A grant of stay of execution was allthat Nigerian government neededto establish the alleged fraud used in securing the contentious UK judgment involving an Irish Company (P&ID) and the Nigerian government and quash same as the case takes a new dimension. KEHINDE OSASONA writes.
Overview
Just last week, the UK Commercial Court granted the Federal Government of Nigeria’s request to appeal its $9.6b judgment against Nigeria in favour of an Irish firm—P&ID over a botched 20-year Gas and Supply Processing Agreement (GSPA).
The court’s judgment was a fall-out of an award made in July 2015 in favor of P&ID, by an arbitration panel sitting in London.
The court had in a ruling on Aug. 16 authorized, an Irish engineering and project management company, Process and Industrial Developments Ltd. (P&ID) to seize 9.6 billion dollars, about N3.5 trillion in Nigerian assets over the failed contract.
The GSPA was purportedly entered into in 2010 between the Federal Ministry of Petroleum Resources and P&ID.
In the failed contract, P&ID was to build a gas processing facility to refine associated natural gas into non-associated gas to power the national electric grid, while the Ministry was to build pipeline to supply gas to P&ID facility to be located in Adiabo, Odukpani LGA, Cross River state.
Unfortunately, the agreement did not work as the company did not build any facility at the agreed site, alleging that the Ministry too failed to construct the pipeline for gas supply despite the fact that it had committed 40 million dollars into the contract.
P&ID then viewed the failure as a repudiation of the contract. In simpler terms, this means that the government renounced its obligation under the contract.
Consequently, based on Clause 20 of the agreement, which both parties signed, in March 2013, P&ID began an arbitration action against the government before a London tribunal.
At the tribunal, P&ID claimed that it had invested $40 million in the project even though it had not acquired the land or built any facilities for gas processing. It claimed damages of about $6.6 billion dollars representing the amount of the net income it would have earned over the 20-year period of the agreement.
In response, the government argued that the damages claimed were not a fair and reasonable consequence of the government’s breach of the agreement. This is because P&ID never commenced building the gas processing facility.
It also argued that P&ID should be awarded only three years’ worth of income. This is because by that time, the company should have found some other profitable investment which would reduce its losses from the breach.
Similarly, the government objected to the measure of estimated expenses and income stream which P&ID used to calculate its damages claim.
Meanwhile, the Minister of Information, Alhaji Lai Mohammed, the Attorney General and Minister of Justice, Abubakar Malami, the Governor of Central Bank of Nigeria, Godwin Emefiele, the Inspector-General ofPolice, Mohammed Adamu and the Acting Chairman of the Economic and Financial Crimes Commission,Ibrahim Maguhad flown to the United Kingdom over the case.
The judgment
The UK tribunal decided that by failing to fulfil its obligations, the government had repudiated the agreement. P&ID was therefore entitled to damages.
Consequent upon that, in 2017, the tribunal had by a majority of two to one made a final award of $6.597 billion together with interest at the rate of 7% starting from 20 March, 2013 until payment is made. The 7% interest reflects what P&ID would have paid to borrow the money or earned by investing the money in Nigeria.
Subsequently, the tribunal awarded damages, in March 2018 when P&ID brought an action before the Queen’s Bench Division of the English Commercial Court.
It wanted permission to enforce the damages awarded by the tribunal.
Despite delays by the Nigerian government, on Aug. 16, the court made an order enforcing the tribunal’s final award which now stands at about $9.6 billion.
In making the award, the court noted that the damages awarded were purely compensatory and not intended to punish the Nigerian government.
The court also confirmed that there were no public policy grounds on which the award should not be enforced. This decision converts the arbitration award to a legal judgment.
This case perhaps highlights issues with Nigeria’s ability to effectively manage its oil and gas resources as well as its facilities.
Between January and June 2019 alone, it is reported that Nigeria lost 22 million barrels of crude oil.
These losses have been largely attributed to pipeline vandalism and aged pipelines.
The Nigerian National Petroleum Corporation recently spent billions on oil pipelines maintenance. But other problems, such as corruption and fraud in awarding security surveillance contracts for pipelines, persist.
The reprieve
After a protracted legal battle, reprieve came the way of Nigeria when an opportunity came for the life of the controversial arbitration to be extended via a court pronouncement.
Recall that earlier, a UK commercial court had granted a stay of execution of the $9.6 billion dollar judgment debt made against the Nigeria over a botched gas contract.
The new development was contained in a statement in London on the court’s decision which was made available to newsmen in Abuja by the office of the Minister of Information and Culture, Alhaji Lai Mohammed.
The Minister was quoted as saying that with the recent developments; Nigeria can no longer be harassed, saying that truth will prevail.
In the same vein, before jetting out of the country, Malami also hinted that “Nigerian delegation leaving for the UK would either file a new case based on the new realities of the contract or build on the previous judgment.
He said, “All cards are on the table but it all depends on (which is) beneficial, that has potency for setting aside the award, having regards to the applicable law in the circumstances.
“We look forward to challenging the UK Commercial Court’s recognition of the Tribunal’s decision in the UK Court of Appeal, uncovering P&ID’s outrageous approach for what it is: a sham based on fraudulent and criminal activity developed to profit from a developing country,” he said.
He noted further that the government would not rule out the possibility of filing a new case or using existing proceedings to seek relief of setting aside the award of the contract cannot be ruled out.
Going forward
After all said and done, the commercial court few days ago in the United Kingdom ruled that Nigeria can appeal the enforcement of the judgment granting Process and Industrial Development Limited (P&ID)the right to seize the nation’s assets worth $9.6 billion.
The court gave the order on Thursday, September 26, 2019.
The court also approved the Nigerian government’s application for a stay of execution; which will prevent P&ID from seizing the assets while the case is heard on appeal.
Nevertheless, the court ruled that Nigeria should pay $200million as security to maintain the stay of execution.
Stakeholders are of the views that having employed both diplomatic and legal means to upturn the decision of the court, Nigeria government should strive to meet its contractual obligations.
In the interest of the country’s image, the Nigeria government should equally change its attitude towards handling of critical infrastructural projects capable of smearing its reputation domestically and internationally.
