Nigeria breathes a sigh of relief as the Commercial Court accepts the contract in dispute was tainted by corruption.
The Commercial Court in London has today (23 October) set aside a USD 11 billion arbitration award in favour of Process and Industrial Developments Limited (P&ID), a British Virgin Islands-based company that had sued Nigeria for breaching a gas processing contract. Should Nigeria have lost the case, being impelled to pay out such a huge sum would have had a seriously deleterious impact on the country’s public finances, with debt now running well in excess of USD 100 billion and inflation at around 27%.
Justice Robin Knowles upheld Nigeria’s argument that the contract and the award “were obtained by fraud and the awards were, and the way in which they were procured was, contrary to public policy”. The court also agreed that Nigeria had established a prima facie case of fraud that would justify the reopening of the arbitration proceedings.
The case, which had lasted for over five years, involved a 2010 agreement between Nigeria and P&ID to build a gas processing plant in Calabar, Cross River State. However, the project never took off as Nigeria failed to supply gas to the plant. P&ID then initiated arbitration against Nigeria in 2012, claiming damages for the loss of expected profits.
In 2017, a tribunal in London awarded P&ID USD 6.6 billion in damages, plus interest at 7% per annum, bringing the total amount to over USD 11 billion as of 2023. Nigeria challenged the enforcement of the award in several jurisdictions, including the US and the UK. The challenge was chiefly centred on section 68(2)(g) of the Arbitration Act 1996, with Nigeria contending that the Gas Supply and Processing Agreement dated 11 January 2010 (GSPA) – the roots of the dispute – was procured by bribes paid to insiders and top government officials in Nigeria as part of a larger scheme to defraud. Nigeria further alleged that P&ID’s founder Mick Quinn, who is now deceased, gave perjured evidence to the original tribunal and, further, that Nigeria’s own representative in the arbitral proceedings did a particularly ineffective job because he himself had been bribed.
Nigeria also sought to set aside the award on the grounds of fraud, corruption and misrepresentation, alleging that P&ID officials paid bribes to Nigerian officials to secure the contract and that the contract was never approved by the Federal Executive Council or the National Assembly. Nigeria also claimed that P&ID had no intention or capacity to perform the contract and that it had forged documents and witnesses to support its claim.
P&ID denied the allegations and accused Nigeria of making false accusations and relying on conspiracy theories to evade its legal obligations. P&ID also argued that Nigeria had waived its right to challenge the award by not raising the fraud allegations during the arbitration. The court, however, found that Nigeria had acted diligently and reasonably in investigating and exposing the fraud. The court also found that there was strong evidence of fraud by P&ID and its agents, including the use of forged signatures, unreasonably inflated costs, the utilisation of shell companies to obfuscate certain aspects of the deal and an overall lack of due diligence.
The court therefore concluded that it would be unjust to allow P&ID to enforce the award based on a fraudulent contract. The court ordered that the award be set aside in its entirety and that P&ID pay Nigeria’s legal costs.
Shaistah Akhtar, partner at Mishcon de Reya who led Nigeria’s legal team, said in a statement: “Today’s judgment is a historic result for Nigeria and its people. The Nigerian government’s resolve in pursuing a just outcome led to it uncovering overwhelming evidence of bribery and corruption. We are pleased that the Judge recognised the severity of the fraud perpetrated against the people of Nigeria in his judgment, and trust that this landmark decision will deter other potential fraudsters and their backers from exploiting the legal system in the pursuit of monetary gain.”
The ruling was welcomed by Nigeria’s Attorney-General and Minister of Justice, Abubakar Malami, who described it as a “watershed moment” and a “huge victory” for Nigeria. He said that the country would continue to defend its sovereignty and interests against any unlawful and unjustifiable claims.
P&ID expressed disappointment with the judgment and said that it would seek permission to appeal. It said that the judgment was “flawed” and “based on a narrow set of issues”. It also said that it remained committed to finding a “reasonable resolution” with Nigeria.
Commenting on the decision, Leigh Crestohl, a partner with the London-headquartered disputes specialist firm Zaiwalla & Co, tells CDR: “This landmark ruling has again underlined the role of London as the leading venue for the fair and impartial resolution of major international disputes. In turbulent international financial conditions the government and people of the Federal Republic of Nigeria must feel significant relief at this decision, which cancels Nigeria’s liability to make a payment to private parties said to be worth more than ten times its annual health budget.”
Crestohl continues: “The decision also illustrates that the English Court will not hesitate to investigate allegations that the conduct of a London arbitration was tainted by fraud, and to put matters right where that is proved. The detailed Judgment of Mr Justice Knowles, running to 140 pages, demonstrates a forensic analysis of the facts and law and reflects the Court’s dedication to achieving justice. For the international community,” Crestohl concludes, “the message should be that the institutions of all nations must not waver in their efforts to root out historic corruption no matter how long ago, and how difficult the task is.”
In The Federal Republic of Nigeria v Process & Industrial Developments, Nigeria was represented by Mark Howard KC of Brick Court Chambers and Philip Riches KC of Twenty Essex, instructed by Mishcon de Reya. P&ID was represented by Lord (David) Wolfson KC of One Essex Court, instructed by Quinn Emanuel Urquart & Sullivan.
https://www.cdr-news.com/categories/litigation/19605-breaking-london-court-nullifies-usd-11-billion-award
