The Federal Government has assured of its intention to diligently defend its interest in the case between it and the Process Industrial Development Limited (P&ID) over the dispute arising from the twenty years Gas Supply and Processing Agreement (GSPA) entered into in 2010.
The Agreement was entered into by the Federal Ministry of Petroleum Resources on behalf of the Federal Government with the Process Industrial Development Limited in respect of accelerated gas development project in Nigeria’s OMLs 67 and 123.
The case is pending before the United States District Courts of Columbia and the United States Court of Appeal as well as the Business and Property Courts of the United Kingdom.
In a press statement signed by the Solicitor General of the Federation and Permanent Secretary of the Federal Ministry of Justice, Mr. Dayo Apata, the Federal Government revealed that Process Industrial Development Limited never began the construction of the project facility although it alleges it incurred about $40 million in preliminary expenses.
The press statement made available to newsmen by Salihu Othman Isah, Special Adviser on Media and Publicity to the Attorney General of the Federation and Minister of Justice, Abubakar Malami (SAN) stated that, it is entirely proper for Nigeria to assert all available and proper defences to the claims brought by Process Industrial Development Limited.
It reads that: “The attention of the Attorney General of the Federation and Minister of Justice has been drawn to series of online publications grossly misrepresenting facts of the on-going litigation between Process and Industrial Developments Ltd (P&ID) Vs Federal Government of Nigeria (FGN) & Anor pending before the United States District Court of the District of Columbia (District Court), the United States Courts of Appeals for the District of Columbia (Court of Appeal) and the Business and Property Courts of the United Kingdom (Commercial Court).”
The statement stated that, “The dispute that led to Arbitration between FGN and P & ID arose from a 20-year Gas Supply and Processing Agreement (GSPA) entered in 2010 between FGN (through the Ministry of Petroleum Resources) and P & ID in respect of an accelerated gas development project in Nigeria’s OMLs 67 and 123. P&ID never began the construction of the project facility although it alleges it incurred about $40 Million in preliminary expenses.”
“P&ID’s claim in the arbitration proceedings was mainly for loss of profit for the entire 20 year term of the GSPA, initially claiming the sum of $1.9 billion and later increasing its claim to $5.9 billion.”
“The Arbitral Tribunal on 31st January 2017 rendered its Final Award against the Ministry of Petroleum Resources in the sum of $6.597 billion together with pre-award interest at the rate of 7% per annum effective from 20th March 2013 and post award interest at the same rate till date of payment.”
It further stated that in granting the huge arbitration award against Nigeria, the tribunal decided that the project would operate at 93% uptime during the 20 year of the GSPA despite the well known risks of operating such a project in the Niger-Delta.
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“That the average price of Natural Gas Liquids (the main revenue earner for P&ID assuming the GSPA had been implemented), should be based on an average oil price in excess of $100 per barrel over the 20 year life of the project.”
“To apply a discount rate to P&ID’s supposed lost profits of 2.65 %, the same interest rate paid on United States treasury notes thereby adjudging P&ID, a start-up company that never commenced any physical work on the project but planned to operate in the midst of the Niger-Delta crisis, using a novel and unproven technology.”
“Upon the Award, P & ID commenced recognition and enforcement proceedings of the arbitration award against FGN in March 2018 in both the United Kingdom (UK) and the United States of America”, the statement added.”
It said the FGN is duly represented in the proceedings in the US and the UK by the Law Firm of Curtis, Mallet-Prevost, Colt & Mosle LLP, adding that P&ID on the 5th June 2018 in the US sought to obtain a clerk’s entry of default against FGN which was successfully set aside by the FGN.
The FGN is challenging the District Court’s jurisdiction in the US, urging the District Court to dismiss P&ID’s petition.
The position of the FGN in the US proceedings has been to resist enforcement of the award on the basis that Nigeria as a sovereign state has an absolute right to obtain an authoritative determination of its sovereign immunity.
The FGN therefore demands that the jurisdictional issue must be conclusively resolved before Nigeria may be required to litigate the merits of P&ID’s petition.
P&ID has variously challenged Nigeria’s position urging the District Court to direct Nigeria to file both its jurisdiction and merit defenses as a consolidated defense so the proceedings may be disposed by the District Court summarily.
The FGN has however pursued the validity of its jurisdictional defense as a preliminary matter which must be conclusively resolved prior to any consideration of the merit argument up to the Court of Appeal.
In a ruling on 9 October 2018, the District Court granted a stay of proceedings pending a determination of the appeal.
P&ID has also subsequently filed motions to have Nigeria’s appeal certified as frivolous and to have proceedings in the District Court continue pending determination of the appeal at the Court of Appeal.
On 1st November 2018, the US District Court issued a decision in favour of FGN denying P & ID’s further attempt to certify Nigeria’s appeal as frivolous and denied P&ID’s attempt to lift the stay of proceedings.
On 15th February 2019, the Court of Appeal issued a decision in favour of FGN by dismissing P&ID’s motion requesting the court to dismiss Nigeria’s appeal for lack of jurisdiction or to summarily affirm the scheduling order of the District Court.
“The proceedings therefore are currently on-going in the US and the FGN will ensure that its interests and that of the people of Nigeria are vigorously defended,” the statement
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