Less than 16 days from now, a British engineering company called Process and Industrial Developments Limited (P&ID) will be expecting to get a final order from a UK court to enforce an $8.9 billion arbitration award against Nigeria over a breach of contract. The award is roughly 20.6 percent of Nigeria’s entire foreign reserves currently standing at $43.2 billion.
BusinessDay on June 7 last year reported how a United States District Court issued a default judgment affirming a $6.59 billion arbitral award against Nigerian government, plus $2.3 billion in interest, in a dispute that arose over a natural gas supply and processing agreement between it and Process and Industrial Developments Limited (P&ID).
Recent development showed P&ID has now gone to a court in UK and may be seeking similar orders in other European countries to substantiate its claim.
P&ID, represented by Marcus J. Green, Michael S. Kim and Josef M. Klazen of New York-based litigation boutique Kobre & Kim in Washington, on March 16, 2018 asked the District Court in the United States to enter an order pursuant to 9 U.S. Code Section 207, 9 U.S.C. & 207, confirming the final award and enter a judgment in its favour and against Nigeria and the Ministry of Petroleum Resources, including interest.
P&ID sought costs and post-judgment compound interest, which was granted, and an order allowing the District Court retain jurisdiction over the case for any future proceedings that could be necessary to enforce the award or judgments that it could obtain in Nigeria.
P&ID’s arguments
P&ID submits that it entered a gas supply and processing agreement with Nigeria’s Ministry of Petroleum Resources in January 2010. Pursuant to the agreement, P&ID claims that it would build the necessary facilities and then refine natural gas into non-associated natural gas for a period of 20 years. The natural gas would be used by Nigeria to power its electrical grid.
The firm was to strip away heavy hydrocarbons known as Natural Gas Liquids (NGLs) in which P&ID would retain the NGLs as payment under the agreement. It said Nigeria was to make sure that all necessary pipelines and related infrastructure were installed and that arrangements were made with agencies and third parties to make sure the supply of gas was met pursuant to the agreement.
P&ID alleges that Nigeria failed to secure the agreed-upon quantity of gas and failed to complete the construction of the infrastructure. It alleges that as a result of Nigeria’s failure to comply with the agreement, it suffered a loss of 20 years’ worth of profits from the potential sale of NGLs.
After series of failed negotiation attempts, P&ID commenced arbitration against Nigeria and the Ministry of Petroleum Resources in London.
Nigerian government’s arguments
Reacting to the US court ruling, the Attorney General of the Federation (AGF), Abubakar Malami, denied allegation of a $6.59 billion default judgment against Nigeria in the enforcement proceedings by P&ID.
The AGF, however, said a foreign solicitor, Messrs Curtis Maller-Prevost, Colt & Mosle LLP, engaged by the Federal Government of Nigeria had filed processes in a United States District Court challenging the $6.59 billion enforcement proceedings against the Federal Government.
Malami, represented by the Solicitor-General of the Federation, Dayo Apata, stated that “what was being taunted as a default judgment was actually a default entry by the court clerk”.
“Under the Foreign Sovereign Immunities Act (FSIA), a defendant has up to 60 days period to answer to a petition filed against it. Where no response is entered for the defendant, the court clerk, upon application by the petitioner, makes a default entry, which in this case was made on June 5,” he said.
The AGF added that under the FSIA, a default judgment cannot be entered against a foreign state like Nigeria except the presiding judge determines so after the petitioner/claimant must have established its entitlement to a default judgment.
Besides, Malami, who noted that the US District Court is still under obligation to determine whether Nigeria is immune from the jurisdiction of the US court under the FSIA, or whether the case before it falls within one of the recognised exceptions, stated that the Federal Government foreign solicitor had on June 12, 2018 filed necessary applications to set aside the clerk’s default entry and to dismiss the entire case on grounds of defective service and lack of personal jurisdiction over Nigeria.
Court’s ruling
On July 3, 2014, the London tribunal found out that it had authority to decide whether it had jurisdiction over the case, the capacity of the ministry to enter the agreement for Nigeria and the validity of the agreement, considering P&ID’s incorporation in the British Islands, rather than Nigeria.
The tribunal found that it had jurisdiction under the United Kingdom’s Arbitration Act 1996, that the agreement between the parties was valid and that the petroleum ministry had the authority to enter the agreement.
In July 2015, the tribunal found that Nigeria failed to satisfy its obligations under the agreement and that P&ID was entitled to damages.
In response, Nigeria filed an application to set aside the liability awarded in the England and Wales High Court, Commercial Court. The High Court dismissed the application, finding that it was untimely and that its objections to the award lacked merit.
Nigeria then filed an action to set aside the award in the Federal High Court of Nigeria, arguing that the seat of arbitration was Nigeria and that the Nigerian courts had jurisdiction over the dispute.
P&ID requested that the tribunal issue an order on the seat of arbitration. The tribunal found that the parties consented to London as the seat of arbitration. However, the Nigerian High Court granted Nigeria’s request to set aside the award.
On January 31, 2017, the tribunal issued a final award, ordering Nigeria and the Ministry of Petroleum Resources to pay P&ID $6.5 billion plus interest.
As of March 16, 2018, P&ID submitted that $2.3 billion in interest has accrued and continues to accrue. The firm submitted that Nigeria has not attempted to appeal the award in the United Kingdom or elsewhere.
DIPO OLADEHINDE
