Corporate Governance has never been this vital in Ghana’s history regarding re- democratization processes especially in the fourth republic. The private sector has been touted as the engine of growth by the past New Patriotic Party (NPP) Government led by Ex-President John Agyekum Kuffour. The current administration of President Mills also considers the private sector as the foundation for accelerated growth and development – the engine of growth. This extraordinary focus on the private sector in recent times means a heightened interest in how organizations are run at profit and how organizational leadership deal with disputes when they occur between management and employees or between the organization and its suppliers, customers and other external bodies.
Why do these disputes occur? Why do the disputes prove so fatal to organizational sustainability? Could they have been avoided? What is Ghana’s corporate governance architecture in respect of disputes resolution mechanisms? These questions are essential for finding out how corporate governance and commercial disputes in boardroom wrangling and disagreements can be managed better.
Corporate governance is regulated in Ghana by the Companies Code, 1963 (Act 179) as the primary legislation for handling corporate governance issues. The principal government organization responsible for corporate governance is the Registrar of Companies at the Registrar Generals Department in Accra.
Disputes Resolution Mechanisms under the Companies Code, 1963 (Act 179) of Ghana
Sections 324 to 327 (only 4 sections) deal with legal proceedings which provisions reveal a glimpse of the dispute resolution mechanism the Company’s Code of Ghana adopts. Section 324 of the Code suggests that legal proceedings are proceedings in a Court of competent jurisdiction. The “Court” as referred to in the Code is defined as “the High Court”. Indeed, throughout the Code, the High Court has been used severally as the reference point for seeking redress to any grievance or disagreement under the code.
The Courts trial process also known as litigation is the most common disputes resolution process in Ghana. “The traditional legal response to disputes between parties has been for lawyers to initiate the litigation process by filing a complaint or motion” in court (Nolan-Haley, 2008). Handed down by the British Colonial Masters, litigation in Ghana is a highly structured and formalized disputes resolution process. The very formal and structured characteristic of litigation as a disputes resolution process is what also makes it problematic.
Lawsuits which constitute the litigation process can be long, winding and cumbersome. It takes an average of two years for a civil matter to be concluded in a typical High Court in Ghana. The litigation process is confrontational or adversarial in nature and destroys relationships. It lacks privacy and confidentiality as court trial processes are generally held in open court as a public hearing except in specific cases involving children and spouses in custody or divorce matters where the matter may be held in the Judge’s chambers. The process is also expensive. Aside court fees, advocates or lawyers charge huge sums as representation fees and so on. The process is long and winding as lawyers exaggerate issues at stake and prolong the process through technical and procedural theatrics which is characteristic of the litigation processes. It is obvious that the above limitations of litigation makes it quite inappropriate for use in commercial disputes or disputes related to corporate governance under the companies code of Ghana because when businesses fight, they lose money as clients and customers quickly move to competitor organizations to do business. Alternative mechanisms lie with the Alternative Disputes Resolution Act, 2010 (Act 798) and not the outdated Companies Code of 1963 (Act 179).
Disputes Resolution Options under the ADR Act, 2010 (Act 798) of Ghana
The Alternative Disputes Resolution Act, 2010 (Act 798) of Ghana was passed in May 2010 to replace the Arbitration Act, 1961 (Act 38) which had become outdated and lagged behind contemporary Arbitration and other ADR practices. The ADR Act has five parts, 138 sections, and five schedules. Part 1 constitutes Arbitration, Part 2 Mediation, Part 3 Customary Arbitration, Part 4 the Alternative Disputes Resolution Centre and Part 5 Financial, administrative and Miscellaneous Provisions. For the purpose of this paper, we shall focus on the first three parts of the ADR Act which is Arbitration, Mediation and Customary Arbitration. Customary Arbitration may be important in Corporate Governance because of the prevalent land acquisition and land disputes problems in Ghana. Because most lands in Ghana are stool lands and owned by traditional families, companies often have to deal with these traditional families in the acquisition of land and property or in dispute situations. Under these circumstances, the viable alternative may be the adoption of the Customary Arbitration alternative to litigation for an amicable settlement of the matter.
Mediation as an ADR Process for Resolving Corporate Governance Disputes
Mediation is another common ADR process. Mediation is generally defined as a disputes resolution process where parties in dispute voluntarily invite a neutral third party called a mediator to assist them in resolving their dispute. The Alternative Disputes Resolution Act, 2010 (Act 798) of Ghana defines mediation as “a nonbinding process in which the parties discuss their dispute with an impartial person who assists them to reach a resolution.” Note that the ADR Act describes mediation as a non binding process. However, section 81 (3) of the ADR Act states that “where the parties sign the settlement agreement, the parties shall be deemed to have agreed that settlement shall be binding on the parties and persons claiming under them respectively.” The parties must agree from the outset for the settlement agreement to be binding on them. The Labour Act, 2003 (Act 651) of Ghana confirms this by stating that “where the parties agree to mediate and at the end of mediation proceedings there is settlement of the dispute, the agreement between the parties as regards the terms of settlement shall be recorded in writing and signed by the mediator and the parties to the dispute….the settlement agreement….shall be binding on all the parties unless the agreement states otherwise”.
This shows that in mediation the parties are truly in control of the process because they regulate or determine the outcome. In Ghana, the effect of a binding settlement agreement is that it “has the same effect as if it is an arbitral award”. Indeed, the ADR Law of Ghana encourages any “party to any agreement may with the consent of the other party submit any dispute arising out of that agreement to mediation by an institution or a person agreed on by the parties”. Hence in corporate governance, all agreements, policies and procedures may incorporate distinct mediation clauses that ensure that parties have a prior agreement to mandatorily resolve disputes by mediation when they occur.
In a presentation to the Global Corporate Governance forum in Paris in 2007, His Lordship Justice Geoffrey W.M. Kiryabwire of Uganda delivered a paper on Mediation of Corporate Governance issues: A case Study from Uganda. In this presentation, he states that “the general tendency in Uganda over the years was to litigate disputes with a view to get a legally binding decision”. Mediation was introduced into the justice system in Uganda riding on the traditional belief that ADR was not a new phenomenon in the Ugandan Culture. Through legal reforms in law and practice mediation was introduced into the justice system of Uganda through the commercial courts system.
The case in Ghana is not very different. The Judicial Service of Ghana runs a nationwide ADR programme as a compliment to traditional litigation processes through its ADR Secretariat headed by a director who is a Court of Appeal Judge. The scope of the National ADR Programme of the Judicial Service of Ghana goes beyond the Commercial Court. It stretches from the District Courts, the Circuit Courts to the High Courts. An appellate ADR system was largely discussed among the Senior Management of the Judicial Service sometime ago with the view to implement processes that make mediation possible in the Courts of Appeal. Indeed, the Courts Act, 1993 (Act 459) states thus:
“Section 72—Courts to Promote Reconciliation in Civil Cases.
(1) Any court with civil jurisdiction and its officers shall promote reconciliation, encourage and facilitate the settlement of disputes in an amicable manner between and among persons over whom the court has jurisdiction.
(2) When a civil suit or proceeding is pending, any court with jurisdiction in that suit may promote reconciliation among the parties, and encourage and facilitate the amicable settlement of the suit or proceeding.
Section 73—Reconciliation in Criminal Cases.
Any Court, with criminal jurisdiction may promote reconciliation, encourage and facilitate a settlement in an amicable manner of any offence not amounting to felony and not aggravated in degree, on payment cases of compensation or on other terms approved by the court before which the case is tried, and may during the pendency of the negotiations for a settlement stay the proceeding for a reasonable time and in the event of a settlement being effected shall dismiss the case and discharge the accused person” (The Courts Act, 1993, [Act 459]).
Further, Order 58 of the Civil Procedure Rules of the High Court of Ghana, CI 47, mandate that all cases filed with the specialized commercial court goes through a mandatory pre-trial conference before trial.
Arbitration as a mechanism for resolving Corporate Governance Disputes
The Arbitration process is just like a private court process in Ghana. It is conducted by an arbitrator who makes a binding determination just like a judge. The process is only voluntary to the extent where the parties agree to adopt the process. Otherwise, arbitration in Ghana is a final and binding process which outcome can only be appealed against on questions of law at the Court of Appeal. Arbitration is known to be faster in many instances than litigation and its outcome is as enforceable as any judgement of the court.
The ADR Act, 2010 (Act 798) of Ghana defines Arbitration as “the voluntary submission of a dispute to one or more impartial persons for a final and binding determination.” In arbitration under the current laws of Ghana, parties in dispute or to a written agreement may provide that a dispute arising under the agreement shall be resolved by arbitration. Such agreement is often in the form of an arbitration clause incorporated in any agreement signed by the parties. There is an opportunity available to organizations in their corporate governance processes to incorporate arbitration agreements into procedures, policies, regulations and other processes to provide for concrete and conclusive resolution of disputes that arise under the corporate governance stakeholders of the organization.
Arbitration has voluntary and compulsory dimensions. Arbitration is generally voluntary. However, for statutory processes such as Public Sector and Labour Arbitration processes, arbitration may be mandatory in accordance with specific statutes of the state. Where a party is not satisfied with the voluntary arbitration award, an appeal on questions of law only may be filed with the Court of Appeal or seek to set aside the award at the High Court on grounds of bias, conflict of interest or arbitrator(s) action outside of mandated or where the Court finds that the award was induced by fraud or corruption. These processes and procedures in Arbitration ensure that there is a certainty and logical conclusion to conflict especially those that arise as a result of commercial or corporate governance interrelationships.
This article reveals that the Companies Code, 1963 (Act 179) of Ghana adopts the courts trial process of litigation as the primary disputes resolution mechanism which has very serious limitations for preventing and managing corporate governance conflicts more efficiently. ADR processes of Negotiation, Mediation and Arbitration as prescribed by the ADR Act, 2010 (Act 798) have been explored and proven as more contemporary and useful mechanisms acceptable worldwide for better outcomes in commercial and corporate governance related disputes.
In conclusion, good corporate governance is the bedrock of Ghana’s business and economic development. Because corporate governance and commercial disputes will continuously be a necessary part of corporate governance processes, it is important for business leaders and board of directors in Ghana, to incorporate in their policies, regulations and procedures, more contemporary disputes resolution processes such as mediation and arbitration for the prevention or conclusive resolution of disputes that arise. Clearly, litigation which is the most common and visible disputes resolution option has serious limitations in Ghana’s judicial system especially for disputants in continuous, ongoing and interdependent relationships.
Alternative Disputes Resolution Act, 2003 (Act 798) of the Republic of Ghana.
Companies Code, 1963 (Act 179) of the Republic of Ghana
Courts Act, 1993 (Act 459) of the Republic of Ghana
High Court Civil Procedure Rules, CI 47. Order 58: Commercial Court Rules of the Republic of Ghana.
Kiryabwire W.M., 2007. Mediating Corporate Governance Disputes through Court annexed mediation: Case Study from Uganda. Presentation delivered at the Global Corporate Governance Forum in Pari – February 12, 2007.
Moffitt L. M. and Bordone R. C., 2005. The Handbook of Disputes Resolution. First Edition. Publication on the Programme on Negotiation at Harvard Law School. Jossey-Bass, San Francisco. USA
Nolan-Haley J. M., 2008. Alternative Disputes Resolution. Third Edition. Thompson/West. USA
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