Breaking the ice
In this article, I shall be discussing the enforcement of the $9 billion arbitration award by Process and Industrial Developments Limited (P&ID) (an engineering and project management company registered in the British Virgin Islands with a Nigerian office) against Nigeria in the English Court presided by Justice Christopher Butcher. The enforcement proceedings are another major arbitration incident of 2019 worth discussing and I shall be doing justice to this conversation in succeeding paragraphs. As both an arbitration enthusiast and a Nigerian with the interest of the country at heart, I am particularly concerned by the huge related to the arbitral award and interests that currently loom as one of the largest arbitral awards in the world.
According to Bloomberg, the arbitral award sum is “potentially the largest financial liability in the African country’s history” and also “equivalent to almost 2.5 percent of Nigeria’s annual gross domestic product.” Further capturing how severe the award sum is, The Guardian (UK) has equally noted the award sum is equivalent to one-fifth of Nigeria’s foreign reserves. Meanwhile, BBC also notes that “The final amount of more than $9 billion is equivalent to about 20 percent of Nigeria’s declared foreign reserves of $45 billion.”
Understanding the journey to enforcement proceedings in the UK
The foregoing said and in mind, it now becomes imperative to provide a background to the enforcement proceedings instituted in the UK, for the benefit of those who have hardly been following this grave development. By way of background, the Nigerian government was accused by P&ID of reneging on its obligation to supply natural gas (Wet gas) to P&ID under a Gas Supply and Processing Agreement dated 11 January 2010 (GSPA). Under the GSPA, P&ID was to construct and operate the facility necessary to process the Wet Gas, with a view to boosting domestic power generation and electricity supply, through the productive utilization of existing natural gas reserves. By Clause 20 of the GSPA, the governing law for the GSPA was stipulated as Nigerian law and it was agreed that “any difference or dispute” arising “concerning the interpretation or performance” of the GSPA would be referred to arbitration where amicable resolution of such difference or dispute could not be reached.
In 2012, a dispute arose with respect to the GSPA with P&ID contending that the Nigerian government had failed to make available to make available Wet Gas in accordance with the GSPA. It was P&ID’s claim that the Federal Government of Nigeria (FGN) frustrated the construction of the Gas Project agreed to during the regime of the late President Yar’Adua and deprived P&ID the potential benefits expected from 20 years’ worth of gas supplies with “anticipated profits of $5 to $6 billion.” Consequently, P&ID served a Notice of Arbitration on the FGN. On 19 September 2012, P&ID appointed Sir Anthony Evans to act as arbitrator while the FRN appointed Chief Bayo Ojo, SAN as its arbitrator on 30 November 2012. Thereafter, the two arbitrators invited Lord Hoffmann to preside over the arbitral tribunal as the ‘chairman’ and the invitation was invited by Lord Hoffmann. P&ID’s initial claim, as reflected in its initial Statement of Case before the arbitral tribunal was damages in the sum of $5,960,226,233, plus interest for breach of the GSPA.
The arbitral tribunal unanimously decided that the FGN had repudiated the GSPA by failure to perform its obligations under the GSPA; that P&ID was entitled to damages, in an amount to be assessed, for the repudiation of the GSPA. Worth noting that while the arbiters unanimously agreed on the liability of the Nigerian government to damages, there was no unanimity among them as to the quantum of damages. As a matter of fact, while two of the three arbiters granted the seemly enormous award, the third (Chief Bayo Ojo SAN) was of the view that a much lower sum should have been awarded as damages for breach of the GSPA. Capturing the latest on the liability of the Nigerian government to P&ID, BBC writes: “The firm was first awarded $6.6 billion (£5.4 billion) in 2017, but the London court has now added $2.4 billion in interest.”
The final award notwithstanding, an out-of-tribunal agreement for the payment of $850 million (about 9.6 percent of the $8.9 billion award) was successfully reached with P&ID during the erstwhile President Goodluck Ebele Jonathan government. However, the responsibility for the disbursement of funds to P&ID was passed on to the then incoming administration of President Buhari. However, rather than take the recommended action, the President Buhari led administration opted to set aside the settlement agreement and challenge the enforcement of the award before the English Commercial Court, while making little efforts at exploring amicable resolution of the matter with P&ID. A strategy that I criticised and spoke against during my interview with CNBC Africa last year March.
Dissatisfied with the approach taken by the Nigerian government in resolving the issue and settling the arbitral award, P&ID approached the English Commercial Court seeking orders granting access to seize Nigeria’s commercial assets in England. This P&ID hope to do, with a view to levying execution of the award earlier obtained from an arbitral tribunal consisting of Lord Hoffmann, Chief Bayo Ojo SAN and Sir Anthony Evans on the FGN.
Coming before the English Commercial Court, P&ID sought to convert the tribunal’s award to a judgment of the High Court of England, with a view to enforcing the arbitral award as a judgment of the High Court.
However, FGN contested the hearing, arguing that given that the GSPA was signed in Nigeria, the English court had no jurisdiction and that the Ministry of Petroleum Resources lacked the authority to have entered into the GSPA in the first instance.
The FGN also argued that the arbitral tribunal erred in its award and urged the English Commercial Court to refuse to enforce the arbitral award.
The Commercial Court, however, found in favour of P&ID and gave its ‘blessings’ to P&ID to enforce the $9bn award. I shall critically examine the arbitral award itself and decision of the English Commercial Court in my forthcoming publication(s).
(To be continued)
Joseph Onele
