial committees of Traditional Councils, Regional and National House of Chiefs.

It is also important to emphasize that customary law—which often times is misunderstood—only refers to elements of the custom or practice(s) of a defined community (generally by ethnicity and ancestry) which  regulates the rights, duties and relationships of self-submitting members of that community in such matters as marriage, divorce, inheritance, succession, chieftaincy and land tenure, including those which the judicial authorities of Ghana recognize (Article 11(2) and (3) of the Constitution). Any custom or practice which is overridden by national law cannot be referred to as ‘customary law’ legally speaking. It may, however, continue to be observed and obeyed among members of a community  only by voluntary compliance or immoral suasion.

This phenomenon of chiefs allocating unto themselves law making and pseudo criminal law enforcement powers while government and other state actors look on without concern is a slippery slope. It poses an imminent threat to the actualization of certain fundamental freedoms including the right to free speech and the right of persons to move freely.

In Adjei Ampofo, the plaintiff sought amongst others a declaration that Section 63 (d) of the Chieftaincy Act 2008 (Act 759) which compels a person to honour a summon by a chief and imposes criminal liability for non-compliance is an encroachment on a person’s right to free movement and therefore unconstitutional. The Court agreed; holding that ‘the wide power of chiefs to summon, on the pain of a criminal sanction, anybody at all in Ghana to attend to an issue of any kind represents an unwarranted interference in the freedom of movement of residents of Ghana and the width of the power does not make it justifiable in the public interest.  Even though criminalising a deliberate refusal to honour a chief’s call may strengthen the authority of chiefs and the respect accorded them, this consideration is not a sufficient justification for the restriction that S. 63(d) imposes on the freedom of movement of individuals, even in a society which reveres its chiefs.’

 

Conclusion

Government and other state actors ought to take the necessary steps to stop this phenomenon which threatens to erode the contemporary constitutional order. Chiefs must also, in the interest of preserving the high regard citizens have for the pre-colonial traditional state over which they preside, be measured and circumspect in  their utterances and activities. The Courts, as well as other institutions of state including the National Media Commission,  are available to chiefs to seek redress where they find comments of individuals uncomplimentary or defamatory.



Sunday, 7 November 2021

Parliamentary immunity: a ticket above the law?


The ongoing impasse between the Ghana Police Service and the Member of Parliament (MP) for Madina Constituency, Mr. Francis Xavier-Sosu, supported by the Speaker of Parliament, over unsuccessful attempts by the Police to invite the MP to assist with investigations relating to a demonstration he is said to have led raises a key constitutional question about the appropriate procedure for serving a criminal process on or arresting an MP.

In his refusal to attend to the Police invitation, Mr. Xavier-Sosu invoked parliamentary privilege. In a press release issued on behalf of the Speaker by the Deputy Clerk of Parliament on November 3, 2021, the Speaker rightly acknowledged that MPs are not above the law and that the immunity from civil and criminal processes granted MPs are limited to the performance of parliamentary proceedings. However, he argues that the Police require his clearance in order to execute criminal processes against MPs while Parliament is in session.

‘The appropriate procedure is to secure from the Speaker a certificate that the Member in question is not attending to Parliamentary Business. Anything short of this should not be entertained by the House’, the press release noted.

The Ghana Police Service has now filed criminal summons against Mr. Sosu for ‘unlawfully blocking a public road and the destruction of public property’ following the demonstration which took place on Sunday, October 31, 2021.

Given the cyclical controversy relating to the qualified immunity of MPs under the 1992 Constitution (‘Constitution’) and the likelihood that this matter may degenerate into unhealthy partisan bickering, it is important to shed some light on the scope of the qualified immunity of MPs for the purposes of public education.

First, the rule of law—one of the cardinal principles of our constitutional democracy—dictates that all persons, irrespective of their social standing, must be treated equally before the law [Article 17(1)]. Despite this principle, the Constitution grants certain categories of public officials limited immunity from civil and criminal processes while in office for good reason. The President, in whom all executive authority of the State is vested, is the only public officer granted absolute immunity from civil and criminal processes while in office [(Article 57 (4)]. This is to enable the President perform the duties of his/her high office without any distractions occasioned by civil and criminal processes. Unlike the absolute immunity granted the President, members of the judicial and legislative arms of government are granted limited immunity from civil or criminal proceedings insofar as such processes relate to judicial and parliamentary proceedings.

In the case of MPs, the qualified immunity accorded them by the Constitution is only applicable so long as MPs are involved in parliamentary proceedings [Articles 117 and 118]. To facilitate the official (not personal) work of MPs, the Constitution provides that ‘civil or criminal process coming from any court or place out of Parliament shall not be served on, or executed in relation to, the Speaker or member or the clerk to Parliament while he is ON HIS WAY TO, ATTENDING AT OR RETURNING FROM, ANY PROCEEDINGS OF PARLIAMENT (Article 117) [Emphasis added]. To limit obstructions to their official duties (parliamentary proceedings), the Constitution further provides that MPs ‘shall not be compelled, while attending Parliament to appear as a witness in any court or place out of Parliament’ (Article 118) [Emphasis added].

The qualified immunity accorded MPs can, therefore, be invoked ONLY under three (3) circumstances:

(i)                 Where an MP is ‘on his way to’ (attending) parliamentary proceedings;

(ii)              ‘Attending’ parliamentary proceedings; and

(iii)            ‘Returning from’ parliamentary proceedings.

Obviously, an MP cannot be deemed to be performing any of the above-mentioned parliamentary related activities when he is engaged in an unofficial or private activity to warrant the invocation of parliamentary privilege as contemplated by the Constitution. Under such unofficial circumstances, the Police need not seek the prior consent or clearance from the Speaker of Parliament to effect the arrest of an MP or serve a criminal process on him/her.

Second, to fully appreciate the meaning of the relevant constitutional provisions, it is useful to deduce the intention of the framers of the Constitution. The intention of the framers of the Constitution for the above-mentioned provisions—which were originally introduced in the 1969 Constitution—could be deduced from the Proposals of the Constitutional Commission for a Constitution of Ghana, 1968 (‘the 1968 proposals’). The Commission noted as follows:

428. Parliamentary immunities are intended to protect Parliamentarians against the possibility of legal actions being brought against them by either the government or by private citizens for anything they may have done IN THE PERFORMANCE OF THEIR PARLIAMENTARY DUTIES.

429. The history of parliamentary privileges and immunities goes back to the days when the people's representatives were faced with powerful governments which did not spare any efforts to intimidate and harrass them. These days when Parliament has no real cause to fear Executive interference, these privileges and immunities are less justifiable. Nevertheless, they still retain their essential raison d'etre because they are not considered simply as favours granted to Parliamentarians in their personal capacity, but rather as rules designed to secure the complete independence of Parliament.

433. Further, in order to ensure that Members of Parliament are not prevented from participating in the work of the House, they should be granted immunity from arrest and detention while they are travelling to and from Parliament or while they are attending Parliament. THIS IMMUNITY HOWEVER SHOULD NOT BE MADE TO COVER SERIOUS OFFENCES SUCH AS TREASON, SEDITION AND FELONY, NOR APPLY TO OFFENCES in flagrante delicto [to wit, in the very act of committing an offence]' [Emphasis added]

Considering the above-mentioned 1968 proposals and the Constitution, it is sound to reason that parliamentary privilege is meant to facilitate the performance of the official work of MPs. It is personal to an MP ONLY insofar as that MP is on or about the business of Parliament. MPs cannot invoke their limited parliamentary immunity when they are engaged in non-parliamentary work and not travelling to Parliament, attending parliamentary proceedings or returning from Parliament, in order to evade court summons, arrest warrants, search warrants, etc. executed in accordance with police powers granted by the Constitution, the Criminal Procedure Act, 1960 (Act 30) and other relevant law. The Speaker’s suggestion that the Police ought to seek his clearance before inviting, searching or executing the arrest of an MP while Parliament is in session would make a mockery of the rule of law.

Third, this reasoning is consistent with best parliamentary practice in democracies around the world. For instance, the UK Parliament’s rules and procedure provide that MPs are protected by privilege only when they are engaged in proceedings in Parliament. UK MPs have no special protection for anything they do outside those proceedings. The rules highlight the fact that not everything that happens in Parliament is a ‘proceeding’. This means that the protections of privilege do not apply to some things done by MPs. For example, they do not apply to correspondence with constituents or ministers, social media activities, statements to the press whether on or off the parliamentary premises, and political party meetings. The boundaries of ‘proceedings’ have been interpreted to the effect that MPs have no immunity from the criminal law. In Canada, the procedure and practice of the House of Commons is that the Speaker, in making a ruling on whether or not to invoke parliamentary immunity, must differentiate between actions which directly affect MPs in the performance of their duties, and actions which affect MPs but do not directly relate to the performance of their functions. For example, if an MP is summoned to court for a traffic violation or his tax return is subject to investigations, the MP could be said to be hampered in the performance of his or her duties at first glance because the MP may have to defend himself or herself in court instead of attending to House or committee duties. However, in these cases, the action brought against an MP is not initiated as a result of his or her responsibilities as a legislator, but rather as a result of actions taken by the MP as a private individual. In these situations, the protection afforded by parliamentary privilege does not and should not apply.

 

Conclusion

Considering the intention of the framers of our Constitution in granting MPs limited immunity in respect of their official duties, the ongoing impasse between the Speaker and the Ghana Police Service is needless. Given that the matter is now before the courts, it would be useful for the leadership of these two important state institutions to formally sit and agree on the appropriate procedure to follow in enforcing the criminal law with respect to MPs, given due consideration to best practice around the world and the principles which underpine constitutional governance in this country. The majority and minority caucuses of Parliament should also avoid politicising this important matter which goes to heart of our constitutional order.

The Supreme Court ought to, at the earlier opportunity (in an article 2 suit), provide clarity on the relevant constitutional provisions in a manner which is progressive and consistent with the principles of rule of law, constitutionalism and best parliamentary practice around the world.

  

 

 

 

 

 

 

Monday, 1 November 2021

6 Practical tips for GSL Part 1 students


While we continue to engage the persons clothed with power within the legal establishment and the executive to do right by the 499 LLB students who have unjustifiably been denied admission, it's also appropriate we congratulate the hundreds who made it into the Ghana School of Law ('GSL') for the practice course beginning this 2021/2022 academic year.

Here are some practical tips on how to sail through Part 1 of the practice course. These tips/strategies—some of which I learned from my seniors—worked for me. It's my hope current Part 1 students would find them useful as well.

1. Give all courses ample study time. Law of Evidence is as important as Civil Procedure; Company and Commercial Practice is as important as ADR and Criminal Procedure. Law Practice Management (LPM) and Legal Accountancy are equally important. Avoid spending too much time on one and neglecting another. The School's repeat policy (you fail 3 or more, you repeat the entire course) is unprogressive. But until it's abolished, please avoid being caught in the web. Do not rob Peter to pay Paul.

2. Start drafting as early as you can. You'd find lots of drafting in civil procedure and criminal procedure. You'd find a few in company and commercial practice, and ADR. Best to start rehearsing them early so you can remember all essential features of relevant processes. If you wait and cram just a few days ahead of the exam, you'd be hot and it may not end well for you. Practise at least one draft a day (I wish I did!). Take tutorials seriously. I cannot emphasise this enough.

3. There's a saying in the legal fraternity that a good lawyer is one who knows his civil procedure and evidence. This statement is largely true. How well you know both would impact your future practice. Read the rules as well as you read your cases. Think of the rules as bones and the cases, the flesh. The cases would deepen your understanding of the rules. They would shape your thinking and help you critique the rules as you go along. For civil procedure, you'd have to memorise the rules at some point. Develop a mental map of the rules from commencement to execution. It will serve you well. Develop flashcards where necessary. Take turns in your study group to test one another on the rules. 

4. Seek help early. Don't be shy to ask for help. Don't feel too big to ask for advice. If you fail to ask for help in a course you're struggling with, you may end up struggling in the exam. Ask for help. Legal accountancy is usually a challenge for neophytes. But it's doable. You'd definitely have colleagues in your class who are quite familiar with accounting. Worry them. Ask questions. Try your hands on tutorial/past questions and have them scrutinise them. If you need an extra class, go for it. Attend Senior Kwadwo Gyan's Civil Procedure tutorial (usually online). I found it very helpful. I hope you would too.  Don't wait and panic at the exam hall. To be forewarned is to be forearmed.

5. You'd have a lot to read for Law of Evidence; cases, text books and the Evidence Act. It's not a difficult course. However, what makes it challenging is the need to assemble ALL the relevant laws in a given question and APPLY them as required. Here's where the tutorial would be most helpful. After taking notes at a tutorial, spend time and read extensively on the given topic (applicable constitutional and statutory provisions, cases, etc.) and SCRIPT YOUR ANSWER to the given question. Do so for every tutorial question discussed. Ask your tutor or any senior to look over your draft scripts for you. If you're able to do this religiously, you'll be alright.

6. Join a workable discussion group (a group of 4/5 members is ideal). Iron sharpeneth iron. You'll find the peer review of your answers to tutorial/past questions useful. It might also be useful to compare notes with your contemporaries from other GSL campuses.

Best wishes.

 

 

 

Monday, 25 October 2021

Klomega (no.2) v. Attorney-general, Ghana Ports and Harbours Authority and others: a missed opportunity to strengthen public financial management

        Photo credit: trackingdocket.com

By Nicholas Opoku

Abstract

Agreements made by or on behalf of the Government of Ghana (‘GoG’) play a key role in securing resources for national development, managing the economy, and structuring Ghana’s relations with other countries. Concerns have frequently been raised, however, about the opacity surrounding the negotiation of these agreements, their fairness or value for money. Parliament, which must by law approve these Executive-initiated agreements before they can bind the State, has been criticised for failing in its duty to subject these agreements to diligent and independent scrutiny. On its part, the Supreme Court has been blamed for compounding the problem with its decision in Felix Klomega (No.2) v Attorney General, Ghana Ports and Harbours Authority, Meridian Port Holdings Limited and Meridian Port Services Ltd[1] where it held that for the purposes of parliamentary scrutiny of public agreements, the word ‘government’ as used in article 181 of the 1992 Constitution does not include State corporate entities. Therefore, agreements and transactions entered into by such State entities need not undergo or receive parliamentary scrutiny and approval. The holding that subjecting such agreements to parliamentary scrutiny would overburden Parliament is disturbing. It effectively creates a window for the central government to enter into transactions with varied financial implications, using state entities as conduits; thereby circumventing accountability mechanisms established by the Constitution. This paper examines the Court’s decision in Klomega and its implications for public financial management and accountability.

Introduction

1.1     The facts of the case

The plaintiff, Felix Klomega, a Ghanaian citizen, instituted proceedings in the Supreme Court, pursuant to articles 2(1) and 130 of the 1992 Constitution (‘the Constitution’), challenging the constitutional validity of a concession agreement and an associated shareholders agreement for the design, construction and, subsequently, the maintenance, operation and management of the Container Terminal at the Tema Port, for a 20-year period.

The Ghana Ports and Harbours Authority (‘GPHA’) granted the concession to Meridian Port Services Limited (‘MPS’). MPS is a Ghanaian company, being a joint venture between Meridian Port Holdings Limited (‘MPH’) and the GPHA, with MPH being the majority shareholder. MPH is an English company, being a joint venture between leading container terminal operators APM Terminals and Bolloré Africa Logistics. The GPHA is a statutory corporation established by the Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160). The Attorney General was named as a defendant to the suit, along with GPHA, MPS and MPH.

1.2     The issues in the case

Article 181(5) of the Constitution requires that any ‘international business or economic transaction’ to which the government is a party must be approved by Parliament.

The plaintiff, Klomega, argued that the word ‘government’ (as used in article 181) included a state entity such as GPHA. Therefore, the concession agreement and shareholders’ agreement initiated and entered into by GPHA should be declared void for want of parliamentary authorisation or approval.

The defendants argued that the GPHA could not be included within the definition of ‘government’ because (i) the GPHA had been set up as a separate legal entity, distinct from the central government under PNDCL 160; (ii) the GPHA’s operations are commercial in nature. Therefore, it would be absurd to cripple its activities by requiring Parliamentary approval of its commercial deals; and (iii) that statutory corporations such as the GPHA have legal and operational autonomy and their financial transactions and international business or economic transactions should not be regarded as ones to which government is a party.

If, contrary to the arguments of the defendants, GPHA was deemed to be within the definition of ‘government’, the court was asked by plaintiff to determine whether the concession agreement and the shareholders’ agreement were, in any event, ‘international business or economic transactions’ for the purposes of article 181(5) of the Constitution.

1.3     The Supreme Court’s decision

On 19 July 2013, the Supreme Court in a unanimous decision dismissed the plaintiff’s action. On the principal issue as to whether the GPHA falls within the meaning of ‘government’, the Court held that in the context of article 181(5) and the facts of the case, the 2nd defendant (GPHA) is not to be regarded as coming within the meaning of ‘government’. The Court reasoned that to subject the international business transactions of statutory corporations with commercial functions to the Parliamentary approval process prescribed in article 181(5) would probably increase the weight of Parliament’s responsibilities in this regard to an unsustainable level. Accordingly, the court held that it is reasonable to infer that the framers of the Constitution did not intend such a result. In the court’s view, ‘government’ should mean, ordinarily, the central government and not operationally autonomous agencies of government.  As such, the word ‘government’ as used in the context of article 181(5), should be interpreted purposively to exclude statutory corporations such as the GPHA.

The Supreme Court did, however, state that its decision did not lay down an absolute rule. For instance, article 181(5) may still apply on the particular facts of a case if the central government was found to have made a particular statutory corporation its alter ego.

In this paper, I reflect on this Supreme Court decision and its implications for public financial management and accountability. First, I highlight the origins of article 181(5) to demonstrate the importance of parliamentary scrutiny and approval of transactions initiated by or entered into by the Government of Ghana (‘GoG’). Secondly, I discuss what constitutes an international business transaction. Thirdly, I discuss the circumstances under which the State could be held liable for the contractual obligations arising from a transaction initiated by or entered into by a State corporation or a State-owned enterprise (‘SOE’) to demonstrate why the Court’s reasoning in Klomega is unsustainable. I conclude with a call on the Supreme Court to review its decision at the earliest opportunity and for Parliament to step up to its constitutional obligation of passing legislation to regulate the scrutiny and approval of ‘article 181(5)’ transactions.

2.0  The origins and policy rationale of article 181

Article 181 of the Constitution states as follows:

(1) Parliament may, by a resolution supported by the votes of a majority of all the members of Parliament, authorise the Government to enter into an agreement for the granting of a loan out of any public fund or public account.

(2) An agreement entered into under clause (1) of this article shall be laid before Parliament and shall not come into operation unless it is approved by a resolution of Parliament.

(3) No loan shall be raised by the Government on behalf of itself or any other public institution or authority otherwise than by or under the authority of an Act of Parliament.

(4) An Act of Parliament enacted in accordance with clause (3) of this article shall provide—(a) That the terms and conditions of a loan shall be laid before Parliament and shall not come into operation unless they have been approved by a resolution of Parliament; and (b) That any moneys received in respect of that loan shall be paid into the Consolidated Fund and form part of that Fund or into some other public fund of Ghana either existing or created for the purposes of the loan.

(5) This article shall, with the necessary modifications by Parliament, apply to an international business or economic transaction to which the Government is a party as it applies to a loan. [Emphasis added]

To fully appreciate the thinking of the framers of the 1992 Constitution on this article, it is important to refer to its origin: article 133 of the 1969 Constitution. Article 133 of the 1969 Constitution dealt exclusively with loans without any reference to international business or economic transactions. The rational for this provision was expressed in the ‘The Proposals of the Constitutional Commission for a Constitution for Ghana (1968) (hereinafter referred to as ‘the 1968 Proposals’) thus:

‘One of the most revealing consequences of the coup d’etat of the 24th February was the realisation by the people of Ghana of the huge debt which the country owed. Apart from the fact that our economy had been made bankrupt we owed money, well over NC800, 000,000. We need not go into the details; we all know the various agreements which the National Liberation Council has had to undertake in order to have a rescheduling of our external debts. This calls for specific provisions in the Constitution to deal with the question of loans, and we propose that Government should not enter into an agreement for the granting of a loan out of any public fund or public account unless the National Assembly has approved, by the votes of not less than two-thirds of all the members of the Assembly, the granting of the loan.’[2]

‘We further propose that the agreement entered into in respect of the loan should be laid before the National Assembly and should not become effective or operative unless it has been approved by an ordinary resolution of the National Assembly in the case of a loan granted to an authority in the country, but where the agreement is in respect of a loan granted to an authority outside this country then the agreement should only come into force after a resolution in favour of the granting of the loan has been passed by the National Assembly, supported by the votes of not less than two-thirds of all the members of the National Assembly.’[3]

‘We are strongly of the view that the above proposals relating to the granting of loans should apply with equal force to the raising of loans. The only addition we wish to make is that the Government should not have power to raise a loan on behalf of itself or any public institution or authority except by or under the authority of an Act of Parliament. That Act of Parliament should incorporate our above proposals regarding resolutions of the National Assembly mutatis mutandis.’[4]

As the Supreme Court noted in Attorney-General v. Faroe Atlantic Co. Ltd[5], “it is clear that the purpose of the framers of the original provision was to ensure transparency, openness and Parliamentary consent in relation to debt obligations contracted by the State. These original provisions of 1969 Constitution were maintained unchanged in the 1979 Constitution as article 144. It is in the 1992 Constitution that this long-standing provision on the giving and raising of loans is modified to include another category of contract, namely ‘an international business or economic transaction to which the Government is a party”.

3.0  What constitutes an international business or economic transaction?

The Constitution does not provide any interpretation of the term ‘international business transaction’. The Constitution however places an obligation on Parliament to pass legislation to give clarity on what constitutes an international business transaction to which government is a party and to which article 181(5) is applicable. Parliament is yet to fulfill this obligation. In the absence of such legislation, the Supreme Court has attempted to clarify what amounts to an international business transaction. The court speaking through Sophia Akuffo JSC in Faroe observed thus

‘…Article 181(5) specifically deals with international business or economic transactions, rather than loans. When one contracting party agrees to supply and the other party agrees to purchase and pay for the thing supplied, is there not a business transaction? I believe there is. And if the supplier is a non-Ghanaian entity and the party of the other part is the Government of Ghana, it is an international business transaction.’

This implies that the term ‘international business transaction’ covers transactions or agreements concluded by the GoG with a foreign government, a foreign company, a firm or transnational corporation or an international institution or an agency of a foreign government.[6] Examples of such are bilateral investment promotion and protection agreements, joint venture between GoG and foreign companies, and debt rescheduling with international financial institutions.[7] So long as GoG is a party to a transaction in which the other contracting party is a foreign entity, such transaction must be scrutinised and approved by parliament to be enforceable.  In Faroe, the Supreme Court held that a Power Purchase Agreement between Faroe Atlantic Co. Ltd and GoG (acting through the Ministry of Mines and Energy) entered into in 1998 without parliamentary approval, contrary to article 181(5), was unconstitutional and as a result unenforceable. The Court refused the enforcement of damages awarded Faroe Atlantic Co. Ltd by the trial court because an unconstitutional agreement is not binding on the Republic, even though the trial court had held GoG to be in breach of it.

4.0  Circumstances under which the State could be held liable for transactions entered into by State-Owned Enterprises (‘SOEs’)

The Supreme Court in Klomega appears to have adopted a three-tier ‘test’ in its determination of whether or not a State-Owned Enterprise (‘SOE’) or public corporation falls within the meaning of the word ‘government’ as used in article 181(5). The test being: (i) if the SOE has a separate legal personality, it does not fall within the purview of article 181(5); (ii) if the SOE’s transactions are subject to ministerial oversight, then the ministerial oversight is adequate. Therefore, the transaction does not fall within article 181(5); and (iii) it is impracticable to subject every transaction entered into by an SOE to parliamentary approval. As such, not every transaction entered into by an SOE should be subjected to parliamentary approval.

4.1     Relationship between Government and SOEs

There is hardly any widely accepted definition of an SOE. However, most SOEs have certain key characteristics; namely,

(i)                 the SOE has a separate legal personality;

(ii)              it is at least partially controlled by a government unit; and

(iii)            it engages largely in commercial or economic activities.[8]

Therefore, it is common to find statutes establishing SOEs conferring separate legal personality status on them by default. The GPHA (2nd Defendant in Klomega) for instance is established as a body corporate having perpetual succession and can sue and be sued in its own name. According to the establishment statute (PNDCL 160), GHPA in the performance of its functions may acquire movable or immovable property; dispose of such property and enter into a contract of any other transaction.[9]

Despite their separate legal personality, SOEs often perform functions that are public in nature. In many countries, SOEs provide basic services such as water, electricity, and transportation to people. Some SOEs also perform functions that are regulatory in nature.  The GPHA for instance is empowered by its establishment statute to ‘plan, build, develop, manage, maintain, operate and control ports in Ghana’. In doing so, it is mandated to amongst others, ‘regulate the use of any port and of the port facilities’; ‘license small ships to lie, ply for hire or otherwise be used within a port upon such terms and conditions as the Authority [GPHA] may deem fit’; ‘appoint, license and regulate stevedores, master porters to operate in the container terminals’.[10] The GPHA is also empowered to ‘…by legislative instrument make regulations for the maintenance, control and management of any port…’[11] In addition to these regulatory functions, some SOEs are also funded by the State and are subject to some level of government control. In the case of GPHA for instance, its funding sources include budget allocations and loans from GoG.[12] The State may also acquire property for GPHA under the State Property and Contracts Act, 1960 (C.A.6) and the State Lands Act, 1962 (Act 125).[13] In terms of control, the President appoints the Director-General and members of the GPHA’s governing Board.[14] The GPHA Board is required to comply with directives given by the President in its operations.[15] All these characteristics of the GPHA demonstrate that despite its separate legal personality, the GPHA is essentially an extension of government, even though in carrying out its commercial operations it may not appear to be carrying out a direct government function.

4.2   When may an SOE’s corporate veil be lifted?

There are instances where a court could disregard the separate legal status of an SOE in order to hold the State liable for the contractual obligations or actions of an SOE. In the case of First National City Bank v. Banco Para El Comercio Exterior de Cuba I (Citibank)[16] (herein referred to as ‘Bancec’), the United States Supreme Court considered whether an American bank may counterclaim against a Cuban government trading company for the value of the American bank’s assets expropriated by the Cuban central government. The dispute in Citibank arose out of Citibank’s conversion of funds belonging to Banco Para El Comercio Exterior de Cuba (‘Bancec’). The resolution of the dispute, however, centered on the relationship between Bancec and the Cuban central government. Despite Cuban legislation establishing the trading company as an autonomous juridical entity, the Supreme Court treated the trading company as an alter ego of the Cuban central government. It held that while there exists a strong presumption that government instrumentalities have a separate legal identity (along with limited liability) from their ‘parent’ governments, this presumption can be overcome in certain situations—for example, ‘where a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created, one may be held liable for the actions of the other.’ In addition, the court emphasized that the doctrine of corporate entity would be disregarded where its recognition would lead to fraud or injustice. Thus, in Bancec the US Supreme Court established a disjunctive test for when the separate identities of sovereign and instrumentality should be disregarded: when there is ‘extensive[] control,’ and when recognising the separate identities would lead to  ‘fraud or injustice’.

Recently in the case of Rubin v. Islamic Republic of Iran[17], the US Supreme Court expanded the ‘Bancec test’. The plaintiffs in Rubin held a judgment against the Islamic Republic of Iran and attempted to attach and execute against certain Iranian artifacts on loan to the University of Chicago. In addressing whether that attachment was proper (it was not), the Supreme Court established a multi-factor test to aid its analysis:

(1) the level of economic control by the government;

(2) whether the entity’s profits go to the government;

(3) the degree to which government officials manage the entity or otherwise have a hand in its daily affairs; and

(4) whether the government is the real beneficiary of the entity’s conduct.

Even though the US supreme court decision is not binding on our courts, this multi-factor test established by the US Supreme Court in Bancec and Rubin is useful in our analysis of Klomega.

In the case of Klomega, the GPHA by its establishment statute has a separate legal personality. Therefore, there is a presumption that GPHA operates independently from the central government. However, as the US Supreme Court made it clear in Bancec and Rubin there are some extraordinary circumstances—including where the central government exerts dominion over a state corporation or SOE so extensive as to be beyond normal supervisory control—that require that we ignore the formal separateness of the two entities (central government and SOE).

The establishment statute and the operations of the GPHA warrant that in considering whether to subject its international business transactions to parliamentary scrutiny and approval, the court sets aside GPHA’s corporate veil because it is essentially an extension of government. Budget allocations and loans from GoG are a key source of funding for the GPHA. The GPHA cannot maintain a foreign exchange account into which it may keep part of its revenue except with the approval of the Finance Minister.[18] The Auditor-General whose mandate is to audit and report on all public accounts of Ghana audits the account books and records of the GPHA.[19]

Further, its establishment statute allows GoG to acquire property for GPHA under the State Property and Contracts Act, 1960 (C.A.6) and the State Lands Act, 1962 (Act 125). The President appoints the Director-General and members of the GPHA’s Board. The GPHA Board is by law required to comply with directives given by the President in its operations. At the end of every financial year, the GPHA Board is under obligation to submit a report on the activities of the GPHA to the Minister of Transport who in turn submits a copy of the report to the President.[20]

In addition, the Minister of Transport may ‘from time to time’ request the GPHA Board to furnish him with such reports.[21] It is also worth mentioning that all SOEs are under obligation to submit their audited financial statements to the Finance Minister ‘not later than four months after the end of each financial year’.[22]

All these factors demonstrate that GoG’s dominion over GPHA is so extensive and goes beyond normal supervisory control. Therefore, in giving effect to article 181(5) of the Constitution, it is sound to reason that an entity like the GPHA falls within the meaning of ‘government’ for the purposes of subjecting its international business transactions to parliamentary scrutiny and approval.

4.2.1  Substituting parliamentary scrutiny for ministerial supervision

The Supreme Court in Klomega reasoned that

where an agency has a separate legal personality distinct from central government, it usually comes under sectoral ministerial supervision. The Board of the corporation and the appropriate Ministry should then exercise oversight over its international business or economic agreements. That oversight should be exercised within the context of the procurement laws of this country.

Ministerial supervision cannot be a substitute for parliamentary oversight. Substituting parliamentary oversight for ministerial (executive) supervision is counterproductive given the fundamental purpose of article 181; which is to ensure transparency and openness. Further, the fact of ministerial supervision itself clearly shows the controlling hand of GoG; even more reason to subject the international business transactions of SOEs to parliamentary scrutiny.

4.2.2  Sidestepping the constitution to avoid overburdening Parliament

The Supreme Court in Klomega also reasoned that ‘Parliament would be sucked into unnecessary minutiae if it were to have the function of approving the international business or economic agreements of statutory corporations.’ The court’s ‘purposive’ interpretation of article 181(5) cures no mischief. It essentially amounts to sidestepping the Constitution in the name of practicality. This interpretation compromises ‘democratic transparency for commercial expediency’.[23] The decision creates room for the central government to circumvent accountability mechanisms established by the constitution by entering into international business transactions with varied financial implications, using SOEs as conduits.

Further, this interpretation is contrary to the court’s own jurisprudence. In Faroe, the court speaking through Sophia Akuffo JSC held that

“[t]he Constitution is the supreme law of the land and article 1(1) makes it clear that ‘…the powers of government are to be exercised in the manner and within the limits laid down in this Constitution.’ As the supreme law of the land, the Constitution is applicable at all times and all acts and things, particularly those done for and on behalf of the Republic of Ghana, must always be tested against its provisions. In the course of judicial proceedings, it is incumbent upon every Judge to keep its provisions in mind to assure compliance, not only by the parties before it, but also by the court itself.’

The court in carrying out its sacred duty of interpreting the constitution cannot be seen to pick and choose when and how an express constitutional instruction—in this case article 181(5)—should apply.

5.0     Conclusion and Way forward

The State has frequently been forced to defend costly suits in international arbitration; risking or paying huge judgment awards for alleged breaches of some of these agreements. The opacity surrounding the negotiation of these agreements, their fairness and or value for money are justifiable grounds for concern. Parliament’s failure to subject these agreements to diligent and independent scrutiny has been identified as a significant gap. Unfortunately, the Supreme Court has failed to provide a solution as its decision in Klomega has further compounded the problem. As I have shown in this paper, the Court’s reasoning for failing to treat the GPHA (an SOE) as an extension of government within the context of article 181(5) is unsustainable. In a number of decisions such as Klomega and Faroe, the Court continues to call on Parliament to express clearly in statute the scope of its intervention with regard to such agreements. However, Parliament’s lack of intervention does not dispense with the need to clarify article 181(5) in a way that meets the history of the provision, and the objectives for which they were included in the 1992 Constitution. Even as we interpret this provision to align with evolving business practices and demands of commercial contracting, it is crucial that those objectives are preserved. The concerns necessitating the inclusion of this constitutional provision have not changed just because business practices have evolved. In fact, one could argue that the risks have gotten worse.

That said, because the Supreme Court has flubbed its lines; and worse, is whittling down the scope of Parliament’s obligation under article 181(5), under a paternalistic pretext of saving Parliament from doing excessive work, there is the need for Parliament to be awake to its role and to step up. In doing so, Parliament must clarify the types of international commercial agreements which must be subjected to parliamentary scrutiny and approval. For instance, Parliament can expressly state in statute that any international commercial transaction by a state entity above a certain threshold (monetary value) should be subjected to comprehensive parliamentary review. The review of transactions above the stated threshold must not be conducted under the routine ‘certificate of emergency’ to allow for a more diligent scrutiny.

 

References

[1] [2013-2015] 2 GLR 546

[2] ‘The  Proposals of the Constitutional Commission for a Constitution for Ghana’ (1968), para 589

[3] ‘The  Proposals of the Constitutional Commission for a Constitution for Ghana’ (1968), para 590

[4] ‘The  Proposals of the Constitutional Commission for a Constitution for Ghana’ (1968), para 591

[5] [2003-2005] 2 GLR 580

[6] Report of the Constitutional Review Commission, para 279

[7] E. Y. Benneh, ‘Comments on External Loan Agreements, International Business Transactions and the Treaty-Making Power under the Fourth Republican Constitution of Ghana’, University of Ghana Law Journal (1996-1999), p.79

[8] ‘State-Owned Enterprises: The Other Government’, International Monetary Fund, April 2020, p.1

[9] Section 2, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[10] Section 5, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[11] Section 24, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[12] Section 11, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[13] Section 2, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[14] Section 2, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[15] Section 2, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[16] 103 S. Ct. 2591 (1983)

[17] 138 S. Ct. 816, 823 (2018)

[18] Section 13, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[19] Article 187(2), 1992 Constitution; Section 15, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[20] Section 16, Ghana Ports and Harbours Authority Act, 1986 (PNDCL 160)

[21] ibid

[22] Section 95, Public Financial Management Act, 2016 (Act 921)

[23] Nana Dr. S.K.B. Asante, ‘Proposed Amendment of Article 181 of the Constitution; vol. 3: No. 4. 1996, p.2. Legislative Alert, published by the Institute of Economic Affairs, Accra, Ghana.



PS. This paper was originally published by the Ghana School of Law Journal (Volume VI), August 2021

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