Nigeria's foremost Online Energy News Platform

$9bn P&ID scandal spreads

... It’s international conspiracy —Lawyers

Though the Nigerian government last week criticised fortnight’s ruling by a British court, which gave about $8.9 billion (about N3.2 trillion) arbitral award against Nigeria, many lawyers have blamed the federal government for delayed action and slow reaction.

Mr. Leke Job, Kaduna based Senior Advocate of Nigeria told this newspaper that “this government does not act with swiftness on any issue. This judgment is serious matter and if enforced it will affect our foreign reserves. What the government can do is to without delay go for appeal.”

This position is shared by Professor Bidemi Anjorin who teaches commercial Law at the University of Ilorin.

“Government must appeal the judgment that is the only way out for now. It took five years of inaction on the part of Nigerian government, that is why we are where we are now”, he said.

Just last Friday, the Central Bank of Nigeria (CBN) said the government would do everything to defend the country and the country’s foreign reserves. Also the Attorney General of the Federation and minister of Justice, Mallam Abubakr Malami, said the government will prosecute all those involved that cause the judgment against Nigeria.

The ruling was by the United Kingdom, Business & Property Courts (the Commercial Court) presided by Justice Butcher. It granted Process & Industrial Development Limited (P&ID) a British engineering firm right to enforce a March 20, 2013 award earlier given against Nigeria by a District Circuit Court in Washington DC.

How the case began

The initial award was $6.6 billion as damages in favour of P&ID, which accused the Nigerian government of breaching a 2010 gas contract agreement. The award was handed by a tribunal constituted under the rules of the Arbitration Act 1996 (England and Wales) and the Nigerian Arbitration and Conciliation Act (CAP A18 LFN 2004).
The immediate past government had negotiated with the plaintiff and agreed for $850 million settlement against the initial $6.6billion, but government of President Buhari refused to act on the settlement.

Following Nigeria’s refusal to enter appeal for over five years since the ruling was given, the court said initial award rose to about $8.9 billion, including an additional $2.3 billion in accumulated interest at 7 per cent rate per annum.
The tribunal said the damages were calculated as the present value of 20-year income, minus certain capital and operating costs incurred from building and running the refining facility.

Friday’s award converted the arbitral award into a domestic UK judgment against Nigeria, creating a situation where Nigeria’s assets around the world, particularly in the UK and U.S., risk being taken over by P&ID, or its agents. Following the ruling, P&ID hailed the British Court’s ruling as the triumph of the rule of law. The company gave an indication that it would be moving to enforce the judgment.

But, the Nigerian government, through the Permanent Secretary and Solicitor General of the Federation, Dayo Apata, dismissed the ruling as “completely wrong and obviously unjustifiable.” Mr Apata said in a statement in Abuja that the government will vigorously defend Nigeria’s rights to protect its people’s assets around the world against the enforcement of the judgment.

“Nigeria intends to strongly avail itself of all defences customarily afforded to sovereign states under the United Kingdom Sovereign Immunity Act at any such enforcement actions,” Mr. Akpata said.

“The damages awarded P&ID are clearly unreasonable and manifestly excessive and exorbitant. The courts went far beyond any legitimate protection of the commercial interests to overcompensate P&ID on a, frankly, gargantuan scale, and impose[d] a punitive award on Nigeria,” he added.

He said the federal government has already instructed its counsel to pursue an appeal on the judgment of the English Court to secure a stay of execution, apart from other efforts in the courts of the United States of America to protect Nigeria’s interests.

In apparent show of determination to see that the execution of the judgment does not see light of day, Mr. Emefiele told State House Correspondents in Abuja that the Nigerian government was not scared about any attempt by P&ID to enforce the ruling by ambushing the foreign reserves.

“I am not scared at all,” the CBN governor told reporters. “Since the news about the judgment broke out late on Friday, we have been discussing with our counsels, and they have advised that there are sufficient and strong grounds on the basis of which we could file a stay of execution and also an appeal against that judgment.

“There are certain anomalies in the process leading to the award of that contract which are currently being looked into by the EFCC (Economic and Financial Crimes Commission). I believe that the EFCC themselves have their own investigation reports about that.”

The CBN governor said the government will aggressively follow through and ensure the execution of that judgment is suspended and the appeal succeeds at every level both within Nigeria and abroad.

Just as the judgment was handed down, it became clear that the country would have paid less than 10 per cent of the $8.9 billion award if the Muhammadu Buhari administration had acted in line with the recommendation passed to it by the preceding Goodluck Jonathan regime.

But rather than take the recommended action, the Buhari administration scorned at the settlement agreement its predecessor signed with Process & Industrial Development Limited (P&ID), the engineering firm fighting Nigeria for breach of contract.

Official documents was said to have shown that a government negotiation team constituted by Mr. Jonathan successfully negotiated an out-of-tribunal settlement with P&ID and got the company to accept a $850 million payment, about 9.6 per cent of the $8.9billion award.

However, the present administration ignored that settlement and rather asked its lawyers to return to the tribunal to further contest the engineering firm’s claims. The tribunal then ruled against Nigeria, awarding $6.6 billion in favour of the British Virgin Island’s firm.

The refusal of the government to settle the matter for over five years attracted additional $2.3billion in accumulated interest at seven per cent per annum. The fine followed a dispute over alleged breach of contractual agreement by the Ministry of Petroleum Resources and the Nigerian National Petroleum Corporation (NNPC).

Jonathan administration then transferred the responsibility of disbursing funds to the aggrieved company to the then in-coming government of President Muhammadu

“President Jonathan reasoned that since his administration was already a few days away from its exit on May 30, it was proper not to approve the payment of $850 million to avoid unnecessary suspicion,” John Adewudi, a lawyer familiar with the case told Business Hallmark.

At a point during the tribunal hearing, counsel to the Nigerian government, Supo Shasore, a senior advocate of Nigeria (SAN), was said to have given a legal opinion that the government’s defence for failure to discharge its obligation under the contract was “feeble and unsustainable.”

On August 11, 2014, the then Attorney-General and Minister of Justice, Mohammed Adoke, advised the government to take steps to settle the matter out of the tribunal “with a view to significantly reduce the claims against it.”
At the end of negotiations on November 20 and 21, 2014, a government team recommended the payment of $1.5 billion to P&ID.

But Mr. Jonathan asked the team to press for reduction of the settlement amount. The team achieved a further concession to about $1.1billion to allow for taxes, salaries and other remunerations to P&ID workers if the contract agreement were executed.

On April 29, 2015, P&ID agreed to the government’s final proposal to pay $850 million to settle the matter once and for all. Although the government expressed discomfort over the $850 million settlement, wishing it was about $500 million or less, a payment schedule was agreed.

Initial payment of $100 million was to be made immediately after signing the Deed of Settlement by all parties. Subsequent payments were to be in three tranches of $250 million every four months.

The Minister of Petroleum Resources at the time, Mrs. Diezani Alison-Madueke, who raised the memo for President Jonathan’s approval, said the Nigerian National Petroleum Corporation (NNPC) was to provide the funding for the payment.

However, on May 25, 2015 (four days to the end of his term), Mr. Jonathan wrote back to the Minister and the Group Managing Director of the NNPC, saying, “I cannot approve at this time. Please bring up for the in-coming government to consider.”

The directive was contained in memo No. PRES/88-3/MPR/813/158/NNPC/7 from the then, president to Mrs. Alison-Madueke. The memo was a response to another, dated May 18, 2015, in which the minister sought the president’s approval to ensure immediate settlement of the matter.

Although Mr. Jonathan, based on the recommendation of the minister, gave approval for immediate settlement of the matter, he however transferred the disbursement of the money to the then in-coming Buhari administration.

However, on assumption of office five days later on May 30, BusinessHallmark learnt that when the matter was brought before President Buhari and Vice President Yemi Osinbajo, they opted for a renegotiation of the entire deal.

Mr. Shasore, who was the government’s defence counsel, was debriefed. He was replaced by Bolaji Ayorinde, also a SAN, to continue the matter at the London tribunal. On December 23, 2015, the new government asked for the award to be set aside completely.

But on February 10, 2016, the tribunal dismissed the application following hearing on July 22 to 24, 2016 to determine the damages. The tribunal ruled that the damage suffered by P&ID was the loss of net income it would have received if the Nigerian government had kept its side of the contract.