Supreme Court okays law on petroleum loans
The Supreme Court has declared as constitutional a law that allows Parliament to only approve loans exceeding $30m contracted by the government for the exploration, development and production of petroleum.
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In a unanimous decision yesterday, a seven-member panel of the apex court presided over by the Chief Justice, Justice Gertrude Sackey Torkornoo, dismissed a suit filed by a private legal practitioner, Elikplim Agbemava, challenging the constitutionality of Section 10 (15) of the Petroleum (Exploration and Production) Act, 2016 (Act 919).
The plaintiff was of the contention that Section 10 (15) of Act 919 violated Article 181 of the 1992 Constitution which empowered Parliament to approve loans contracted by the government for itself or on behalf of any public entity.
The court dismissed the entire reliefs sought by the plaintiff and stated that its full reasoning for the judgment would be deposited at the court’s registry. Members of the panel were Justices Gabriel Pwamang, Prof. Henrietta Mensa Bonsu, Samuel Adibu Asiedu, Ernest Gaewu, Yaw Darko Asare and Richard Adjei Frimpong.
On August 4, 2016, Parliament passed Act 919, a law that regulates the upstream petroleum sector and deals with issues such as petroleum contracts, exploration, production, development, transportation, treatment, storage and other activities relating to petroleum in its natural state.
Act 919
Pursuant to Section 10 of Act 919, an entity seeking to engage in the exploration, development and production of petroleum in the upstream sector can only do so in accordance with a contract with the Republic of Ghana and the Ghana National Petroleum Corporation (GNPC), which has to be ratified by Parliament.
In order to promote Ghana’s active participation in the upstream petroleum sector, the law allows the government, acting through the GNPC, to leverage its assets in raising capital to engage in the exploration, production and other petroleum related activities.
However, Section 10(15) of Act 919 gives Parliament the power to approve loans exceeding $30m. The section stipulates that “any borrowing exceeding the cedi equivalent of thirty million United States Dollars for the purpose of exploration, development and production shall be approved by parliament and shall be in consonance with the Petroleum Revenue Management Act, 2011 (Act 815)”.
Constitutional challenge
In 2017, Mr Agbemava invoked the original jurisdiction of the Supreme Court to interpret and enforce the Constitution with a case that Section 10(15) of Act 919 violated Article 181 of the 1992 Constitution.
It was his contention that by qualifying the loan Parliament could approve, Section 10(15) of Act 919 was inconsistent with Article 181, and therefore should be declared unconstitutional by the Supreme Court.
“The true meaning derived from an interpretation of Section 10 (15) of Act 919 is that all loans or borrowing by the Ghana National Petroleum Corporation (GNPC), the Ministry of Finance, Petroleum Commission or any other organ of state for the exploration, development and production of petroleum and associated resources which range from the cedi equivalent of $1.00 to $30,000,000.00 need not and will not be submitted to Parliament for approval”.
“Conversely, only borrowings or loan agreements for loans above $30,000,000.00 shall be submitted to parliament for approval,” Mr Agbemava contended. The plaintiff, therefore, wanted the Supreme Court to declare that Section 10 (15) of Act 919 had whittled down the mandatory constitutional power given to Parliament to approve all loans contracted by the government.
Another relief was a “declaration that on a true and proper interpretation of Article 181 of the Constitution, Section 10 subsection 15 of the Petroleum (Exploration and Production) Act, 2016 (Act 919) in so far as it purports to exclude or exempt loan agreements of certain financial values entered into by the state, for the purpose of exploration, development and production of crude oil and natural gas, from parliamentary approval and scrutiny is contrary to Article 181 of the Constitution and therefore unconstitutional”.
Again, he sought “a declaration that any loan agreement entered into by the State or any public entity without Parliamentary approval by virtue of Section 10 subsection 15 of the Petroleum (Exploration and Production) Act, 2016 (Act 919) for the purpose of exploration, development and production of crude oil and natural gas is unconstitutional, void and of no legal effect”.
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