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Nigeria to Overturn $11Bln Arbitration Claim: What Threatens Africa's Largest Economy?

© AP Photo / Kirsty Wigglesworth Media wait outside the High Court in London, on March 18, 2021.
 Media wait outside the High Court in London, on March 18, 2021. - Sputnik International, 1920, 23.01.2023
Process & Industrial Developments Limited (P&ID) is an engineering and project management company founded in 2006 to conduct energy projects in Nigeria. In 2010, P&ID and Nigeria entered a 20-year natural gas processing and supply deal. Two years later, the company began arbitration proceedings against the country for breach of contract.
Nigeria is to file a lawsuit on Monday at London's High Court seeking to overturn an $11Bln arbitration award that resulted in the country owing more than a quarter of its foreign exchange reserves to an obscure British Virgin Islands-based oil and gas company over a failed natural gas project.
As the case develops, Sputnik outlines major events within a prolonged legal dispute between Nigeria's government and P&ID over an alleged repudiation by Nigeria of the agreement, which has rumbled for over a decade and drawn great attention of both domestic and international media. The trial is on the list of the biggest in the UK history in terms of the amount of money involved.

Nigeria's Deal With P&ID

On 11 January 2010, Nigeria and Process & Industrial Developments Limited (P&ID) signed a Gas Supply and Processing Agreement (GSPA). The initial goal of the project was to assist the west Afrcian country in its efforts to exploit its huge natural gas reserves.
The company was founded and led by two Irish nationals - Michael Quinn and Brendan Cahill.
The terms of the contract required Nigeria to supply natural gas to the company's processing facility, which was expected to be built in the country. In exchange, P&ID would process the gas and return almost 85 percent of it to Nigeria, taking certain by-products from the refining for its own use. The GSPA also stipulated that the country had to build pipelines and other facilities to transport the gas.
However, Nigeria's government was said not to have fulfilled its part of the deal for more than two years. Therefore, the project never got off the ground.

P&ID's Legal Action Against Nigeria

Viewing this situation as a breach of contract by Nigeria's government, in August 2012, P&ID began arbitration proceedings in London, stating that the country failed to arrange supply of the agreed-upon quantity of natural gas and construct necessary infrastructure. In 2015, the arbitration tribunal ruled that Nigeria had not honored its side of the agreement.
Nigeria, for its part, first tried to appeal to England’s courts, requesting that the arbitration tribunal’s decision be set aside. But in February 2016, the High Court of Justice in London denied its application on the ground that it had been filed more than four months after the deadline.
After that, Nigeria sought a set-aside order in its own Federal High Court which, in May 2016, ruled “setting aside and/or remitting for further consideration all or part of the arbitration award.”
At the same time, arbitration proceedings continued in London. In 2017, the tribunal decided that the Nigerian court had no jurisdiction to set aside its determination, and awarded P&ID about $6.6Bln for lost profits with interest at the rate of 7 percent beginning 20 March 2013. The sum has now risen to $11Bln. If enforced, the award would pose a major threat to the country's economy, with the damages accounting for more that 20 percent of foreign exchange reserves and about 10 percent of the total public debt stock.
After the court's ruling, P&ID sought to enforce the award in England. In August 2019, the English High Court of Justice concluded that it was enforceable.

Nigeria's Legal Response

Meanwhile, Nigeria started a criminal investigation into the company's procurement of the natural gas deal. After the judgment for enforcement of the arbitral award, in December 2019, Nigeria subsequently applied to the High Court to extend the deadline to challenge the award citing new evidence of fraud in the arbitration, as well as in underlying contract negotiations. The country stated it had "a prima facie case of fraud" against P&ID, which justifies the extension of time.
Nigeria’s lead counsel, Mark Howard KC, focused on several key aspects in his arguments:
First of all, he claimed that the company illegally obtained the GSPA by paying bribes to Nigerian government officials.
Second, he argued that Michael Quinn, the former chairman of P&ID, gave “perjured evidence" to the court trying to give the impression that the company itself was able and willing to fulfill its obligations under the contract.
Third, Howard asserted that Nigeria's arbitration counsel Olasupo Shasore had colluded with P&ID, and therefore, poorly defended the case, which resulted in the court making decision in favor of the company.
In general, Howard presented evidence that the agreement was reached by fraud "as part of a larger scheme to defraud Nigeria".
The judge, Sir Ross Cranston, said there was “a possibility” that Nigeria’s lawyer “had been corrupted”, pointing out to several payments made by Shasore to lawyers connected with the proceedings. The judge agreed that there was a "strong prima facie case" that the payments were made to “to purchase their silence”.
As a result, the English court granted Nigeria more time to pursue a challenge on the grounds of alleged corruption. As of now, the court has not set aside the arbitration award and a trial on these issues is scheduled to commence in January 2023. It is expected to last eight weeks, and hear the testimony of individuals including Cahill, Grace Taiga, a former legal services director at the country's petroleum ministry, and former P&ID director James Nolan.
The company claimed that Nigeria came up with the accusations of corruption to avoid paying what it legally owes as a result of repudiation of the agreement.

"P&ID vigorously denies that the awards in its favor should be set aside [...].P&ID will present its submissions and evidence to the English High Court in support of its defenses," the company stated.

Thus, Nigeria is now trying to convince the High Court that the arbitration claim was based on “a massive fraud perpetrated by P&ID” along with former Nigerian government officials.
"Nigeria keenly awaits the opportunity to present its case before the High Court in London and is confident that justice will finally be served, ” the government said in a statement.
The court proceedings come as Africa’s largest economy struggles through difficult times. Nigeria’s federal government spent about 80 percent of its revenue on debt servicing between January and November 2022, as oil production decreased and spending on fuel subsidies rose.
Nigeria's Finance Minister Zainab Ahmed leaves after a discussion about the global economy at the 2022 IMF/World Bank annual meeting October 13, 2022, in Washington, DC. - Sputnik International, 1920, 06.01.2023
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