In 2010, the Federal Republic of Nigeria (Nigeria) entered into an agreement with a British company known as Process & Industrial Development Ltd (P&ID) following its decision to embark on a policy named the Accelerated Gas Development Project. The policy was meant to tackle the problem of harmful gas flare pollution caused by oil exploration and also generate electricity in Nigeria. The agreement between Nigeria and P&ID is known as the Gas Supply and Processing Agreement for Accelerated Gas Development (GSPA).
Under the agreement, Nigeria was obligated to supply wet gas to Gas Processing Facilities (GPFs) which were to be constructed by P&ID. P&ID’s obligation was to strip the wet gas into lean gas which will be delivered to Nigeria for power generation and the remaining natural gas liquids were to be retained by P&ID for sale either domestically or by export.
Nigeria on its part did not perform its obligations under the agreement, neither did P&ID construct any Gas Processing Facilities (GPFs) to receive gas. However, three years into the agreement (2013), P&ID commenced an arbitration action against Nigeria for repudiatory breach of the GSPA and the arbitration tribunal by a part final award dated 17th July, 2015, delivered an Award on Liability, which held that Nigeria had in fact committed a repudiatory breach of the GSPA and therefore liable in damages. The Tribunal published a further award dated 31st January, 2017, dealing with quantum (“the Final Award”), and it held that Nigeria is required to pay P&ID the total sum of US$ 6.6 billion, with an at the rate of 7%. The current outstanding amount, including interest, is some US$11.1 billion.
P&ID commenced enforcement proceedings in the English High Court on 16th March, 2018, pursuant to section 66 of the English Arbitration Act of 1996, and simultaneously initiated legal proceedings in the United States. On 16th August, 2019, Butcher J issued an order for the enforcement of the Awards and rejected Nigeria’s attempt to oppose the enforcement on the basis that the arbitration’s jurisdiction was in Nigeria, not England. During a hearing on the 26th of September, 2019, held to address related matters, Butcher J granted Nigeria permission to appeal the decision regarding issues pertaining to the arbitration.
Nigeria, at the Commercial Court in London (The Court of Appeal), challenged the Award on Liability, the Final Award and an award on jurisdiction delivered by the arbitration tribunal. Nigeria made allegations of bribery and corruption by P&ID before, at and after the time the parties entered into the GSPA and also alleged that the entire arbitral process as a whole from arbitration agreement to Final Award was robed in corruption. It alleged that some of its own lawyers at the time of the arbitration, including two Leading Counsel, were corrupted by P&ID. P&ID on its part, expressly described Nigeria’s case against it as “false and dishonest”.
JUDGEMENT
The Appeal Court in its final decision held that Nigeria succeeds on its challenge under section 68 of the English Arbitration Act 1996. It also held that the awards were obtained by fraud and the way in which they (the awards) were procured were contrary to public policy and therefore set aside the awards delivered by the Arbitration Tribunal.
The court further stated that what happened in this case is very serious indeed, and it is important that section 68 has been available to maintain the rule of law.
Section 68(3) provides:
“(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may:
(a) Remit the award to the tribunal, in whole or in part, for reconsideration,
(b) Set the award aside in whole or in part, or
(c) Declare the award to be of no effect, in whole or in part.
The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.”
CONCLUSION
The entirety of this case borders on the fundamentals of contract, and the consequential impact of a breach of any term in a contract. If the decision of the Commercial Court had taken a different turn considering that both parties presented very strong cases, Nigeria would have incurred a liability that would have left a dent in its economy as the value of the damages claimed in the dispute was equivalent to a third of Nigeria’s total annual budget for 2023 and five times its health budget!
This will also impact the general outlook of Nigeria in the global scene, in that, for long Nigeria has been projected and viewed as one of the most corrupt and fraudulent countries in the world but was able to win a case on allegations of fraud and corruption against a foreign company, in a foreign country regardless of how complex the dispute was.
This judgement is a historic victory and Nigeria believes that this ruling will establish a clear boundary, sending a message that any entity assuming African nations are susceptible to exploitation should reconsider their assumptions.
This judgement is a significant outcome that we all should learn from as business owners, creatives and founders, as a breach of a simple term in a contract can change the course of business, career, and financial life.
