P&ID VS NIGERIA: UK court finds fraud in $10bn judgement •Govt officials took $200,000 bribe to write legal advice

A commercial court in London on Friday granted the prayer of Nigeria to challenge a $10 billion award judgement delivered against the country on January 31, 2017.

This was after the court said it found a prima facie case of fraud in the procurement of the judgement by Process and Industrial Development Limited (P&ID), an offshore Shell company.

A lawyer hired by Nigeria was found by the court to have paid $200,000 to the accounts of two government officials involved in giving legal advice to the government on the basis of which Nigeria believed it had a bad case.

On January 31, 2017, London tribunal had ruled that Nigeria should pay P&ID $6.6 billion as damages, as well as pre-  and post-judgment interest at seven per cent. The current outstanding amount is estimated at $10 billion.

Nigeria had sought permission to appeal the award despite having missed the original 28-day appeal deadline. It said new facts only came to light in late 2019. Ross Cranston, judge of the Commercial Court, in his judgement in case number CL2019-000752 on Friday held that although there was an unprecedented delay by Nigeria before challenging the award, the exceptional circumstances of the case convinced him to grant it.

The judge said: “These are applications by the Federal Republic of Nigeria (‘Nigeria’) for an extension of time to bring challenges under sections 67 and 68(2)(g) of the Arbitration Act 1996 (‘the 1996 Act’ or ‘the Act’). There is a related application for relief from sanctions to adduce new evidence in response to an enforcement application. The hearing before me was by order of Butcher J in The Federal Republic of Nigeria v Process & Industrial Developments Limited  [2020] EWHC 129 (Comm). It occurred over two days but, as I explain shortly, there were later written submissions about what was said to be new evidence.

“These challenges and the enforcement application concern arbitral awards by a London Tribunal relating to a gas processing contract (“the GSPA”) between Nigeria and Process & Industrial Developments Limited (“P&ID”) dated 11  January 2010. The Tribunal’s Final Award of 31 January 2017 ordered Nigeria to pay P&ID damages of US$6.6 billion,  as well as pre and post-judgment interest at 7 per cent. The current outstanding amount is some US$10 billion.

“Nigeria’s case for an extension of time is that the GSPA, the arbitration clause in the GSPA and the awards were procured as the result of a massive fraud perpetrated by P&ID, and that to deny them the opportunity to challenge the  Final Award would involve the English court being used as an unwitting vehicle of the fraud. P&ID’s case is that the awards date back some three to five and a half years and it would be unprecedented to grant the extensions. Speed and finality are essential features of London arbitration and the case that there has been any fraud (which is denied) is at  best weak.”

He, however, said he found that the lawyer who represented Nigeria in the case and got a professional fee of $2 million deliberately sabotaged it following alleged fraudulent deals. The lawyer was said to have told the Federal Government in legal advice that there were no “exonerating facts” and therefore “no legal grounds to defend the claim”.

“Separately the NNPC wrote to the Minister for Petroleum Resources, Mrs Alison Madueke, on 1 September 2014,  agreeing with the Attorney General and outside counsel that the ministry had “a bad case”. To that end it recommended that settlement be explored but that Nigeria should, nonetheless, file a defence. On 11 November 2014, the Attorney  General wrote to Mrs Alison-Madueke, including the advice from the lawyer, urging her to pursue settlement discussions.

“On 11 November 2014, the legal adviser to the ministry from 2013 to 2017, sent a memorandum to the permanent secretary of the ministry recommending a settlement with P&ID. “On 18 November 2014, US$100,000 of cash was deposited into the legal adviser’s account in ten US$10,000 tranches. As explained later in the judgment, the lawyer and the legal adviser accept that the lawyer was the source of the payment. There was an equivalent payment of US$100,000 to the coordinator, legal services at the NNPC. Both lawyer and NNPC coordinator accept that the lawyer made the payment.

“In December 2014, the three persons travelled to London for settlement negotiations with P&ID. “On 30 December  2014 the legal adviser wrote a memorandum to the ministry’s permanent secretary. She stated that there was no doubt he ministry was in breach of the GSPA; the negotiating team was apprehensive that the Tribunal might award  P&ID’s claim of US$5.9 billion; and Nigeria should offer a lower amount which P&ID might accept,” the judge noted in the judgement.

He faulted the argument of the P&ID that Nigeria delayed in challenging the verdict on the ground of fraud. “Mr Mill’s  (P&ID’s lawyer)’s argument was that there was no credible case that P&ID was responsible for Nigeria’s delay in issuing the current claims. I am afraid I cannot accept this. As explained above, I have held that Nigeria has established a strong prima facie case of fraud, which P&ID has prima facie covered up, thus contributing to the delay.

“Mr Mill’s contention was that an extension would cause irredeemable prejudice to P&ID because it was being kept out of its money for a further significant period. A fraud trial would not only take a considerable time, especially with appeals, but it would also be very expensive.

There was also the further delay in the appeal on Butcher J’s enforcement decision, which would likely be postponed until after any fraud trial. “It seems to me that, where a party has a strong prima facie case of fraud, there can be no prejudice to the respondent in being subject to a full inquiry into the fraud at trial. As Mr Howard expressed it, an award that is liable to be set aside as having been procured by fraud is, in legal terms, worthless,” he said. P&ID Vs Nigeria: UK  court finds fraud in $10bn verdict While agreeing that the delay in the case “is extraordinary and weighs heavily on the  side of the balance against an extension,” Judge Cranston, however, held that “other factors bring it down in favour of an  extension.”

He said: “As I have explained, the delay is not in my view the result of a deliberate decision made because of some received advantage, and in all the circumstances Nigeria has acted reasonably. Given the strong prima facie case of fraud which I have concluded Nigeria has established. “Overall, I accept Mark Howard’s submission that the Nigerian team needed to see the different building blocks to what they now allege as a massive fraud before proceeding with the current claims. In summary, the time from September 2019 until the proceedings taken in this court in December 2019  was modest in the circumstances and Nigeria’s behaviour reasonable.

“As alleged by Nigeria, fraud is complex in character and continuing. Even on my preliminary examination, it comprises a number of quite different strands. What occurred, in this case, was deliberately concealed. Especially with the international advisers it engaged, P&ID wore the cloak of legitimacy. In the circumstances which Nigeria has prima facie established, it acted reasonably in its investigations and in pursuing a settlement.

“The length of the delay is unprecedented. The Liability Award was published approximately four and a half years, and the Final Award some two years and ten months, before the current proceedings were launched. Mr Howard did not seek to deny the very significant delay. His only point was that the reason for the delay was that P&ID successfully concealed its fraud during the arbitration, and for many years afterwards.

“For the reasons I have given, P&ID has contributed to the delay, and it will not by reason of the delay suffer irremediable prejudice in addition to the mere loss of time if the application is permitted to proceed. Although not a  primary factor, fairness in the broadest sense favours an extension in this case.

“For the reasons given, I  grant Nigeria’s applications for an extension of time and relief from sanctions.” In 2010, P&ID  entered into a 20-year agreement to build a gas processing facility that would refine wet gas generated from oil drilling into lean gas that could be used for electricity generation.

The agreement said the P&ID would refine the gas and give it to the Nigerian government for free and would make its profit from selling the by-products (Natural Gas Liquids) on the international market. In return, the Nigerian government would guarantee the supply of wet gas and construct pipelines and other infrastructure to transport the gas to the processing facility.

By mid-2012, neither party had laid a single brick in respect to its obligations. P&ID viewed the failure of the government to construct the facilities to begin the deal as a renunciation of its obligations per the contract and began the arbitration proceeding against the government.

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