Nigeria has been in the eye of a global legal storm since the decision, on August 16, by a British judge, Mr Justice Christopher Butcher, to uphold an arbitration award of $9.6bn in favour of Process & Industrial Development (P&ID) Ltd, an Irish company, based in the British Virgin Islands.
Unsurprisingly, the London commercial court ruling was extensively reported by the international media. This, after all, is about Nigeria, a nation reputed globally for endemic corruption and blatant disregard for the rule of law; thus, such a landmark ruling against the country was bound to make headline news around the world. But the stupendous amount involved was also difficult to ignore. As the Financial Times noted, the $9.6bn liability is the equivalent of about a fifth of Nigeria’s foreign reserves, adding that “the decision represents perhaps the largest financial liability in Nigeria’s history”!
But last week, there was an interesting twist to the case when, in what seemed like a tit-for-tat action, the Federal High Court sitting in Abuja authorised the federal government to seize assets belonging to P&ID Virgin Islands and its Nigerian affiliate, P&ID Nigeria Ltd, having found them guilty on two charges of tax evasion and money laundering brought by the Economic and Financial Crimes Commission (EFCC). According to one newspaper, “The companies had through their representatives pleaded guilty to all the charges”.
Yet, one must wonder why the tax evasion and money laundering charges were not advanced in the London arbitration and court cases or instituted separately in the UK and the US, where a parallel P&ID action is still ongoing. Given that Nigeria is not a signatory to any treaty on the recognition and enforcement of foreign judgements, such as the Hague Convention or the New York Convention, the ruling of the federal high court would only have effect in Nigeria. By contrast, the London court judgement, if upheld in any appeal, would potentially affect all of Nigeria’s non-diplomatic assets in all British entities, the European Union, the US and several other countries.
But leaving aside the legal niceties about the recognition and enforcement of foreign judgements, the London ruling is deeply embarrassing and damaging to this country. Which raises the obvious question: how did Nigeria get into such a terrible legal mess? Well, the problem stemmed from two familiar sources: corruption and abuse of power on the one hand, and utter disregard for legality and the rule of law on the other.
Everything about the P&ID case smells of attempts by certain powerful individuals to commit Nigeria to a shoddy international commercial contract, in part for personal gains, and, subsequently, a reckless decision, borne out of shameful incompetence and deliberate disregard for the principle of the sanctity of contract, to renege on and frustrate the performance of the contract.
Let’s take the corruption first. It is an open secret – isn’t it? – that government-awarded contracts in Nigeria are intended, in large part, to serve personal interests. In her book titled “Fighting Corruption Is Dangerous”, Ngozi Okonjo-Iweala, Nigeria’s two-time finance minister, devoted a section to this phenomenon. She described a common practice in which politicians and officials award contracts with a view to defaulting on them for personal gains. This arrangement involves connivance between contractors, government officials and the courts, she said, describing “an unholy alliance where amounts owned by government, interest and penalties were inflated and all parties shared in the proceeds after payment.”
Of course, at the heart of the P&ID case was a contract which the politicians and government officials involved had no intention of performing, but which went terribly wrong against the game plan! According to the narrative, in 2010, the government awarded a contract to P&ID to build a gas processing plant, while Nigeria, on its part, committed to laying all the pipelines and supplying gas to the plant. P&ID’s payment for the contract was to come from the export of gas products from the plant over 20 years. But, although the company said it spent $40m in preparatory work, it didn’t break ground on the project, arguing that the government frustrated the contract by reneging on its commitment to lay the pipes. In 2012, P&ID went to arbitration to seek damages for breach of contract.
This was clearly contract entered into with wrong motives, without due diligence. The two Irish businessmen, Brendan Cahill and Michael Quinn, who were awarded the contract to build the gas plant, made their names, according to the Irish Times, in the entertainment industry. Their company, P&ID, didn’t previously exist; it was set up specifically to undertake the project. Yet, this was still a valid contract, and, thus, had to be performed. The failure by any of the parties to perform it, or any attempt by one party to frustrate the other party’s ability to perform it, which was what P&ID alleged, would be a breach of contract.
But Nigeria deliberately ignored the huge legal risks, riding roughshod on the rule of law. On May 3, 2015, about 26 days before President Muhammadu Buhari was sworn in, P&ID reached a settlement with President Goodluck Jonathan’s administration for the sum of $850m. But President Buhari refused to pay the settlement, ignoring the fact that, with respect to international legal obligations, government is treated as a continuum!
Of course, at the heart of the P&ID case was a contract which the politicians and government officials involved had no intention of performing, but which went terribly wrong against the game plan
Even when the Buhari government eventually became involved in the case, it’s handling of the arbitration was embarrassingly shambolic and incompetent. For instance, Nigeria did not challenge the arbitration tribunal’s initial decision in favour of P&ID in July 2015, nor did it appeal the final arbitral award made in January 2017, in which the tribunal ordered Nigeria to pay P&ID $9bn for the breach of contract.
Instead, Nigeria spent time arguing that England was not the proper place for the case. Yet, any lawyer with a basic knowledge of conflict of laws knows that, as one of the parties, in this case P&ID, had a strong connection with the UK, unless there are explicit choice of law and choice forum provisions in the contract, England was an appropriate forum. There was a court decision in 2016 that the UK was the right jurisdiction for the arbitral case. However, even though Nigeria could appeal the decision within 28 days, it missed the deadline by several months. Inevitably, a judge dismissed its appeal. Yet, Nigeria till refused to pay up!
In November last year, the former British Secretary of State for International Development, Priti Patel, alluded to the case in a damning article, titled “If Nigeria wants to take part in global markets, it must shape up and honour its obligations.” The former minister blamed President Buhari for cancelling a compensation settlement between P&ID and the Jonathan government, adding that, since taking office, Buhari “has done his level best to pretend Nigeria’s obligations to P&ID do not exist”, by “refusing to respect the various tribunal decisions.” Nigeria, she said, must honour its obligations to companies like P&ID, adding: “Until the, investors inevitably will be very wary of investing in the country”.
Of course, Nigeria still refused to pay the arbitral award. But, now, the English commercial court has converted the award into a judgement debt. Unless Nigeria successfully appeals the case, its commercial assets around the world are at risk of being confiscated.
Nigeria’s reputation with investors is already damaged by this case, but the financial consequences could be equally devastating. Yet, some would say it serves Nigeria right, hailing the case as a triumph of the rule of law over the rule of men and impunity!
Olu Fasan
