High Court of Justice, Business and Property Courts England and Wales: The instant matter wherein Arbitral Award of 11 billion USD vis-à-vis Gas Supply and Processing Agreement (GSPA) between Nigeria and Process & Industrial Developments Ltd. was challenged by Nigeria on the ground that they were procured by fraud; the Bench of Justice Robin Knowles, CBE*, describing the dispute to be “highly unusual case that draws attention to matters of wider importance (…) and touches the reputation of arbitration as a dispute resolution process”; upheld Nigeria’s challenge to the impugned Arbitral Award under Section 68 of Arbitration Act, 1996.
The Court did not accept all of Nigeria’s allegations, but stated that PID attained the Arbitral Awards by practising the most severe abuses of the arbitral process. Hence, the Coust concluded that Nigeria had a right to object under section 68(2)(g) of the Arbitration Act 1996. “True, there were other causes of the Awards, including incompetence and neglect throughout the Arbitration on the part of Nigeria. But the presence of these causes does not detract from the effects of PID’s abusive conduct. If this was a fight it was not a fair one and could not lead to a just result”.
Background: The Federal Government of Nigeria and Process & Industrial Developments Ltd., (PID) had signed a Gas Supply and Processing Agreement for Accelerated Gas Development (GSPA) on 11-01-2010. The GSPA was conceived as Nigeria embarked on a policy named the Accelerated Gas Development Project, to tackle a chronic shortage of electric power and wastage of gas recovered from oil. Nigeria was to supply specified quantities of “wet” gas to Gas Processing Facilities (GPFs) constructed by PID and the company was to strip the wet gas into “lean” gas, and deliver it to Nigeria to be used for power generation. The remaining natural gas liquids were to be retained by PID for onward sale either domestically or by export.
Non-performance of the GSPA was alleged by both the parties which led to a dispute and then a resolution by Arbitration as per Article 20 of the GSPA.
The Arbitral Tribunal found that Nigeria had committed a repudiatory breach of the GSPA, and was liable to pay damages and thus owed the other party 6.6 billion USD. With the interest rate awarded by the Tribunal, the amount exceeded to 11 billion USD.
Aggrieved by the award, Nigeria knocked the doors of the Commercial Court, and made allegations of bribery and corruption by PID before and after the parties had signed the GSPA. It was further alleged that some of Nigeria’s lawyers at the time of the arbitration, including two leading counsels, were corrupted by PID. Commercial Court’s Sir Ross Cranston granted Nigeria an extension of time to pursue the application to set aside, and relief from sanctions to rely on new evidence to resist the application to enforce. He found that there was a strong prima facie case that the Awards were procured by fraud. Following the judgment of Sir Ross, a number of further orders for disclosure of documents were made internationally on Nigeria’s application.
Court’s Assessment: Taking note of the complexity of the case and that it touches upon the very reputation of arbitration as a dispute resolution mechanism, the Court embarked on considering the evidence in context, and with regard to the age and complexity of events.
The Court stated that the instant case is a civil and commercial litigation, and the standard of proof is on the balance of probabilities. It was noted that the drafting of the GSPA exposed Nigeria to an unfavourable situation should it not deliver wet gas even when PID had not built any Gas Processing Facilities.
The Court noted that the Nigerain Government’s Legal Director, who was heavily involved with the GSPA and its drafting, had received money before and after signing the GSPA and same was deliberately concealed from the Nigerian authorities. Taking note of the Legal Director’s cross examination, the Court stated that “Keeping payments secret from her employer (Federal Govt. of Nigeria), was deliberate, as she (the legal director) knew that the payments were corrupt”. The Court stated that just because bribery was extensive in Nigeria, and that some business could not in practice be transacted without it, these points do not justify bribery. They reinforce the seriousness of a practice that threatens the foundations of a society.
Taking note of the Arbitration proceedings, the Court further pointed out that PID was provided with many of Nigeria’s internal legal documents which were retained by PID. The Court pointed out that PID’s improper retention of Nigeria’s Internal Legal Documents, received at various points during the Arbitration, enabled them to track Nigeria’s internal consideration of merits, strategy and settlement during the Arbitration. The improper retention of Nigeria’s Internal Legal Documents also allowed PID to monitor whether Nigeria had become aware of the fact that the Tribunal and Nigeria were being deceived.
The Court was surprised that the Arbitral Tribunal had accepted the argument from Nigeria that “the Government had no obligation to deliver gas until there was a plant to receive it”. However, the Tribunal used this finding about this commercial absurdity to support its conclusion that: “There was nothing in the GSPA to suggest that these obligations [a reference to Nigeria’s obligations under Article 6b)] were conditional upon the completion by P&ID of the construction of the Gas Processing Facilities”.
The Court further pointed out that during the course of arbitration, the Tribunal also faced many delays from Nigerian side and other unsatisfactory conduct.
After a thorough analysis of the entire case, evidence and arbitration proceedings, the Court stated that areas of the case that Court dealt within this judgment on the evidence were-
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The circumstances in which the GSPA came to be signed, including what the responsibilities of persons named by the Nigerian authorities as indulging in bribery and corruption.
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Nigeria’s inept handling of the arbitration.
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Nigeria’s failure, over a period of several years, to carry out any investigation into the bribery allegations they eventually advanced in December 2019.
The Court admitted that the afore-stated points did not leave Nigeria with a positive case.
Taking note of Section 68 of Arbitration Act, 1996, the Court stated that the section is concerned with serious irregularity “affecting the tribunal, the proceedings or the award. It was stated that in the instant case, the Court had to focus on 68 (2)(g), that is concerned with “the award” and “the way in which it was procured”. It was stated that for purposes of irregularity under Section 68, the Award that must be “obtained by fraud” and the way in which the Award is procured that must be “contrary to public policy”.
The Court pointed out that the objection under consideration in Section 68(2)(g), that of “the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy”, is of fundamental character to the arbitration process because it goes to the integrity of that process. “No policy of arbitration law calls for Section 68(2)(g) to be given other than its plain meaning. An award obtained by fraud or contrary to public policy (or procured in a way that was contrary to public policy) and which has caused or will cause substantial injustice is not what the parties agreed to when they agreed on arbitration. To support it in the name of supporting arbitration as a process achieves the opposite. Unless the right to object is lost for reasons of finality”.
Justice Knowles opined that within Section 68(2)(g), there would be a case where there is an overall fraudulent enterprise or plan from the start to procure an award. “Here the contract is a first or early step in carrying out that overall fraudulent enterprise or plan, but the result is the award”. The Court was satisfied that PID intended to perform the GSPA when it entered into it, and that there were means by which it could have done so. However, PID did not have to contemplate performing the GSPA itself with its assets, experience and employees.
The Court however pointed out that there are three things that bring the instant case within ambit of Section 68(2)(g)-
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Firstly, PID providing to the Tribunal and relying on evidence before the Tribunal that was material but was evidence that PID knew to be false.
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PID’s continued bribery of the Legal Director (even during Arbitration proceedings) in order to suppress from the Tribunal and Nigerian Govt. the fact that she had been bribed when the GSPA came about.
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PID’s improper retention of Nigeria’s Internal Legal Documents that it had received during the Arbitration. It retained these (rather than returned them unread) so as to monitor Nigeria’s position and awareness as the Arbitration continued. This included monitoring whether Nigeria had become aware of the deception being practised by PID on the Tribunal and on Nigeria as a party before the Tribunal.
The Court pointed out that in the instant case, the core is the bribery of the Legal Director when the GSPA was being created. It is the fact of that bribery that PID’s co-founder falsely concealed the corrupt payments. It was stated that by its retention of the Nigeria’s Internal Legal Documents PID was monitoring the arbitration proceedings. “I have no hesitation in concluding that Nigeria suffered substantial injustice within the meaning of the section. And that is even before taking into account what PID did with Nigeria’s Internal Legal Documents”.
The Court further pointed out that nature and contents of the documents, and the scale, continuity, and circumstances of PID’s conduct were such that, Nigeria’s right to confidential access to legal advice was utterly compromised throughout all or most of the Arbitration. “It (Nigeria) was effectively denied an important part of the process of arbitration. Here too I have no doubt that had the Tribunal known, its approach would have been very different”.
The Court emphasised that what happened in this case was very serious indeed, and it is important that Section 68 of Arbitration Act, 1996 had been available to maintain the rule of law. The Court hopefully stated that this case should provoke debate and reflection among the arbitration community, State users of arbitration, and among other courts with responsibility to supervise or oversee arbitration. “The risk is that arbitration as a process becomes less reliable, less able to find difficult but important new legal ground, and more vulnerable to fraud. The present case shows that having (as here) a tribunal of the greatest experience and expertise is not enough. Without reflection, then a case such as the present could happen again, and not reach the court”.
The Court in its concluding remarks, stated that, “This case has also, sadly, brought together a combination of examples of what some individuals will do for money. Driven by greed and prepared to use corruption; giving no thought to what their enrichment would mean in terms of harm for others. Others in the present case include the people of Nigeria, already let down in so many ways over the history of this matter by a number of individuals in politics and administration whose duty it was to serve them and protect them”.
[The Federal Republic of Nigeria v. Process & Industrial Developments Ltd., [2023 EWHC 2638 (Comm), decided on 23-10-2023]
*Judgment by Justice Robin Knowles, CBE
