{"id":309118,"date":"2023-12-12T18:30:02","date_gmt":"2023-12-12T13:00:02","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=309118"},"modified":"2023-12-13T17:04:17","modified_gmt":"2023-12-13T11:34:17","slug":"high-court-of-justice-arbitral-award-nigeria-11billion-usd-challenge-legal-news","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/12\/12\/high-court-of-justice-arbitral-award-nigeria-11billion-usd-challenge-legal-news\/","title":{"rendered":"High Court of Justice upholds challenge to arbitral award of 11 billion USD against Nigeria vis-à-vis Gas Supply and Processing Agreement"},"content":{"rendered":"
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High Court of Justice, Business and Property Courts England and Wales:<\/span> 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*<\/span>, 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<\/span>”; upheld Nigeria’s challenge to the impugned Arbitral Award under Section 68 of Arbitration Act, 1996.<\/p>\n

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<\/span>”.<\/p>\n

Background:<\/span> 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.<\/p>\n

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.<\/p>\n

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.<\/p>\n

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.<\/p>\n

Court’s Assessment:<\/span> 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.<\/p>\n

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.<\/p>\n

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<\/span>”. 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.<\/p>\n

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.<\/p>\n

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<\/span>”. 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<\/span>”.<\/p>\n

The Court further pointed out that during the course of arbitration, the Tribunal also faced many delays from Nigerian side and other unsatisfactory conduct.<\/p>\n

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-<\/p>\n