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Nigeria Vs P&ID: $9bn judgement sum a fraud?

Nigeria Vs P&ID: $9bn judgement sum a fraud?

Doris Ukaonu
President Muhammadu Buhari

The $9 billion judgment debt awarded against the Nigerian government, which the British Commercial Court recently endorsed for enforcement in favour of the Process and Industrial Development Limited (P&ID) has been described as a fraud.

Reacting to the judgment, senior lawyers and industry experts who spoke to Daily Times questioned the transparency of the gas supply and processing agreement which Nigeria allegedly signed with Process and Industrial Development Limited (P&ID) in January 2010.

A former Chairman of Civil Legal Committee that vetted most of the agreements on government privatised companies, Mr. Yunus Ustaz Usman (SAN), said he is at pain with the fraudulent attitude of some government officials who collude with foreign partners to defraud the nation.

He recalled that he once vetted the Federal Government agreements with arbitration clauses and was surprised to discover that government officials willingly approved the venue of arbitration to be in London.

“I changed the venue or seat of the arbitration to Abuja, but when we left after the assignment, government officials altered them to read London,’’ he lamented.

He said that he could not figure out the reason for such alteration other than fraud and the unpatriotic nature of most of the officials, declaring that “you can quote me anywhere.”

On his part, legal luminary and political activist, Dr. Kayode Ajulo attributed the controversy to certain lacunae in the supposed agreement.

Describing the contract as fraudulent, Ajulo recalled that at the period the agreement was allegedly signed, the late President Umaru Yar’Adua was hospitalised and could not have approved the said agreement nor did the agreements have the approval of the sum, which is within the threshold for Federal Executive Council.

A state attorney general who spoke on condition of anonymity questioned the rationale behind the award of full compensation for loss of potential income and interest over the life span of the project to P&ID.

He reasoned that P&ID had equally defaulted by not building the gas facility to which the gas pipeline will be laid as clearly stated in the controversial agreement.

According to the legal expert, the agreement required Nigeria to lay gas pipelines to a processing facility to be built by P&ID and not an open field, adding that since the company also failed in its responsibility, it was unfair for arbitration tribunal to award full compensation for loss of potential income in P&ID’s favour.

“It’s regrettable that P&ID, a company with no track record in the gas industry purports to have spent $40 million in front end engineering and design would be allowed to reap from where it did not sow”, he said.

He emphasised that the whole transaction is full of deliberate acts of omission that were contrived to create space for corruption.

Although P&ID is owned by Irish men, Michael Quinn and Brendan Cahill, it is believed that some powerful Nigerians are only fronting for them with the sole aim of defrauding the country.

It all started in January 2010 when the former President Umaru Musa Yar’Adua, was away on a medical sojourn in Saudi Arabia.

The then Minister of Petroleum Resources, Dr. Rilwanu Lukman, who died in 2014, had allegedly brokered a Gas Supply and Processing Agreement on behalf of Nigeria with an Irish engineering and project management company, Process and Industrial Development Limited (P&ID).

Under the terms of the agreement, Nigeria was to supply natural gas (wet gas) at no cost to P&ID via a government pipeline to the site of P&ID’s production facility.

P&ID was required to construct and operate the facility necessary to process the wet gas and return to the Federal Government lean gas suitable for use in power generation at no cost to the Nigeria government while P&ID was entitled to other derivatives stripped from the wet gas.

Clause 20 of the GSPA provides for the agreement to be governed and construed in accordance with the laws of the Federal Republic of Nigeria.

The parties also agreed that in case of differences between them concerning the interpretation or performance of the agreement, and if they fail to settle such differences or dispute amicably, then a party may serve on the other a notice of arbitration under the rules of the Nigerian Arbitration and Conciliation Act (Cap A18 LFN 2004).

The purported contract also stipulates that the arbitration award shall be final and binding upon the parties while the venue of the arbitration shall be London, England or otherwise as agreed by the parties.

Due to unresolved dispute that arose as a result of Nigeria’s alleged failure to lay the gas pipelines, P&ID filed a request for arbitration, alleging that it had so far spent $40 million even though it was evident that P&ID had also defaulted by not building the plant as required.

Whereas P&ID had accused the Nigerian government of failing to lay pipelines as specified in the agreement, thus demanding compensation for lost earnings, the government also argued that the company also failed to build the processing facility which was proposed to be sited in Adiabo, Odukpani Local Government Area of Cross River State.

On August 22, 2012, the P&ID served the Jonathan administration its notice of arbitration and on September 19, 2012, the company appointed Sir Anthony Evans to act as its arbitrator while Nigeria appointed Chief Bayo Ojo (SAN) as its arbitrator.

The two arbitrators, in what analysts described as inexplicable circumstances, appointed a British jurist, Lord Hoffmann to be chairman of the arbitral tribunal effective January 29, 2013.

A senior official in the Federal Ministry of Justice who pleaded anonymity berated the Jonathan administration for its naivety and failing to resolve the impasse before vacating office on May 2015.

According to the official, the fact that the arbitration panel was constituted with two 85-year-old British jurists against a Nigerian, without questioning Chief Bayo Ojo’s pedigree, was already a lost cause for Nigeria as the constitution of the panel was already skewed.

“How did you expect him to win such a case in favour of Nigeria? The panel was already a case of two against one, especially with the fact that the case was heard in London.

“At least, the chairman should have been picked from a different continent taking into consideration that Chief Ojo might be faced with a minority ruling,” the official added.

Many Nigerians also believe that government officials also played a role in the unfortunate incident, especially in the aspect of inactions by successive governments.

Although the deal was struck before former President Goodluck Jonathan was confirmed acting President, keen observers were of the view that six years was enough for him to have taken a decisive action to forestall this nightmare.

Sources in the Federal Ministry of Justice said that when Jonathan discovered the contract was a scam, he should have cancelled the contract immediately and worst still pay the penalty which would have been a meagre amount compared to what we are faced with.

Although, the former President had constituted a team comprising of former Petroleum Minister, Diezani Alison-Madueke, Justice Minister, Mohammed Bello Adoke, former Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo -Iweala and ex-NNPC GMD, Andrew Yakubu to negotiate an out-of-tribunal settlement with P&ID, the source maintained that knowing the gravity of the case, Jonathan shouldn’t have allowed it to linger for six years unresolved.

The Buhari regime was not left out in the blame game as it was also blamed for negligence, especially over its failure to abide by the agreement as entered into by the government team constituted by Jonathan, who was able to convince P&ID to accept the sum of $850 million in compensation for loss of revenue, negotiated down from an initial proposal of $1.5 billion.

The payment was to be made in four tranches of $100 million at first and then in three instalments of $250 million each.

Officials familiar with the matter have confirmed that the out-of-court settlement was struck few days to Jonathan’s exit from the government on May 30, 2015, and as such he could not approve such payment but transferred the responsibility of disbursing funds to the aggrieved company to the then in-coming government of President Muhammadu Buhari.

Sources also confirmed that details of the negotiated settlement were included in the handover notes to Buhari.

Buhari’s government is believed not to have followed up the matter after he was sworn into office in 2015 as he ignored the settlement agreement.

After a series of hearings, the Arbitration Panel sitting in London in 2015 awarded $6.6 billion for loss of income over the lifespan of the GSPA and $2.3 billion in interest in favour of P&ID.

With a lackadaisical attitude, it took Nigerian government more than the statutory period of four months to appeal the judgment at the Commercial Court in London with an excuse that there has been a change of administration in Nigeria and that ministers including the attorney general had only just been appointed.

The nation, therefore, requested for an extension of time to act on the outcome of the Arbitration Tribunal as well as to set aside the liability award, an appeal which was dismissed by Phillips J. on grounds of no merit.

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Following its failure to have its way in the English court, the minister of petroleum resources commenced proceedings at the Federal High Court, Lagos, seeking essentially the same reliefs that were rejected by Phillips J. which was granted in favour of Nigeria, but was dismissed by P&ID as “abusive and as a deeply unattractive attempt to forum shop.”

Lord Hoffmann told the parties that the Federal High Court had no jurisdiction to annul the liability award and on January 31, 2017, the tribunal issued the final award, granting P&ID damages in the sum of $6.597 billion with an accumulated interest at the rate of 7 per cent per year, working out at $1.265 million per day.

Following the New York Convention which allows winners of arbitral awards to enforce them in signatory countries; on March 16, 2017, P&ID filed a petition before the US courts to confirm the award.

Shockingly, Nigeria for reasons best known to government failed to either appear in court or mount its defence which led to a United States District Court issuing a default judgement affirming a $6.59 billion arbitral award against the Federal Government, plus $2.3 billion in interest.

Reports have it that Nigeria’s foreign affairs ministry was served with the petition in March 2018 and had two months to oppose it. The document was received and signed for by the ministry on March 27, 2018. The two months expired by the end of May 2018 with Nigeria failing to appear to defend itself.

It was also gathered that the solicitor general of the federation and permanent secretary of the justice ministry reportedly contacted two American law firms regarding the case but stopped short of actually instructing them.

As the deadline loomed largely, international law firms sent letters to Nigeria’s Justice Minister, Abubakar Malami, warning him of the seriousness of the situation and the urgent need to act promptly to avoid the dire consequences of the case.

Commenting on the outcome of the arbitration, Marion Lespiau of Grant Thornton said: “it shows the importance of the respondent (Nigeria) challenging facts, assumptions and calculations provided by the claimant (P&ID) and of providing alternative evidence to the tribunal.”

However, the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, has condemned the judgment which if allowed to stand would deplete the country’s external foreign reserve, saying it would do everything to defend it, adding that Nigerian government was not scared about any attempt by P&ID to enforce the ruling by ambushing the foreign reserves.

It is sad to note that a sovereign debt hedge fund – VR Capital Group, is reported to have acquired a 25% stake in P & ID.

VR Capital founded and run by London-based hedge fund manager Richard Deitz, is well known for buying distressed sovereign debt, with a track record in Russia (1998), Argentina (2001), Greece (2012) and Ukraine (2014) among others. The involvement of VR Capital Group is a clear indication that there is a high degree of confidence in the outcome of P&ID’s case.

Meanwhile, the Federal Government through the Attorney General of the federation and Minister of Justice, Abubakar Malami (SAN), has vowed to probe the alleged sordid actions taken by some individuals that have resulted in the award of $9 billion judgment debt against the Federal Government in favour of P&ID.

According to him, “Nigerians woke up on Friday 16, August, 2019 to the rudest consequences of the underhand dealings of the past administration that has resulted in the award of $9 billion against the Federal Republic of Nigeria by a British Court which ruled that Process and Industrial Development Limited (P&ID) had the right to seize $9 billion in Nigerian assets.”

The Federal Government obviously embarrassed has condemned in a very strong term “the underhand manners by which the negotiations, signing and formation of the contract were carried out by some vested interests in the past administration in connivance with their local and international conspirators”.

The real culprits and masterminded of these sordid acts are likely to be the sponsors of two Irish citizens who founded the P&ID. Though the identities of these people are not yet known, Nigerians believe the Federal Government can as well direct its probe in that direction as well.

Also condemning the development in a very strong term, a top legal luminary and a Senior Advocate of Nigeria, Olushola Ojo, called for a thorough investigation and arrest of all those involved with the process of awarding the contract.

‘’For me, it is negligence on the part of Nigeria not to enter an appeal for a period of five years after the ruling was delivered knowing very well the implication of what was involved. It shows that we are not serious people with disregard to the rule of law.

“Nobody no matter how highly placed should be spared if found guilty. We are talking about Nigeria here and not individual, this is about the future of Nigeria’’, Ojo told the Daily Times.


This article was written by Ukpono Ukpong, Doosuur Iwambe, Philip Clement & Andrew Orolua- Daily Times

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