The Nigerian government is celebrating the decision of a UK court to overturn the over decade-long $11.3 bn award against it over the controversial 13-year-old deal by Process & Industrial Developments (P&ID), a British engineering firm.
But the ruling a fortnight ago, October 16, culminated from a long and tortuous legal tussle over a flawed contract conceived during the late former President Umaru Musa Yar’Adua’s administration.
Contract background
The background to the contract was contained in a deposition in a court document filed the late Chairman of P&ID, Michael Quinn, in support of his case before the UK arbitration court.
The document revealed that the conception and negotiations for the controversial gas contract involved top Nigerian government officials in the Presidency at the time, with representatives of key government agencies in the oil and gas industry, namely the investment management services subsidiary of the Nigerian National Petroleum Corporation (NNPC), the National Petroleum Investments Management Services (NAPIMS) and the Department of Petroleum Resources (DPR).
Quinn said P&ID was incorporated on May 30, 2006, as a business with a registered address in the tax haven at Tortola in the British Virgin Islands, with Nigerian affiliate, P&ID Nigeria Limited, incorporated on July 21, 2006, with its registered Nigerian offices at 12, Vaal Street, Off Rhine Street, Ministers Hill, Maitama, Abuja.
He said the proposal for the gas projects was first discussed with the then Special Adviser to the President on Energy, late Rilwanu Lukman, before a formal proposal was submitted to the then President and Minister of Petroleum, late Musa Yar’adua on August 7, 2008, for implementation.
Following the proposal, Quinn, who was involved in several similar projects in Nigeria in the past, said P&ID Nigeria was later invited to a meeting with the president, who directed that a formal presentation be arranged to the Minister of State at the Ministry of Petroleum Resources, Olatunde Odusina in October 2008.
Quinn said further exploratory meeting with Lukman was held on December 18, 2008, shortly after his elevation as Minister of Petroleum Resources, which resulted in the directive by President Yar’adua for P&ID’s proposal to be further examined by the government.
Again, he said P&ID was invited by the then Technical Assistant to the Petroleum Minister, late Taofiq Tijani, for another enlarged meeting with the Minister for Petroleum Resources on February 24, 2009. The meeting, he said, was attended by about 15 top-level officials from the Ministry of Petroleum, NNPC, DPR, NAPIMS, and Addax Petroleum to structure a gas sales and purchase agreement.
Top government officials named to have been involved in the negotiations for the contract include former Petroleum Minister, Diezani Alison-Madueke; former Presidential Adviser on Petroleum, Emmanuel Egbogah; former Group Managing Director of NNPC, Shehu Ladan, as well as his counterparts between 2011 and 2012.
The then General Manager (Gas) of National Petroleum Investment Management Services (NAPIMS), Labi Ajibade; the Managing Director, Addax Petroleum in 2010, Neil Hitchcock; then Permanent Secretary of the Ministry of Petroleum Resources, Goni Sheikh; the Director (Legal) Ministry of Petroleum Resources, late Grace Taiga, and a representative of the ministry’s head of policy (one Ibrahim).
Mr Quinn also named the then Group General Manager/Special Technical Adviser to NNPC (General Executive Director, Power & Gas, NNPC), David Ige; representatives of the DPR, Ogwu Jones and Sunday Babalola; the then General Manager of Planning, Gas & Petroleum of NNPC, Uno Adeniji; then Manager, Gas & Petroleum, NNPC (Umar); the then Technical Adviser to the Group Managing Director of NNPC, Nuhu Tizhe; the then Assistant Legal Adviser to the Petroleum Minister, Belgore; Debo Spaine of Addax Petroleum, and Mohammed Kuchazi of P&ID.
Contract Terms
On January 11, 2010, Quinn said the GSPA was executed by him on behalf of P&ID and Lukman on behalf of the Nigerian government. Under the terms of the agreement, P&ID claimed it was to build and operate an Accelerated Gas Development project to be located at Adiabo in Odukpani Local Government Area of Cross River State.
The Nigerian government’s obligation under the deal was to source for and supply natural gas from oil mining leases (OMLs) 123 and 67 operated by Addax Petroleum, for P&ID to refine into fuel suitable for power generation.
Nigeria was to supply the initial volume of about 150 million cubic feet of gas per day, with a plan to ramp up the volume to about 400 million cubic feet per day over a 20-year period.
Seed of discord
Following President Yar’adua’s death, and Jonathan’s assumption of office as the substantive President, Quinn said P&ID wrote to him on February 10, 2012, to solicit his support for the project.
Again, in May 2012, Quinn said P&ID wrote another letter to the then Minister of Petroleum Resources, Diezani Alison-Madueke, and the former presidential adviser on petroleum, Emmanual Egbogah, to intimate them on the status of the project. He said no response came from the Jonathan government, as it appeared they were still grappling with the demands to settle into office rather than to proceed with the project.
In the final week of June 2012, Quinn said Debo Spaine of Addax Petroleum, contacted him with the information about the decision by Addax Petroleum headquarters in Switzerland to unilaterally withdraw their support for the proposed project in favour of the development of another non-associated gas.
The decision by Addax Headquarters, perhaps, laid the foundation for the crisis that affected the project implementation, as the gas feedstock for its operation expected to come from the oil mining concession operated by Addax faced a potent threat.
Request for Arbitration
Frustrated by the lack of information from the government about the project, Quinn said said after attempts to settle out-of-court with the Nigerian government failed, P&ID resolved to approach the District Circuit Court in Washington DC for arbitration. In August 2012, the Nigerian government was served with a Request for Arbitration. In September 2012, he said P&ID, in a letter to the Minister of Petroleum Resources, Mrs Alison-Madueke, confirmed the nomination of Anthony Evans as its Arbitrator in the U.S. tribunal.
At arbitration, P&ID accused the Nigerian government of reneging on its obligations under the deal after it began negotiations with the Cross River State government for the site of the project.
P&ID said the Nigerian government’s failure to construct the pipeline that would supply gas not only undermined the construction of the project but also deprived it of potential benefits that could have accrued to it over 20 years.
The Nigerian government denied liability, arguing that providing the gas pipeline could not have proceeded without P&ID acquiring the site and building the gas processing facilities.
On November 30, 2012, the Nigerian government announced the appointment of the former Attorney-General and Minister of Justice, Bayo Ojo as its Arbitrator to represent Nigeria in the three-member arbitration tribunal.
After a preliminary review of the case, the three-member tribunal ruled on March 20, 2013, that Nigeria’s obligations under Article 6B were not predicated on the condition that P&ID must first complete the gas processing facilities.
On August 11, 2014, the then Attorney-General and Minister of Justice, Mohammed Adoke, advised the administration to take steps to settle the matter out of the tribunal “with a view to significantly reducing the claims against it.”
Based on the advice, a team was constituted to negotiate an out-of-tribunal settlement with P&ID. At the end of negotiations on November 20 and 21, 2014, a government technical team made an initial recommendation for the payment of $1.5bn to P&ID to accept to discontinue the arbitration process.
The amount was later cut down to $1.1bn following Mr. Jonathan’s directive to the team to press further concession. The proposed amount was to allow P&ID to settle its tax obligations, workers’ salaries, and other remunerations as if the contract agreement was executed.
On April 29, 2015, P&ID agreed to a final offer of $850mn to settle the matter once and for all, although the government expressed the wish for a further scaling down to about $500mn or less.
In line with the agreed payment schedule, an initial payment of $100 million was to be made immediately after the Deed of Settlement was signed by the two parties. Subsequent payments were to be in three tranches of $250 million every four months.
The Minister of Petroleum Resources at the time, Diezani Alison-Madueke, who raised the memo for President Jonathan’s approval, was quoted to have said the NNPC would be requested to provide funding for the payment.
However, on May 25, 2015 (four days to the end of his term), Mr Jonathan wrote back to the Minister and the group managing director of the NNPC to inform them although he gave approval for the immediate settlement of the matter, the approval for the disbursement of the money should be left for his successor in office.
The information contained in memo No. PRES/88-3/MPR/813/158/NNPC/7 was a response to the correspondence dated May 18, 2015, in which the former minister sought the president’s approval to ensure immediate settlement of the matter.
Those familiar with the deal said President Jonathan had reasoned that since his administration was already on its way out on May 29, 2015, approving the payment of $850m would raise unnecessary suspicion by his successor.
Buhari opted for arbitration
However, on assumption of office five days later on May 30, it was learned that when the matter was brought before the then newly sworn-in President Muhammadu Buhari and Vice President Yemi Osinbajo, they opted for a renegotiation of the entire deal.
After a review of the contract and the agreement, the new government, on December 23, 2015, filed an application before the tribunal asking it to set aside completely the award .
But on February 10, 2016, the tribunal dismissed the application. Following hearings held between July 22 and 24, 2016 on the appeal filed by the Nigerian government, the tribunal ruled that damages suffered by P&ID covered the loss of net income the company would have received if the Nigerian government had kept its side of the contract.
For over five years, the Nigerian government did not contest the March 20, 2013 ruling of the tribunal, which awarded P&ID damages for $6.62bn.
P&ID moved to enforce the award
On March 16, 2018, P&ID filed for the enforcement of the award, claiming the final award was governed by the New York Convention treaty which does not deprive the court of jurisdiction to go after Nigeria’s assets located anywhere in the world based on her status as a foreign sovereign state.
Although the governments criticized the award, P&ID said Nigeria was bound by a treaty to pay up, having waived its right to immunity as a sovereign nation when it signed the agreement.
In August 2019, the court in its ruling granting P&ID the right to enforce the award earlier given against the Nigerian government by a District Circuit Court in Washington DC said an additional $2.3bn in accumulated interest had raised the initial award to about $8.9billion.
The tribunal said the damages were calculated at the prevailing rate of 7 percent per annum on the value of the 20-year income, minus certain capital and operating costs that would have been incurred if the gas processing facility was built and running.
Nigeria’s Rejects Move
The Nigerian government described the award as a conspiracy to cause economic damage to Nigeria.
The then Attorney General of the Federation and Minister of Justice, Abubakar Malami, who described the award as “clearly unreasonable and manifestly excessive and exorbitant, punitive and unjustifiable,” said the government would probe the contract, to bring suspected collaborators and conspirators to account.
Also, in rejecting the ruling, the then Permanent Secretary and Solicitor General of the Federation, Dayo Apata, described the ruling as “completely wrong and unjustifiable.”
Apata said the Nigerian government would vigorously defend Nigerian people’s rights to protect their assets around the world against the unjust enforcement of the ruling.
Initially, Justice Christopher Cooper had denied Nigeria’s appeal against the ruling on the ground that it was belated, as it was filed outside the 30-day copies of the summons and the complaint should be served on a foreign state.
The court however granted a part of the country’s motion that it was not properly served, because the process documents were not addressed to the “head of the ministry of foreign affairs” in line with the practice under 28 U.S. Code, Section 1608(a)(3), which stipulates the order of service or delivery of a summons and complaint in U.S. courts to a foreign state or political subdivision of a foreign state.
The Nigerian government argued in its appeal that the affirmation of the award by the tribunal on March 2018 to its January 2017 ruling was not enforceable, as it was a “default entry by the clerk” rather than a “default judgment.”
Malami said the arbitration court lacked the constitutional powers to issue such an order or give such an award against a sovereign state like Nigeria, adding that certain conditions must be attained before the U.S. court could deliver such a judgment against Nigeria.
Under the Foreign Sovereign Immunities Act (FSIA), the former AGF said a default judgment could not be entered against a foreign state like Nigeria unless the presiding judge determined so after the petitioner/claimant had established its entitlement to a default judgment.
Based on the presumption of sovereign immunity, Malami said the U.S. District Court was still under an obligation, despite a default by a Foreign State, to determine whether the Foreign State was immune from the jurisdiction of the U.S. Court under FSIA, or whether the case before it fell within one of the recognized exceptions.
Even where the court had determined it had jurisdiction, the former Minister said granting a default judgment was never automatic, or a routine matter to be handled by a court clerk, as this could only be done after a formal trial.
Despite Nigeria’s position, the three-member tribunal led by the presiding arbitrator, Lord Hoffman, said its final award to P&ID against Nigeria was based on the laws of the Federal Republic of Nigeria.
Lord Hoffman said P&ID and Nigeria had agreed before the contract that in the event of any dispute, each may issue a notice of arbitration under the rules of the Arbitration Act 1996 (England and Wales) and the Nigerian Arbitration and Conciliation Act (Cap A18 LFN 2004.
Under the Act, the parties agreed that any “arbitration award shall be final and binding upon the parties.”
P&ID argued that by virtue of the terms of the agreement it signed, the Nigerian government agreed to be bound by the outcome of any arbitration, which meant it waived its right to immunity as a sovereign nation.
The conversion of the award into a domestic UK judgment against Nigeria meant the country’s assets around the world, particularly in the UK and U.S., were at risk of confiscation by P&ID, or its agents.
The Royal Courts of Justice Strand, London, WC2A 2LL presided over by Justice Sir Ross Cranston said it decided to grant the “Nigerian government application for an extension of time and relief from sanctions following a review of written submissions after the arbitration award, which revealed “new evidence” in the matter in dispute.
Tribunal grants Nigeria’s appeal
On the insistence of the Nigerian government for a stay of execution of the award, the British commercial court in September 2020 granted the appeal but demanded that Nigeria deposit $200 mn in the court’s account pending the conclusion of its appeal, in addition to some court costs to be paid to P&ID.
Nigeria’s argument has always been that the gas processing project was procured through a campaign of bribery and fraud. In March, the Nigerian government asked the Court to overturn the arbitration award in favour of P&ID.
Investigations by the Economic and Financial Crimes Commission (EFCC) confirmed that the entire project agreement purportedly between the Nigerian government and P&ID was procured by bribes paid to top government officials, including those who presided over the technical committee mandated to review the gas plant contract as part of a larger scheme to defraud Nigeria.
In 2018, the anti-graft agency followed trails of at least two bank transfers by a member of the P&ID group of companies, Dublin-based Industrial Consultants (International) Ltd. to a senior government official who oversaw the drafting of the gas plant contract agreement.
A fortnight ago, precisely on Monday, October 16, 2023, the UK court, the Business and Property Court in London presided by Justice Robin Knowles gave a ruling to halt the enforcement of the over $11bn 2017 arbitration award in favour of P&ID against Nigeria in case No.CL-2019-000752.
The court said the arbitration awards in favour of P&ID were obtained by fraud, as they were procured contrary to public policy.
Nigeria’s lead Counsel, Mark Howard, described P&ID as the type of entity that was “prepared to engage in bribery’, to achieve its aims – to undermine the administration of justice in Nigeria in the pursuit of, ‘riches beyond the dreams of avarice.’
Nigerians and civil society groups have hailed the tribunal’s ruling, describing it as a stern warning against predatory foreign companies interested in exploiting Nigeria.
The Executive Director, of Africa Network for Environment and Economic Justice, ANEEJ, David Ugolor, has called on Nigerian and UK governments to take steps to expose and prosecute all those identified to have been involved in the grand corruption to serve as a deterrence and also end the culture of impunity in business transactions in Nigeria.
Apart from setting up a panel of inquiry to probe the P&ID case, ANEEJ wants the Nigerian and UK governments to blacklist and ban indefinitely the companies and individuals found to have been involved in the scandalous transaction.
A fortnight ago, precisely on Monday, October 16, 2023, the UK court, the Business and Property Court in London presided by Justice Robin Knowles gave a ruling to halt the enforcement of the over $11bn arbitration award in favour of P&ID against Nigeria in case No.CL-2019-000752.
The court Judge, Robin Knowles found that the massive arbitration award in favour of P&ID was tainted by fraud, as the process through which the company secured the contract was fraudulent.
