Legal lessons from Nigeria vs P&ID case

On October 23, Justice Robin Knowles CBE, of the High Court of Justice, commercial court of Business and Property Courts of England & Wales, the King’s Bench Division while ruling on an Arbitration Claim between the Federal Republic of Nigeria and Process & Industrial Developments, halted the enforcement of the $11bn arbitration award in favour of P&ID against Nigeria in a case delineated CL-2019-000752.

Justice Knowles held that the process through which P&ID secured a 2010 contract to build a gas processing plant in Calabar, Cross River State, was fraudulent and “in the circumstances and for the reasons I have sought to describe and explain. Nigeria succeeds in its challenge under section 68. I have not accepted all of Nigeria’s allegations. But the 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,” Justice Knowles held.

The ruling which favoured Nigeria came about after a protracted legal battle bordering on allegations that the Nigerian government botched a deal by failing to provide gas to P&ID leading to $6.6bn judgment debt against Nigeria in 2017 when the arbitration tribunal ordered the country to pay P&ID with interest to start counting from March 2013.

Though the government of President Goodluck Jonathan reached an out-of-tribunal agreement for the payment of $850 million and passed on disbursement to the administration of President Muhammadu Buhari but he kicked against paying the negotiated sum, set aside the settlement agreement, and challenged the enforcement of the award before the English Commercial Court. But the London court added $2.4 billion in interest, making it $9 billion.

The judge granted Nigeria’s request for a stay on any asset seizures while its legal challenge is pending but ordered it to pay $200 million to the court within 60 days to ensure the stay. It also must pay some court costs to P&ID within 14 days.

This scandal began in the late 2000s when the administration of then-President Umaru Musa Yar’Adua planned to address Nigeria’s energy supply crisis by exploiting vast untapped gas reserves in its mineral-rich Niger Delta region.

Seizing the opportunity, Process & Industrial Developments (P&ID) pitched an ambitious project to the petroleum ministry, to build and operate a gas-processing plant near the southern city of Calabar despite having never undertaken a project like that before.

Under the terms of the agreement, the government would provide wet gas to P&ID for free over 20 years. The two parties would then split the processed resource, with the government using its share to help power the country’s energy grid.

But the project never got off the ground. P&ID never built the plant and Nigeria never provided the company with any gas. P&ID blamed the government for the failure and convinced an arbitration panel it had been wronged.

But aside jubilating that the country which is currently in dire economic straits have been saved from a fate that can make it topple, Nigerians especially those at the helms of affairs must take away some lessons to avoid a similar occurrence.

What are the lessons to be taken from the judgment? Obtaining by fraud invalidates a contract; the UK court overturned the arbitration award because the court decided that the contract was obtained by fraud.

Also, there is the issue of illegal subject matter: according to the decision of the court, if the subject matter is illegal, the contract will not be valid. If the formation or performance of the contract will require a party to break the law, the contract is invalid. An example can be inferred in an agreement for the sale or distribution of prohibited substances such as drugs and ammunition

Duress: This is when pressure is exerted upon a person to make that person enter into a contract they otherwise wouldn’t enter via the use of force or the threat of force. Any action taken under duress is illegal and unlawful. And this covers contracts too.

When terms of an agreement lack conscience, that is, they are harsh, unfair, excessively oppressive and unduly one-sided; such a contract can be legally voided.

Contracts can be found to be unenforceable on grounds of public policy. And this is not only to protect one of the parties involved, but also because what the contract represents could pose harm to society as a whole.

Lack of capacity to enter a contract – For a contract to be valid, all the parties must have the legal capacity to contract. Certain persons by law cannot enter a contract; they include minors, persons with a mental deficiency and persons under the influence of drugs or alcohol among other deficiency to take legal actions.

 

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