How Nigeria lost $9.6b gas contract award suit in UK

The Irish gas firm involved in the $9.6 billion asset controversy with Nigeria at the weekend blamed President Muhammadu Buhari’s government for the nation’s precarious situation in the matter.

According to P&ID, the current administration failed to take a conciliatory stance and was negligent in the processes leading to the confirmation of the award by the English Court.

A court in the United Kingdom had, two weeks ago, affirmed the right of P&ID to seize at least $9.6 billion (about N2.9 trillion in the official exchange rate of N305/$) of Nigeria’s assets as arbitration award because the country failed to live up to the terms of the contract.

The company’s latest position coincided with calls from authoritative voices in legal and diplomatic space on the government to cut its losses by seeking a more diplomatic means of resolving the impasse.

Key government officials, including Information and Justice ministers, Alhaji Lai Mohammed and Abubakar Malami, last week, alluded to fraud in the crafting of the 2010 gas contract that would have allowed P&ID build a state-of-the-art gas processing plant to refine natural gas (wet gas) into ‘lean gas.’

The company would receive no payment for executing the contract but own the by-products created by the refining, including propane, ethane, and butane — natural gas liquids (NGLs). The market would be worth billions of dollars over the 20-year lifespan of the contract.

The government has already instituted a probe of the contract.

Professor of Political Science, Bolaji Akinyemi, in a telephone interview with The Guardian, said there was nothing wrong in probing the processes leading to the contract but cautioned that the domestic component of the matter should be tackled separately while engaging the P&ID in resolving the matter.

“Deal with your domestic culprits separately. That can take you as long as you want. (But) try to reach a settled agreement with the foreign aggrieved company. Don’t wait for one to deal with the other. Let the nation learn the right lesson from this whole mess,” Akinyemi advised.

Wondering why the previous agreement reached with the Irish company was not implemented, Akinyemi said: “The right lesson is that the rest of the world does not crawl at the same pace Nigeria does. The compromised settlement should have been implemented.”

In the same vein, professor of International Law and Jurisprudence, Akin Oyebode, said Nigeria should cut its losses and intentionally seek legal advice on the issue.

According to him, “Nigeria is having more than enough distractions on the home front” and “must look for urgent solutions to its barrage of disturbances abroad.”

He said: “You entered into a mega-contract and you didn’t get anything from legal advice. I’m really sad for the country. We entered into that contract which included an arbitration clause and (we) willingly surrendered our freedom… in expectation of compliance.”

An official position paper sent to The Guardian by the company at the weekend said the Nigerian government is merely creating a fictional history to cover up its negligence.

“This week’s series of desperate conspiracy theories point to something deeper: the Buhari administration is refusing to admit its own role in the P&ID case from 2015-2019 after it came into office,” the company said in an email to The Guardian.

Malami had, from the sidelines of last week’s Nigeria Bar Association (NBA) conference in Abuja, told CNBC Africa that he believed the P&ID project showed the possibility of some level of conspiracy to cause unnecessary economic damage against the interest of Nigeria’s economy.

“The government as a unit was delicately involved,” he said. “And that was the government in 2010. The award was in 2012, and then three years thereafter, the current administration under the leadership of Muhammadu Buhari came into place. So, the time when this administration came to place in 2015, the award was over three years. There was no appeal, no application for execution, no application to set the award aside.”

But the Irish firm, which said it would like to put the record straight, described Malami’s appearance on international television as a ploy to “wipe his hands and the hands of the Buhari administration clean.”

Listing the grounds on which the current administration would be found culpable in the arbitration award that threatens more than 20 per cent of Nigeria’s foreign reserves, P&ID explained that on May 3, 2015 (shortly before the Buhari administration assumed office for its first tenure) it offered to settle the dispute with the Nigerian government for $850 million, an amount less than 10 per cent of the actual arbitration award of $9.46 billion.

“President Goodluck Jonathan indicates they are handing over the negotiations to the incoming Buhari administration; May 29, 2015: Muhammadu Buhari was sworn in as the 15th president of Nigeria, but failed to appoint a cabinet for five months; July 17, 2015: The Arbitration Tribunal found in favor of P&ID (i.e. – the Liability Award). The new Buhari administration did not make any attempts at settling or negotiating with P&ID and did not make any effort to challenge the decision.

“Attorney General Malami was sworn in November 11, 2015, just under three months after the Liability Award; May 27, 2016: The Arbitration Tribunal wrote to the Nigeria government confirming: ‘As the parties will be aware from Procedural Order No 12, the Tribunal has decided that the seat of the arbitration in England. It follows that the Federal Court of Nigeria had no jurisdiction to set aside its Award.’

“Neither Attorney General Malami nor any representative of the Buhari administration did anything in response other than continuing with the proceedings, thereby tacitly accepting the analysis of the Arbitration Tribunal; June 24, 2016: having failed to set aside the Liability Award by falsely claiming the seat of arbitration was in Nigeria; not England, Attorney General Malami wrote personally to the arbitrators to say, ‘My office has taken over the handling of the above arbitration on behalf of the Ministry of Petroleum Resources.’” 

He asked for and obtained an extension of time to file a defence to quantum, and appointed his own legal team in place of the Ministry of Petroleum Resource’s legal team.

“August 30-31, 2016: The Quantum Hearing (i.e. – amount of damages payable) takes place in London. Attorney General Malami’s legal team conducted Nigeria’s defence at the quantum hearing. Expert witnesses as to quantum were called to give evidence and were cross-examined.

“After the Quantum Hearing, Attorney General Malami instructed his lawyers to request a standstill agreement, which would take effect from the date of the award.

“This fact has never been publicly reported until today; January 31, 2017: The Arbitral Tribunal issued a final award, ordering Nigeria to pay P&ID $6.5 billion-plus $2.3 billion in uncollected interest as of March 2018; February 17, 2017: The Award on Quantum was delivered to the parties on February 17, 2017. Despite the 60-day standstill having been agreed by P&ID, Attorney General Malami made no attempt to negotiate with P&ID during the 60 days following the handing down of the Quantum Award.

“April 28, 2017: After the 60 days had expired, Attorney General Malami instructed his lawyers to write to P&ID’s lawyers and explained: ‘The delay was occasioned by the bureaucracy of the Federal Government in a bid to determine a reasonable strategy after receipt of the arbitral award.’
 
“The Attorney General’s lawyers added: ‘We now have the authority of the Vice President of the Federal Republic of Nigeria to meet with the claimant to negotiate the terms of the arbitral award.’

“Today: In the lead up to the judgment by the English Commercial Court, Attorney General Malami allowed the time for acknowledging service in both the United States and London to lapse without filing any response.

“In both jurisdictions, Nigeria’s lawyers Curtis Mallet had to apply for ex post facto extensions of time and make the necessary apologies and explanations to the court. In London, a senior Curtis Mallet partner explained that the Claim Form was ‘immediately filed and not passed up the chain of command’ at the Ministry of Justice. The partner pleaded ‘the delay was neither deliberate nor intended to be disrespectful to the court.’

“In the U.S., Curtis Mallet explained that the deadline was missed because they were in the process of being formally retained by the Nigerian government and had been instructed to inquire about the potential for a settlement.

“The Attorney General’s pronouncements in the Nigerian press are a clear attempt to cover up his own incompetence and that of the Buhari administration. This is a matter, which could have been settled shortly after he took office in November 2015 for $850 million. Instead, he personally took the decision to gamble on the arbitration and turned an $850 million liability into a $9.6 billion liability.

“And at no time since has Attorney General Malami assumed responsibility has he raised any allegation of fraud or scam, either in the arbitration or in the subsequent enforcement proceedings. The reason for this is that there was no fraud. All of this raises serious concerns for foreign investors in Nigeria, whether you are investing in a commercial enterprise or buying Eurobonds. Not only will Nigeria deliberately refuse to pay an international arbitration award backed by an English Court, but they are prepared to launch sham investigations and character assassinations when all else fails.”

Describing the investigations initiated by the Federal Government as dishonest and an assault on the rule of law, the P&ID insisted it would only be focused on vigorously enforcing its legal rights in the UK, including seizing Nigerian assets to satisfy the award. “This will begin as soon as possible,” the Irish firm noted.

Efforts by The Guardian to reach Mohammed at the weekend, following his earlier statement on the P&ID issue, were unsuccessful as his phone rang out. At press time, last night, he had not responded to a text message seeking further clarification in the light of the P&ID’s latest position.

Also, James Odaudu, who is currently in charge of media matters at the Attorney General’s office, was not able to provide Malami’s side of the matter against the backdrop of P&ID’s allegation of negligence.

Meanwhile, about 1,000 Civil Society Organisations (CSOs) are set to picket the British and Irish High Commissions in Abuja today to protest against the $9.6billion judgment.

The Secretary-General of the Coalition of Civil Society Groups, Abubakar Ibrahim, confirmed the plan yesterday in an interview with The Guardian.

If the current effort by Nigeria fails, the country stands to lose a huge chunk of its financial assets in less than two months’ time when the United Kingdom court reconvenes from vacation to give a final ruling on the matter.

A document showing the facts and figures and efforts by the Nigerian government to avert the legal stand-off sighted in Abuja yesterday revealed that the arbitration was commenced against the Ministry of Petroleum by Messrs Process & Industrial Development (P&ID), a limited liability company with which the Ministry of Petroleum Resources signed a Definite Agreement dated January 11, 2010, for Accelerated Gas Development in OML 123 and 67 for a period of 20 years.

In 2009, the Federal Government of Nigeria signed a Definite Agreement for Accelerated Development Policy with eight companies, one of which was P&ID.

But following the inability of the parties to implement the agreement as envisaged, P&ID commenced the above arbitration initially claiming US$1.9 billion against the Ministry of Petroleum, and thereafter increased its claim to US$5.9 billion and recently submitted a final claim of US$8.1 billion.