In a rare feat , the Federal Republic of Nigeria yesterday succeeded with its challenge stoping the arbitral award of US$9.6 (now circa USD11 Billion) in favour Process and Industrial Developments Limited (P&ID).
The awarded was made against the federal government in 2017, in favour of (P&ID) for an alleged breach of a Gas Supply and Processing Agreement (GSPA) it purportedly entered into with the Ministry of Petroleum Resources (MPR) to establish a gas processing plant in Calabar for which P&ID never ever secured any land site.
With the judgment it is likely the USD11 Billion Award would be set aside by the court when it decides on cost after the parties addresses.
Honourable Mr Justice Robin St John
Knowles of the United Kingdom Commercial Court on Monday said Nigerian challenge was successful while delivering a 140 page final judgment.
” In the circumstances and for the reasons I have sought to describe and explain, Nigeria succeeds on its challenge under section 68. I have not accepted all of Nigeria’s allegations” he stated.
The judge said USD11 Billion arbitral ” Awards were obtained by fraud and the Awards were and the way
in which they were procured was contrary to public policy.”
” What happened in this case is very serious indeed, and it is important that section 68 has been available to maintain the rule of law. “
But the court has not taken further decision on the.atterin view of the provisions in 5ection 76 and Section 68 (3) of the Arbitration agreement that provides as follows:.
“(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may
(a) remit the award to the tribunal, in whole or in part, for reconsideration,
(b) set the award aside in whole or in part, or(c) declare the award to be of no effect, in whole or in part.
The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.”
“I was asked by Lord Wolfson KC in closing that should my judgment conclude in favour of Nigeria, as it does, to leave over the question of the order the Court should make so that the parties have the opportunity to present argument once they have considered the judgment. I respect that request and will hear that argument as soon as that can be arranged.”
Reflecting on the Agreement (the GSPA), the Arbitration and the Awards the judge said that S78 of GSPA had said that its objective was: “to provide for the construction of Gas Processing Facilities by P&ID encompassing the provision of Wet Gas by the Government and the processing of the said Wet Gas by P&ID utilising two or more process streams with a total capacity of up to 400 MMSCuFD together with all utilities, support and
maintenance facilities at the Site and the provision of Lean Gas by P&ID to the Government as set forth in this Agreement and its Appendices and to operate and maintain the facilities in an efficient manner.”
According to the judge “stripped of repetition the GSPA as a whole provided for little more detail. A “Schedule of Works” was said to be annexed at Appendix B. Even if a schedule was annexed, it could have added little because the main work that had been done was not for that particular site or that particular project.
He also said in the Arbitration the Tribunal did what it did with what it had. The English Court too saw nothing of what truly lay underneath when it first, briefly, came across the Arbitration in 2016. But the fact is that the Arbitration was a shell that got nowhere near
the truth.
He noted that Policy, worldwide, properly limits challenges to arbitration awards. In the present case a challenge has been available and, in my judgment, has prevailed. “But I end the case acutely conscious of how readily the outcome could have been different, and of the
enormous resources ultimately required from Nigeria as the successful party to make good its challenge. I highlight the possible consequences if Mr Andrew had drafted Mr Michael Quinn’s witness statement a little more cautiously and if P&ID had not retained Nigeria’s Internal Legal Documents during the Arbitration
.
“Regardless of my decision, I hope the facts and circumstances of this case may provoke debate and reflection among the arbitration community, and also among state users of arbitration, and among other courts with responsibility to supervise or oversee
arbitration. The facts and circumstances of this case, which are remarkable but very real, provide an opportunity to consider whether the arbitration process, which is of outstanding importance and value in the world, needs further attention where the value involved is so large and where a state is involved. “
The risk is that arbitration as a process becomes less reliable, less able to find difficult but important new legal ground, and more vulnerable to fraud. The present case shows that having (as here) a tribunal of the greatest experience and expertise is not enough. Without reflection, then a case such as the present could happen again, he warned
The judge also detailed and listed both Nigerian and foreigners that were involved in bribes that marred the purported P&ID gas processing plant project in Calabar .
Reacting to the judgment yesterday the Attorney General of Federation AGF and of Justice Lateef Fagbemi SAN this successful result is a decisive victory for the people of Nigeria who stood to lose over US$11 billion, and for the Nigerian administration which has now reached a milestone in its mission to challenge the scourge of corruption.
The judgment also serves as a damning indictment of predatory international
investors, who should now rightfully be deterred from preying upon Nigeria and
other developing nations to satisfy their greed.
According to Fagbemi “P&ID and its associates both Nigerians and foreigners alike, shamelessly attempted to defraud the country and enrich themselves through sharing the FRN’s privileged documents, fraud, bribery and corruption on an industrial scale. Those efforts, which took place over many years, have finally been uncovered for all to see.”
Fagbemi pointed out that several agents of P&ID made overtures to the Government for settlement of this case. However, the resolve of the administration of President Bola Ahmed Tinubu not to go hands in gloves with
fraudulent counterparties or condone corruption informed the position of the
FRN to hold fast to its position not to settle.
Indeed, earlier this morning, the
President at the opening ceremony of the Nigeria Economic Summit Group,
reiterated this cardinal position of his administration, he added.This judgement has vindicated the government and should serve as a pointer to others who might be nursing or nurturing any plan to swindle Nigeria.
He said that there will be further hearings by the UK court on the heels of this judgement to determine costs payable by P&ID and other matters.