Beyond the euphoria of the P&ID court case verdict
As Nigeria continues to savour its court victory against Process & Industrial Developments (P&ID) Limited in the protracted P&ID v Federal Republic of Nigeria case, the Federal Government should consciously put in place mechanism to prevent the country from being similarly ensnared in legal processes bereft of due diligence. On October 23, 2023, the Business and Property Court in London, presided over by Justice Robin Knowles, officially ended the enforcement of an $11 billion arbitration case initially awarded to P&ID on January 31, 2017, by the London Court of International Arbitration (LCIA), ruling that the arbitration awards were obtained by fraud, and the way in which they were procured was contrary to public policy.
The roots of this legal battle can be traced back to January 2010 when the then President Umaru Yar’Adua administration entered into a 20-year Agreement, known as the Gas Supply and Processing Agreement (GSPA), to refine natural gas for powering Nigeria’s electricity grid. However, by August 2012, the agreement unravelled as P&ID failed to produce the expected results. In adducing reasons for its failure, P&ID accused Nigeria of failing to provide the required gas supply for the project. It subsequently took legal action, alleging a breach of contract against Nigeria. It won an award against Nigeria. Initially, the arbitration award was $6.6 billion, but the award later amounted to $11.5 billion as of the date of the court judgment because of interest.
However, the enforcement of the awards was stalled by Nigeria for obvious reasons. During President Goodluck Jonathan’s administration, the Ministry of Petroleum Resources appointed Mr. Bayo Ojo, a former Attorney General and Justice Minister, as a party-nominated arbitrator to constitute the Arbitral Tribunal for the purpose of settling the judgment debt. By the time the sum of $850 million was finally agreed upon as the term of settlement in May 2015, the Jonathan government was on its way out of power. Rather than pay the agreed sum, the Jonathan government astutely pushed the matter to the incoming government of President Muhammadu Buhari. Under President Buhari’s government, several meetings were convened at the instance of the former Attorney-General of the Federation and Justice Minister, Abubakar Malami, on the negotiated settlement of the judgment debt.
However, the former Vice President, Yemi Osinbajo, later discovered and announced in June 2018 that the entire P & ID contract was tainted by fraud. Consequently, Nigeria subsequently filed an appeal against the enforcement of the awards. During the hearing of the appeal, Nigeria argued that there was substantial evidence of fraud in the contract and the arbitration award’s procurement. Nigeria prayed the court to set the award aside, highlighting that some individuals involved in the case were facing trials for money laundering and corruption.
In his ruling on October 23, 2023, Justice Knowles not only concurred that the arbitration awards were obtained by fraud but also found that the manner in which they were procured was contrary to public policy. Although Nigeria secured a legal victory in the case, thereby saving a gargantuan $11.5 billion that would otherwise have been paid as an arbitral award to the country, the government should ensure that the P&ID scam is not repeated. The scam has exposed the harm official corruption may be causing the country. Stealing of government money by public officials cannot be a statecraft in Nigeria. As Justice Robin Knowles rightly noted in his judgment: ‘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.’
As the former Minister of Justice and Attorney General of the Federation (AGF), Michael Aondoaka, has rightly observed, the P&ID scam is a wake-up call for the government to muster the political will to look at other similar cases such as the Ajaokuta Steel Company and others in which some Nigerian officials hurriedly went abroad and cooked up some arbitration awards which they are trying to enforce against Nigeria.
The P&ID scandal should make the government checkmate the reckless expenditure of public funds abroad. Nigeria had expended so much financial and human resources in defending the P&ID. The Central Bank of Nigeria (CBN) at that time was made to deposit $200 million in court in 2020. At a time, the former Governor of the Central Bank, Godwin Emefiele, had hired fresh British lawyers to represent Nigeria at a huge professional fee. Till date, the CBN has expended about $40 million on legal services in the matter. The genesis and major players of the terms and conditions of the contract were unknown. The Ministry of Finance, the Attorney-General of the Federation, and the Presidency seemed not to be involved in the contract supervision.
Beyond revelling in the ego boost from the P&ID contract case victory, Nigeria must now implement consistent contract practices and a National Arbitration Policy. The recurrent policy shifts and contract reversals by successive Nigerian governments constitute a significant national embarrassment.
Apart from corruption, the P&ID scandal occurred due to managerial lapses and capacity deficits among the Nigerian officials involved in the P&ID contract negotiations. As Justice Knowles rightly observed, “the case has shown examples where legal representatives did not meet the required standard, where experts failed in their duties, and where politicians and civil servants neglected to ensure that Nigeria, as a state, participated properly in the arbitration. Even without the dishonest behaviour of P&ID, Nigeria was compromised.”
Therefore, to ensure that government officials entrusted with decision-making power demonstrate a strong sense of responsibility in the future, the government should invest in building the capacity of officials involved in contract negotiations and management. This includes providing training on international business practices, negotiation skills, and contract management.
Above all, before entering into future potential international contracts, Nigeria must conduct thorough due diligence on potential partners, verifying the credibility and financial capacity of the companies involved. It is high time Nigeria established independent oversight bodies or agencies responsible for monitoring and auditing government contracts. These bodies should have the authority to investigate and report on potential irregularities.
The government should review and update existing laws and regulations related to contracts and international agreements to ensure that the legal frameworks are robust and provide mechanisms for holding those who engage in fraudulent activities accountable. Nothing prevents Nigeria from collaborating with international organisations and partners to share best practices and receive support in building effective systems for international contract management.
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