Nigeria: Exclusive - Besides $9 Bn P&ID Ruling, Nigeria Dogged By Other Huge Contractual Judgement Debts

(File photo)
15 October 2019

As Nigeria puts together an appeal against the $9 billion judgement debt in favour of Process and Industrial Development Limited (P&ID), by the United Kingdom Commercial Court, the country is still haunted by other contractual judgements debts against it by local and foreign courts.

Last month, the UK court granted the Nigerian government's application for a stay of execution after it granted P&ID leave to seize $9 billion in assets belonging to the country over a botched gas project in August.

P&ID had approached the court to seek compensation claiming the Nigeria government breached a 2010 gas contract agreement. The government had hired P&ID to build gas processing facilities around Calabar, Cross River. According to the contract, the government was required to supply wet gas of up to 400 million cubic feet daily.

The court initially granted the firm an arbitral award of $6.6 billion. But the figure rose to about $9 billion with an additional $2.3 billion in accumulated interest at 7 per cent rate, after Nigeria refused to enter an appeal for more five years after the original ruling.

Nigeria's Attorney-General and Minister of Justice, Abubakar Malami, said the ruling was "clearly unreasonable and manifestly excessive and exorbitant."

But while the government hopes to upturn the ruling, there are at least four other similar dispute judgements against it in Nigeria, UK and United States courts worth more than $600 million (excluding accumulated interests), which it has shown no interest in complying with.

The $276 million award row

In 1999 the Ministry of Interior (formally known as the Ministry of Internal Affairs) awarded a contract to manufacture the Combined Expatriate Residence permit and Aliens Card (CERPAC) to Continental Transfert Technique Limited.

According to the deal, the Continental will provide equipment, training and technical support while the ministry will provide office accommodation for the CERPAC facilities. It further stated that the Federal Government will collect 60 per cent of fees earned from CERPAC, Continental would get 30 per cent while the remaining 10 per cent will used to cover operating expenses.

However, in November 2007, Continental filed an arbitration proceeding at the International Dispute Resolution Centre, London, as stipulated in the terms of the contract. The company claimed that the Nigerian government misrepresented and failed to perform its obligation of the contract.

The government denied the allegations and filed a counterclaim asking the arbitration court to order Continental to pay it $34 million for failure to deliver equipment and perform services.

On August 14, 2008, the arbiters awarded Continental approximately USD $252 million in damages, USD $247,500 in costs, and USD $238,007 for the cost of arbitration. In 2009, Continental also secured a judgment by the United Kingdom's High Court of Justice that confirmed the arbitral award as final and enforceable.

The Nigerian government refused to pay.

Frustrated by the refusal of the government to pay, Continental initiated a proceeding in the US District Court of Columbia to seek enforcement of the arbitration award. On March 26, 2013, the U.S. District Court of the District of Columbia issued a judgment that granted Continental an award in the amount of U.S.$276.1 million, including post-judgment interest at a rate of 3.4 per cent. per annum.

On 25 April 2013, the government filed an appeal against the judgement but could not get the court to upturn the judgement and completely stopped appearing in court in respect of the case from 2017.

"I worked on that case for many years. However, in February 2017, we were relieved as counsel. According to publicly available court records, the Nigerian government never retained new counsel and it has not responded to any of the filings in that case since that time," David Ludwig, a partner at the law firm, Dunlap Bennett & Ludwig told PREMIUM TIMES in an email.

Worried that it may never get the Nigerian government to voluntarily pay the award amount, in May 2018, Continental applied to recover from an account operated by the Central Bank of Nigeria (CBN) in JP Morgan in New York. However, on Tuesday August 6, a judge of a U.S. District of Columbia Court ruled that the money in the said account was immune to seizure.

Pointing at several payments to U.S. entities for items such as aircraft and military equipment, legal and consulting services, and tuition payments on behalf of the Nigerian government, Continental argued that "Using those funds in the account to pay Nigeria's commercial bills, without any apparent discretion, cannot qualify as a 'central banking activity,"

However, the judge, Paul Friedman, held that the Foreign Sovereign Immunities Act (FSIA) protects the CBN account with JP Morgan because the funds in the said account was being used for typical bank functions. The CBN had argued that the funds were being used to pay US commercial bills incurred by the Nigeria government.

"Courts and commentators have recognized that the very type of conduct engaged in by CBN here -- serving as a banker to [the federal government of Nigeria] by paying certain commercial debts in the United States -- is a standard central banking activity," the judge ruled.

Mr Friedman also ruled that "a bank account is presumed to be the property of the person or entity whose name appears on the account or to whom the account is registered," that is the CBN.

Dispute with Interstella Communications

In June 2007, Interstella Communication Limited, a telecommunication company sued the defunct Nigerian Telecommunications Limited (NITEL) for a breach of contract and its inability to provide it with the half 1*STM2 circuit on SAT3, a fiber-optic network transmission standard, it paid for since October 2006.

Interstella prayed the court to order NITEL to pay it N1.9 billion yearly, as revenue, as well as $150,000.00, being the cost of medical treatment of its chief executive officer and another $2.4 million per month, being the monthly revenue it would have accrued from its investment in the fiber-optic network.

The company was not done. It also prayed the court for an order for NITEL to pay it N2 billion as exemplary damages for injury inflicted on its business.

In June 2012, a Federal High Court in Umuahia ordered the Central Bank of Nigerian to reimburse Interstella its claim against NITEL to the sum of $119 million.

Soon after the judgement, the Federal government and Interstella reached an out of court settlement and agreed that N12 billion would be paid to Interstella. The parties entered the settlement as consent judgement at the Federal High Court and the judgement sum. The government then paid 30 per cent of the agreed N12 billion. However, around 2015 when a new government was sworn in, the Federal Government discontinued further payment.

Interstella headed back to court to compel the federal government to honour the out-of-court settlement.

In a scathing judgement in December 2017, the Supreme court ruled that the out-of-court settlement was unknown to law explaining that after the original judgement was $119 million was entered by the high court judge, the judge "had no jurisdiction to enter judgement as per terms of settlement for twelve billion naira (N12B)"

"Terms of Settlement are only entered as judgement of the court before judgement is delivered and not after," it explained further.

It also explained that irrespective of the legality of the N12 billion settlement entered by the court, once such an agreement was reached it is then bidding for the parties involved to honour it. It explained that "such an agreement can only be set aside by fraud, misrepresentation mistake, undue influence and certainly not by the federal Government questioning the process adopted by the judgement creditor to recover the outstanding sums agreed by the parties, or on its whim."

"It is reprehensible to agree to pay twelve billion naira judgement sum, proceed to pay 30% of it then refused to make further payments. Agreements entered into by the federal Government and that have been partly executed must be executed in full even if a new Government assumes office," one of the Supreme Court judges wrote.

As at December 2017, the judgement debt against the Federal Government had risen to $289 million due to accruing interest. It is not known whether the government has paid Interstella the judgement debt which was still pending or reached an agreement for settlement.

Dispute with Enron Nigeria Power Holding, Ltd.

In 1999, Enron Power Holding Limited (ENPH) a subsidiary of Enron International Corporation signed a contract with the Lagos State government to design, build, finance and operate gas pipelines and electric plants.

In 2001 after Enron, the parent company of ENPH collapsed, the Nigerian Federal Government, through the National Electric Power Authority (NEPA) cancelled the deal arguing that enforcing the contract was against public policy due to the fraud that led to the demise of its parent company in the US.

ENPH argued that the collapse of its parent company would not have stopped it from delivering the contract. Despite efforts made by ENPH to move the contract forward Nigerian did not show further interest forcing the company to approach the International Chamber of Commerce's International Court of Arbitration (ICC) in London in 2006.

The ICC found no clear evidence that ENPH induced Nigeria to enter the contract, as alleged by the government. The court added that the contract contained no implied or express guarantees from Enron, which was not even a party nor has been named in any capacity in the contract. The court also ruled that the accounting fraud that led to the collapse of Enron in the US has not connection to ENPH or the contract signed with the Lagos State government.

The court subsequently ordered Nigeria to pay ENPH $12 million as damages. Nigeria refused to pay forcing ENPH to try to enforce the payment in the US. The case has since gone through two appeals in the US and Nigeria has lost both of them and thereby incurring huge interest on the original judgement debt and legal cost of about $240,000.00.

The final Appellate judgement was given in November 2017. It is not known whether the country complied with the ruling of the court.

Dispute with LR Avionics

In October 2002, the Nigerian government signed a deal with Israeli firm, L R Avionics Technologies Ltd for the supply of military equipment. The contract was governed by the Nigerian Arbitration and Conciliation Act.

Ten years later, the Israeli filed for a breach of contract and the Chief Judge of the Federal High Court appointed Babajide Ogundipe, a Nigerian barrister as the sole arbitrator to adjudicate the matter. On February 2013, the arbitrator awarded $5million plus $4.7 million cost in favour of the Avionics. The award was without interest.

The government's attempt to set aside the award in 2013 at the Federal High Court, Abuja was unsuccessful. But the government refused to pay the Israeli firm the judgment debt.

Unable to compel the Nigerian government to pay, in 2015, Avionics sought to enforce the award in the United Kingdom. The firm tried to sell a property belonging to the Nigerian government located at 56-57 Fleet Street, London.

The property is a three-storey building that was previously used by the Nigeria High Commission for its consular services. At the time Avionics tried to sell the property, it was leased to Online Integrated Solutions Ltd, a firm that was providing visa and passport services, at £150,000 per year.

But avionics' attempt to sell the property was unsuccessful as a British court ruled that because the property was being used for diplomatic activities, it was immune to execution under UK laws.

The court explained that although the property may be connected to a commercial transaction due to the Online Integrated Solution's services to the Nigerian High Commission, but the purpose was for visa and passport services, which falls under diplomatic services.

Nigeria's attorney-general and minister of justice, Abubakar Malami, did not respond to phone calls and text messages asking him for comments about these disputes and what the government was doing to resolve them.

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