Inappropriate contractual breaches have been identified as the major cause of judgement debt (JD) in Ghana over the past decade. A recent report by the Centre for Social Justice (CSJ) has found that Judgement debt due to contractual breaches accounted for 73% of the total judgement debt payments between 2000 and 2019.
Interestingly, the report highlights that illegal abrogation of contracts involving huge amounts of money, which is part of judgement debts arising from contractual breaches, have mostly followed political transitions.
Overall, the report highlights that between 2000 and 2019, Ghana has been slapped with judgement debts to the tune of GH¢1.89 billion. This amount, according to the report, is equivalent to 135% of new multilateral loans contracted by the government in 2019.
Causes of judgement debts
The report highlights several reasons why Ghana incurred judgement debts over the years aside contractual breaches. One of them is the government’s failure to promptly pay compensations for its compulsory land acquisitions. Another important cause of judgement debt is statutory breaches committed by public officials in the course of their official duties.
Consequently, the report blames the occurrence of judgement debts to negligence, blatant disregard for public procurement laws, illegal abrogation of contracts, and corrupt activities by public officials. The CSJ said “all of which have resulted in the payment of huge sums from the public coffers”.
According to the report, judgement debts due to failure to promptly pay compensations and statutory breaches accounted for 25% and 1.6% of the total JDs in the review period respectively.
Largest judgement debt in a year
Meanwhile, to date, the largest amount of judgement debt payments made in a given year was GH¢356.6 million paid in 2010. According to the report, this amount was equivalent to about 20% of the total education expenditures for that year alone.
Also, the report notes that per the Auditor-General’s reports from 2013 to 2019, huge amounts of judgement debts awarded against the State remain outstanding. For example, in 2017 alone, the amount outstanding as shown in the Auditor-General’s report was GH¢411.6 million.
The report highlights that in some instances, breach of simple contracts multiplied over a thousand fold into judgement debts over a long period of time. It cites the case between Rockshell International Ltd vs. Attorney General as an example. This case saw a GH¢55,305.60 contractual obligation become a US$35 million judgement debt payment.
This was a contract awarded in December 1983 to Rockshell International Ltd to supply stones to the Keta Sea Defence Project. Rockshell after the performance of its obligations under the contract issued a certificate for the payment of ¢553,056,000 (GH¢55,305.60).
However, after several unsuccessful demand notices and follow-ups, the company instituted legal action against the State. In November 20, 2006 it obtained a favourable judgement of US$70 million against the state. But, after several negotiations, government agreed to pay US$35 million as the full and final settlement of the judgement debt in 2009.
Meanwhile, the most recent judgement debt of US$170 million awarded against the government over the termination of a power purchase agreement with the Ghana Power Generation Company was not captured in the current report.
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