Nigeria: FG Under Pressure to Pay N150 Billion Judgment Debts

Pressure has continued to mount on the federal government to pay judgement debts of a whopping sum of N150 billion arising from litigations within and outside the country.

Apart from the $9 billion judgement debt obtained against it last year by Process and Industrial Development Limited (P&ID) by the United Kingdom Commercial Court which is still a subject of litigation, the Nigerian government is still grappling to other contractual judgements debts against it by local and foreign courts.

Judgement debt is damage or other monetary award pronounced upon by a court of competent jurisdiction. According to the law, there are two parties in the enforcement of a judgment: the judgment creditor (any person/group/government for the time being entitled to enforce a judgment) and the judgement debtor (a person/group/government liable under a judgment).

Justice Minister and Attorney General of the Federation, Abubakar Malami (SAN) had in October last year lamented that Nigeria was currently in judgement debt to the tune of N150 billion.

He said the huge amount piled up from contract failures, damages, especially fines against human rights abuses, and other bad cases.

Speaking during the 2020 budget defence of his ministry before the Senate committee on Judiciary, Human Rights and Legal Matters, Malami implored the Red Chamber to appropriate additional N30 billion to the ministry to service the debt annually.

Noting that the country was facing "hydra-headed challenges meeting up with the obligations, the AGF said, while N10bilion was paid in 2017, N150 billion had remained unpaid.

This, he said, had provoked beneficiaries to mount severe pressure on the ministry, just as he demanded that a commission of 2.5% of the total recovered loot should be given to the Asset Recovery Unit in his office to service bills.

Malami said, "There exists over N150 billion judgment debt against the interest of the federal government, as at 2015, when this government came into being. Our national assets all over the globe are experiencing one threat or the other, targeted at enforcing these judgments."

Weighing in, some senior lawyers in the country yesterday expressed concern over the more than N150billion judgement debt owed by the federal government.

The lawyers who separately spoke to LEADERSHIP warned that something urgent and drastic should be done to reduce the judgement debt burden of the country.

The government, they warned, might be compelled to pay the awards when the international government starts talking about it, a development the said may become embarrassing for the government.

They averred that the court cases will hurt the government more, as it will send negative signal to foreign investors that it is unable to honour contracts.

A Senior Advocate of Nigeria, Chief Agboola Dare, warned about the consequence of allowing the debt to accumulate, saying the judgement debts were incurred as a result of litigations which must be paid by the federal government.

He said, "These judgement debt is a must paid by the government because they came following a litigation. The more the government delay in the payment the more it will continue to accumulate.

"I sympathize with the government but there is nothing anybody can do about it. It is a court pronouncement and must be obeyed".

Also, a United States-based lawyer, Ikenna Osuagwu, told LEADERSHIP Weekend that the lackadaisical attitude of some government officials in the handling of cases against the government contributed to the judgement debt.

According to him, government may have lost some cases that should have been won, which is part of the contributing factors to the judgement debts.

Osuagwu stated: "Non-adherence to the rule of law is a major factor when you talk about judgement debt. In my view, I think government needs to do more to tackle rising cases of judgement debts.

"This is a debt that must be paid because they came from the court. But government can actually negotiate with those they owe to reduce the cost".

A constitutional lawyer, Abdul Balogun, said while the federal government was already bleeding with heavy judgement debts, negotiating with the judgement creditors is the way out.

"The government has no choice than to negotiate with them because that is the only way to get out of the mess it has found itself. N150billion is a lot of money which could have been used to better the lots of millions of Nigerians".

On his part, an Abuja based lawyer, Emeka Anuforo, said the debt burden of the federal government was huge and it must urgently device a means to clear the debts.

He also agreed with other lawyers that the debt is a must pay, noting that it is not a matter of whether it is convenient for the government or not, it is something they must pay.

Also speaking, Geoffrey Akinloye, a lawyer and director of Research of the Centre for Humanitarian Studies, said government was already groaning under heavy debt burden both locally and internationally.

According to him, if care is not taken, government may not be able to engage in meaningful infrastructural development.

He said the federal government needs to fashion out a way to get out of the heavy debt burden it has found itself.

He said, "The masses will be the ones to suffer because already, we are heavily indebted to foreign bodies and to now add judgement debt to it is something that should be thoroughly addressed by the government".

Another constitutional lawyer, Ahmed Salihu, cautioned the federal government to ensure accountability in the payment of the judgement debts.

He said proper auditing should be done to ensure that fictitious figures are not added into the debt. "I am sure if proper auditing is done, the figure can't be up to N150billion".

Only on June 12, 2018, US-based gas processor, Process and Industrial Development Limited (P&ID) obtained a default judgement affirming a $6.59 billion arbitral award against the Federal Government, plus $2.3 billion in interest after a dispute that arose over a natural gas supply and processing agreement in January 2010.

The judgement was awarded against Nigeria because the federal government failed to appear in court to mount a defence.

Other cases brought against Nigeria mentioned in the Eurobond prospectus include Interstella vs NITEL.

In June 2012, a Federal High Court sitting in Umuahia, Abia State, ordered the Central Bank of Nigeria (CBN) to pay Interstella Communications Ltd a total of $286 million, including accrued interest.

The high court ordered the CBN to debit the accounts of the Federal Government in order to pay the same to Interstella Communications.

Interstella Communications, a Nigerian internet gateway operator, had instituted a legal action against Nigerian Telecommunications Limited (NITEL) since June 2007 in order to seek legal redress for a breach of contract.

The company won a judgement against NITEL six years ago when the judge ordered NITEL to pay the sum of N1.944 billion per annum accruable to the plaintiffs as revenue from their investment on 36 E1 switch port beginning from 2002.

The court also directed NITEL to pay 30 percent interest until date of judgement and thereafter at 25 per cent until date the liquidation of judgement debt hereby granted.

NITEL appealed the ruling; however the 2017 court order given by Justice M.G Umar of the Federal High Court was challenged by the then Attorney-General of the Federation and Minister of Justice on the allegation that it was obtained without the knowledge of the Attorney-General. The matter is presently pending at the Supreme Court of Nigeria.

In March 2017, Supreme Court ruled in favour of Korea National Oil Corporation (KNOC) that the decision of the federal government to re-award Oil Prospecting License (OPL) 321 and 323 to Owel Petroleum Consortium was illegal.

The dispute commenced in 2009, when KNOC filled an action against the Federal Government entities at the Federal High Court of Nigeria.

In the suit leading to the Court of Appeal and the Supreme Court, the Federal High Court upheld all KNOC's claims against the Federal Government and had held that the decision of the President contained in a letter of January 8, 2009, purportedly revoking KNOC's interests in the OPLs was illegal.

The Federal High Court, therefore, voided and quashed the revocation on grounds that the decision of the late former President Yaradua revoking KNOCs interest in the OPLs was illegal, procedurally unfair, unreasonable, and against the legitimate expectation of KNOC.

Dissatisfied with the decision of the Federal High Court, Owel Petroleum Services Limited went to the Court of Appeal.

OWEL was not an original party to the suit but joined after the commencement of the action at the lower court as the Court of Appeal in agreement with the Federal High Court ruled that the President's revocation of KNOC's interests in OPLs 321 and 323 was wrong as the President has no power to void the allocation of the OPLs.

The Court of Appeal also held that the Side Letter granting KNOC a discount on the signature bonus in consideration for a $6billion investment by KNOC in strategic downstream project was invalid.

Dissatisfied with the decision of the Court of Appeal, KNOC, OWEL and the Federal Government entities, filed separate appeals to the Supreme Court challenging some findings of the Court of Appeal, primary of which were, the decision of the Court of Appeal on the technical issue as to the mode of commencement of the suit and more substantive issues such as the legality of the Side Letter and the revocation of KNOC's interests in the OPLs.

Another case in court is a case between Continental Transfert Technique Ltd and the federal government as a District of Columbia federal judge last year banned Nigeria's government from invoking a broad sweep of evidence to fight a pending effort to enforce a $276 million arbitral award turned judgment against the country, after Nigeria missed a deadline to share information about its U.S. assets.

The case goes back to 2008, when Continental sued the country over the underlying award.

The company had won a contract from Nigeria's government in 1999 to create computer-readable cards for noncitizen residents, akin to the U.S. green card.

The company was supposed to get paid by splitting the proceeds of card sales 50-50 with Nigeria's government, but that changed as the contract was amended.

Continental said sales of the card came in far below Nigerian government projections, and the company filed for London arbitration against the country in November 2007 with the International Dispute Resolution Centre in proceedings under Nigerian law.

It won an award for N30 billion ($255 million as at that time). A federal judge confirmed the award in U.S. dollars, and the judgment totalled $276 million as of 2013.

Continental Transfert has been trying to depose Nigerian officials about their government's U.S. assets since 2014. It asked the court earlier last year to sanction Nigeria by limiting its right to raise defences, but the country has resisted, saying its fundamental rights couldn't simply be stripped away.

An award of $21.24 million (N6.5 billion) was also ruled in favour of ENRON Nigeria Power Holding (ENPH) Limited, which signed an agreement with the Lagos State government for the construction of power projects in the state.

The federal government guaranteed the agreement and has now been held liable after Lagos was accused of breaching it.

The award in favour of ENRON, which has been affirmed by both high and appeal courts in the United States, has been awaiting settlement for more than a year and 26 days, since April 26, 2017.

The Federal Government has remained docile over the need to review the Production Sharing Contract (PSC) signed about 25 years ago between the Nigerian National Petroleum Corporation (NNPC) and International Oil Companies (IOCs).

While losses of over $21 billion have already been recorded since threshold for review of the contract was reached in 2000, experts are expecting the losses to triple as the price of crude oil increases and more deepwater projects come on board.

The disputes are currently the subject of four separate arbitral proceedings which the contractor parties Nigeria Agip Exploration Limited, Shell Nigeria Exploration and Production Company (SNEPCO), Esso Exploration and Production Nigeria Limited (Esso) and Statoil (Nigeria) Limited ("Statoil")) have instituted against the NNPC.

The four arbitral tribunals have issued awards. However, the NNPC applied to the Federal High Court, Abuja challenging the arbitration proceedings on the basis that the exclusive jurisdiction to determine tax disputes lies with the Federal High Court of Nigeria pursuant to Section 251 of the Constitution.

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