Nigeria: British Court Awards U.S.$9.6 Billion Against Nigeria to UK Firm for Doing Nothing

(file photo)
17 August 2019

Lagos and Abuja — A British Commercial Court yesterday affirmed the ruling of a London Arbitration Tribunal which in January 2017, awarded $6.6 billion judgement debt against the federal government over alleged breach of a gas supply and processing agreement (GSPA) it allegedly signed with a British firm, Process and Industrial Developments Ltd (P&ID).

The tribunal had ruled that Nigeria was liable for $6.6 billion in damages, which increased to well over $9 billion with interest accruing daily.

However, analysts are worried that the British court simply rewarded P&ID with the monstrous amount for doing nothing for Nigeria. Curiously, P&ID never began the construction of the project facility for which it claimed about $40 million in preliminary expenses.

Besides, the firm's claims in the arbitration proceedings were mainly for loss of profit for the entire 20-year term of the botched contract, initially claiming US$1.9 billion and later increasing its claim to US$5.9 billion.

Mr. Justice Butcher of the Commercial Court yesterday rejected Nigeria's objections both to the arbitration process including the jurisdiction as well as the amount of the award and said he would "make an order enforcing the Final Award in the same manner as a judgment or order of this Court to the same effect."

In line with the Clause 20 of the GSPA, the British Judge said he would receive submissions from the parties as to the precise form of order appropriate.

The Clause 20 of the GSPA provided in part that the parties "shall agree to appropriate arbitration terms to exclusively resolve any disputes arising between them from this Agreement."

It also provided that the arbitration award "shall be final and binding upon the Parties and that the venue of the arbitration shall be London, England or otherwise as agreed by the Parties."

The British court decision yesterday was sequel to the March 16, 2018 proceedings in the Court by P &ID, seeking leave to enforce the Final Award in the same manner as a judgment.

If the order was made as sought, the legal judgement would allow P&ID the right to seek to seize some $9 billion in assets from the Nigerian government over the alleged failed gas project.

But the federal government yesterday said it had commenced move to reverse the judgment of the British court and had already instructed its lawyers to initiate appeal proceedings against the judgment at the British court.

This was contained in a statement from the Federal Ministry of Justice, signed by the Solicitor-General of the Federation, Dayo Apata.

Apata, while assuring that the federal government would do everything possible to defend vigorously its interest and that of the people of Nigeria, hinted that part of the move was to seek for a Stay of Execution of the said judgment, adding that the issue was a current litigation issue at the United States of America.

Apate said: "As regards the recent Judgment of the English Court of 16 August 2019, the federal government's Counsel has been instructed to pursue an appeal on the judgment of the English Court dated 16 August, 2019 and at the same time seek for a Stay of Execution of the said judgment.

"In view of the above, please be informed that the Federal Government of Nigeria is making vigorous efforts to defend its interest in this matter and would not relent in exploring every viable option in doing so", the statement read in part."

The federal government insisted that the P&ID never began the construction of the project facility for which it claimed about $40m in preliminary expenses.

The FG said the firm's claims in the arbitration proceedings were mainly for loss of profit for the entire 20-year term of the GSPA, "initially claiming the sum of US$1.9billion and later increasing its claim to US$5.9billion.

Apata disclosed that though the Arbitral Tribunal had on 31st January 2017 rendered its Final Award against the Ministry of Petroleum Resources in the sum of US$6.597 billion together with pre-award interest at the rate of 7% per annum effective from March 20, 2013 and post award interest at the same rate till date of payment, the government had challenged the decision.

He said: "Upon the Award, P & ID commenced recognition and enforcement proceedings of the arbitration award against FGN in March 2018 in both the United Kingdom ("UK") and the United States of America (the "United States").

"The FGN is duly represented in the proceedings in the United States by the Law Firm of Curtis, Mallet-Prevost, Colt & Mosle LLP which also represented it in the UK proceedings of which judgement was given on 16th August, 2019 in favour of the P&ID to commence enforcement proceeding against the FGN assets in the UK.

"Recall further that this matter was inherited from the previous administration by the present one. Upon inheriting this matter, this government engaged the renowned US Law Firm of Curtis, Mallet-Prevost, Colt & Mosle LLP to defend the interest of the FGN. The law firm has taken step to defend the proceedings in the United Stated by urging the District Court to dismiss the P&ID application for enforcement of the award on the ground that Nigeria as a sovereign state has an absolute right to obtain an authoritative determination of its sovereign immunity.

"The FGN therefore demanded that the jurisdictional issue must be conclusively resolved before Nigeria may be required to litigate the merits of P&ID's petition."

In the proceedings before the British court, Mr. Matovu QC, for the FRN had submitted among others that the issue of the location of the juridical seat of the arbitration was to be determined in accordance with the law governing the arbitration clause of the GSPA; that that was Nigerian law; and that as a matter of Nigerian law, the seat of the arbitration was Nigeria.

He also argued that the orders of the Nigerian Court (on 20 April 2016 to restrain further conduct of the arbitration, and to set aside and/or remit the Liability Award were highly significant, given that the Nigerian Court was the supervisory court.

Matovu had also contended that Procedural Order was issued in "flagrant breach" of an injunction of the supervisory court, as well as having been arrived at in a procedurally unfair fashion. Equally, the Liability Award had been set aside by the supervisory court (Nigerian court), and the Final Award, which depended on it, was therefore a "nullity".

He also argued that: The FRN's earlier application under s. 68 Arbitration Act 1996 to the English Court had been a mistake, and had not created an issue estoppel; that in light of the foregoing there was nothing to prevent the FRN from arguing before this Court that the seat of the arbitration was Nigeria.

He said if, contrary to these arguments, the seat was England, then nevertheless as a matter of discretion the Final Award should not be enforced because (a) the amount awarded and the basis on which it was awarded were manifestly excessive and contrary to English public policy; and (b) that as a matter of Nigerian law, as the governing law of the GSPA, pre-award interest was not available.

But Mr. Justice Butcher in rejecting his submissions held that the Tribunal was entitled to decide to make a ruling as to seat.

"For reasons which will already be apparent, I do not accept the contention that the Tribunal was not entitled to make a ruling on seat. As I have said, I consider that the Tribunal was authorised to determine a dispute as to the location of the seat; that it had been asked to do so by P&ID on 1 and 19 April 2016; and that the order of the Nigerian Court of 20 April 2016, even if the Nigerian Court had relevant jurisdiction, did not injunct the Tribunal from proceeding with the reference", Butcher asserted.

He further asserted: "Given the nature of the FRN's complaint here, which was based on considerations of fairness, and due process, it must be very relevant that the FRN had remedies in relation to the suggested procedural unfairness of the Tribunal's determination, which it did not pursue (see paragraphs 64-66 above). Given that, I am not able to accept that there would be an unfairness in recognising an issue estoppel as a result of Procedural Order No. 12.

"I have also reached the same conclusion as did the Tribunal in relation to there being an agreement by conduct that the seat of the arbitration as provided for by clause 20 of the GSPA should be regarded as London. In this regard the terms of the Part Final Award of 3 July 2014, which I have quoted in paragraph 9 above are of significance. It stated in terms that the seat of the arbitration was England. Further, that Part Final Award, and the Liability Award both stated, at the end, that the place of the arbitration was London, England.

Given the terms of s. 26(3)(c) ACA, that was a clear statement that the Tribunal considered that the legal seat was England. The FRN did not object to these statements in the Part Final Award of 3 July 2014 or the Liability Award and continued to participate in the arbitration. Like the Tribunal I consider that, objectively viewed, there was here an agreement by the FRN that the seat stipulated in clause 20 of the GSPA was England.

"Looking at the Final Award itself, there can be no doubt that the Tribunal was intending to award only compensatory damages, and that there was not intended to be any element of penalty or punitive damages in the sums awarded. In paragraph 40 it is stated that: "The damage suffered by P&ID is the loss of the net income it would have received if it had been supplied with wet gas in accordance with the contract and had been able to extract and sell the natural gas liquids." The Tribunal went on to consider and reject an argument that P&ID would not have performed the contract, and to hold that losses of the kind referred to in paragraph 40 were not too remote (paragraphs 41-56), and were quantified at US$6,597,000,000

"In circumstances where, as I have found, the seat of the arbitration was England, any excess of jurisdiction by the arbitrators could have been the subject of an application under s. 67 Arbitration Act 1996. Given that there was no such application in relation to the award of pre-award interest (or at all), I do not consider that there can now be a separate objection to enforcement on the basis of a lack of jurisdiction.

"In any event, the suggestion that the award of pre-award interest was beyond the scope of the submission to arbitration is not made out. Interest, which was not said to be confined to post-award interest, was claimed in the Notice of Arbitration. Issue was joined with P&ID's claim, but there was no suggestion that the tribunal lacked jurisdiction to award pre-award interest. In the circumstances I do not consider that the issue was jurisdictional. It may be that the FRN had answers to the claim which it did not put forward, but that is a different matter."

He concluded: "For these reasons, I am prepared to make an order enforcing the Final Award in the same manner as a judgment or order of this Court to the same effect. I will receive submissions from the parties as to the precise form of order appropriate."

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