NIGERIA on Tuesday lost a $1.7 billion lawsuit against US investment bank, JP Morgan Chase over the transfer of proceeds from the sale of Oil Prospecting Licence (OPL) 245 in 2011.
Nigeria alleged that JP Morgan was “grossly negligent” in its decision to transfer funds paid by Shell and Eni into an escrow account controlled by a former minister, Dan Etete who was convicted in France in 2007 of money laundering in an unrelated case.
The damages Nigeria sought included cash sent to Etete’s company, Malabu Oil and Gas, around $875 million paid in three instalments in 2011 and 2013, plus interest, taking the total to over $1.7 billion.
The lawsuit alleged that JP Morgan should have known that there was corruption and fraud in the transaction and insisted that there were red flags which JP Morgan ought to have seen and stop the transfers.
Unable to prove its claim
The Federal Government through its lawyer Roger Masefield claimed that it was the victim of a “fraudulent” scheme as payments “were suspected to have flowed”.
It claimed JPMorgan had breached its duty by allowing bank transactions in 2011 and 2013 despite there being “reasonable grounds” to suspect fraud.
But in her 137-page ruling on Tuesday at London’s High Court, judge Sara Cockerill dismissed the claim, ruling that Nigeria had fallen at the first hurdle because there was no evidence a fraud had been perpetrated against Nigeria.
The Nigerian government could not prove that it was defrauded, she noted, saying it may be that with the benefit of hindsight, “JP Morgan would have done things differently” but insisted that “none of these things individually or collectively amount to triggering and then breaching” the bank’s duty of care to its client.
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Judge Cockerill said that by the time of the 2013 payments, the bank was “on notice of a risk” of fraud.
“There was a risk – but it was, on the evidence, no more than a possibility based on a slim foundation.”
Masefield had argued in February that Nigeria’s case rested on proving that there was a fraud and JP Morgan was aware of the risk of fraud.
“The evidence of fraud is a little short of overwhelming,” the lawyer told the court then.
“Under its Quincecare duty, the bank was entitled to refuse to pay for as long as it had reasonable grounds for believing its customer was being defrauded.”
Quincecare refers to a legal precedent whereby the bank should not pay out if it believes its client will be defrauded by making the payment.
The judge ruled that no Quincecare breach had occurred and that Nigeria failed to prove its case.
The Financial Times quoted an unnamed Nigerian official as saying that the country was “naturally disappointed by the outcome of the judgment and will be reviewing it carefully before considering next steps. The FRN will continue its fight against fraud and corruption and to work to recover funds for the people of Nigeria.”
Reacting too, according to the Financial Times, JPMorgan said: “The judgment reflects our commitment to acting with high professional standards in every country we operate in, and how we are prepared to robustly defend our actions and reputation when they are called into question.”
How it started
In 1998, as an oil minister under the Sani Abacha’s military rule, Etete awarded OPL 245 to Malabu Oil and Gas, an oil company he has a huge interest in.
After the death of Abacha and the return of the country to democracy, subsequent administrations challenged Etete’s rights to the field until a deal to resolve the impasse through a sale to Shell and Eni was finally struck in 2011.
The deal involved the payment of about $1.1 billion by the oil giants and Malabu subsequently relinquished interest in OPL 245, paving the way for the international oil companies to acquire the block.
The deal would later lead to a criminal trial over alleged corruption by the Italian government.
However, in March 2021, after about three years of trial, the defendants were discharged and acquitted by a Court of Milan.
So, the lawsuit brought by the Federal Government was to seek an award of $1.7 billion against JP Morgan Chase Bank, which facilitated the transaction, for allegedly failing in its Quincecare duty when it transferred $810 million to Malabu from the OPL 245 sale proceeds.
Nigerian legal team in the trial accused Mohammed Bello Adoke, the Attorney-General of Nigeria under former President Goodluck Jonathan between 2010 and 2015, of corruption.
But Adoke has consistently denied the allegations.
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