In late October London’s High Court overturned an arbitration decision which had seen Nigeria liable for $11bn in compensation to a firm which the government insisted had acted fraudulently.
The original case had been brought to London’s arbitration courts by Process & Industrial Developments (P&ID), a British Virgin Islands-based company which had signed a 2010 gas supply and processing agreement with Nigeria’s petroleum ministry to develop a processing plant in Calabar, Cross River State.
When Nigeria failed to build a pipeline that would have supplied the plant, the firm alleged breach of contract and began arbitration proceedings in London. That led to a $6.6bn judgment in the company’s favour, which later swelled to $11bn with interest.
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But the High Court judge, Justice Robin Knowles, reversed the decision after concluding that P&ID had paid bribes to a Nigerian oil ministry official in connection with the contract which it had failed to disclose when it commenced arbitration.
“I have not accepted all of Nigeria’s allegations. But the Awards were obtained by fraud and the Awards were and the way in which they were procured was contrary to public policy,” he said in a judgement delivered on 23 October.
The appeal victory has prompted huge relief in Nigeria, whose people can ill-afford to make an $11bn payout – equivalent to roughly a third of the country’s foreign exchange reserves. Many will see the victory as a huge blow struck for a continent whose tangled financial affairs are often dragged through foreign courts.
In a strong statement, Nigerian President Bola Tinubu was quick to seize on the wider implications of the judgment.
“This landmark judgment proves conclusively that nation states will no longer be held hostage by economic conspiracies between private firms and solitarily corrupt officials who conspire to extort and indebt the very nations they swear to defend and protect. Today’s victory is not for Nigeria alone. It is a victory for our long-exploited continent and for the developing world at large, which has for too long been on the receiving end of unjust economic malpractice and overt exploitation.”
NGO Spotlight on Corruption argued that the “economic prospects of an entire country have been held hostage by a tainted arbitral award for a gas project that was built on bribes and lies.”
Justice Knowles suggested that London’s arbitration system would have lessons to learn from the affair.
“The facts and circumstances of this case, which are remarkable but very real, provide an opportunity to consider whether the arbitration process, which is of outstanding importance and value in the world, needs further attention where the value involved is so large and where a state is involved,” he said.
The saga may yet drag on. Justice Knowles said he wanted to hear more arguments from both parties before deciding on whether to dismiss the award entirely or return the dispute to arbitration, and P&ID can seek permission to appeal.
Wider lessons
But there are wider lessons that can already be drawn. For too long, Nigeria’s petroleum industry has been a wild-west defined by opaque decision making, cowboy operators and outright corruption. Over decades, successive governments and private interests have conspired to defraud the Nigerian public of billions of dollars of much-needed revenues while plunging parts of the country into environmental crisis.
Tinubu is right to say that Nigeria and Africa have for too long been the victims of organised extortion. But if there is an enduring lesson that Nigeria can learn from this expensive debacle, it’s that to avoid a return to the world’s courts, industry reform must start at home. Watertight contracts, government transparency and due diligence on private companies are essential to outwitting the vested interests who lay claim to Nigeria’s oil wealth.
