The Federal Republic of Nigeria v Process & Industrial Developments Limited [2023] EWHC 2638

Background:

In 2010, the Nigerian government entered a 20-year contract with Process & Industrial Developments (P&ID). In this contract, the government promised to construct a pipeline to supply gas to P&ID, and P&ID promised to convert the gas into power for millions of Nigerian citizens.

The government failed to build the pipeline they promised. Due to this, P&ID commenced arbitration proceedings against the government in 2012. They argued the government had breached the contract. The tribunal agreed. They ordered the Nigerian government to pay $6.6 billion in damages to P&ID in 2017.

The Nigerian government refused to pay. They appealed the decision and claimed it had been secured through bribery and fraud.

Proceedings:

In 2023, the Commercial Court in London heard the Nigerian government’s appeal. Due to interest,
the original $6.6 billion in damages had risen to over $11 billion.

The Nigerian government submitted that P&ID had bribed officials, including the Nigerian government’s legal team, throughout arbitration to receive the $6.6 billion in damages. Additionally, they argued that P&ID had submitted fraudulent evidence to the tribunal. The legal basis for the Nigerian government’s appeal was Section 68(2)(g) of the Arbitration Act 1996. This statutory provision allows the challenge of an arbitration award when there has been a serious irregularity due to the award being obtained by fraud or being obtained contrary to public policy.

P&ID submitted that the Nigerian government’s claims of bribery and fraud were ‘false and dishonest’. They argued that the Nigerian government had acted with ‘catastrophic institutional and individual incompetence’ since 2010. P&ID requested the court to dismiss the Nigerian government’s appeal and to order the Nigerian government to pay over $11 billion in damages.

Judgment:

On October the 23rd 2023, the court found in favour of the Nigerian government.

Knowles J delivered a 140-page judgment, which focused on 4 key areas.

Bribery
Grace Taiga was the Director of Legal Services at Nigeria’s Petroleum Ministry before the contract was entered into in 2010. Knowles J found Taiga was paid $5,000 just before and after the contract was signed. He rejected P&ID’s argument that Taiga’s role was minor as “the timing was material”, and the amount was equivalent to her annual salary. Further payments were made to Taiga during and after the arbitration proceedings. Knowles J stated this was to suppress the truth from the tribunal and to ensure her silence.

Privileged Documents

The Nigerian government’s Privileged documents (confidential documents) were wrongly leaked to P&ID during arbitration proceedings. Andrew and Burke KC (P&ID’s legal representation during the arbitration proceedings) knew these documents had been leaked and remained silent. Knowles J stated that, as legal professionals, their conduct was ‘indefensible’ and they were motivated by greed. He referred them to their independent regulators for misconduct. They deny wrongdoing.

Fraudulent Evidence
Knowles J decided P&ID had provided fraudulent evidence during the arbitration hearing. Michael Quinn (Co-founder of P&ID) gave evidence to the tribunal in 2014. He knowingly failed to disclose the money Grace Taiga had been paid by P&ID. Instead, he knowingly provided false evidence he knew to be untrue. Most strikingly, he claimed that all the project finance was in place when the contract was signed in 2010. It was not. Therefore, Knowles J stated it was very unlikely that P&ID would have been able to perform their contractual obligations.

Incompetence and unfair allegations
Knowles J accepted that the Nigerian government had acted with some incompetence. For example, they missed numerous appeal deadlines. He also refused to accept all their submissions. For instance, he ruled that Olasupo Sharsoe was not corrupt, as Nigeria alleged. However, Knowles J stated P&ID attempted to use government incompetence to excuse their wrongdoing. For example, he concluded that transmitting Nigeria’s privileged documents to P&ID was not due to incompetence but deliberate. He also agreed with most of the Nigerian government’s submissions.

Outcome

The $11 billion award was dismissed, and the Nigerian government does not have to pay for it. P&ID was ordered to pay the Nigerian government £20 million in legal fees and damages within 28 days.

Commentary:

This case has provoked discussion surrounding arbitration reform. Knowles J stated, ‘it is important to consider where the value is so large, and a state is involved’ if arbitration or a court is best placed to pass judgment. In this case, he described arbitration as ‘a shell which got nowhere near the truth.’ In the future, this suggests arbitration may no longer be used in cases of this nature.

If the Nigerian government had lost this case and had to pay over $11 billion, this would have destroyed the country’s economy. For context, $11 billion equates to 1/3 of Nigeria’s foreign exchange reserves.
Nigeria’s President described the victory as a ‘victory for the developing world at large’. This means Nigeria can continue to secure loans, attract investors, and develop.

Following this judgment, many companies will likely request solicitors to review their bribery and fraud prevention procedures and ensure they comply with regulatory requirements. This is because they want to avoid the large fine and reputational damage P&ID suffered.

Written by Nick Bowes