The Registrar/Chief Executive Officer, Nigerian Institute of Chartered Arbitrators, Mrs. Shola Oshodi-John, in this interview on Arise Television, spoke about the judgment of a London court that authorised an Irish company, Process and Industrial Developments Limited to seize $9.6 billion of Nigerian assets in the United Kingdom. She stressed the need for governments at all levels to always involve professionals in any contract they are entering into. Hamid Ayodeji brings the excerpts:
Process and Industrial Development Limited (P&ID) are seeking the right to seize $9.6 billion in asset from Nigeria. Can you take us through how the country found itself in this situation?
During late President Musa Yaradua’s tenure, a contact was entered with P & ID to build a gas facility in Cross River State and the federal government said they were going to provide the pipelines. The contract was supposed to be in the interest of Nigeria as it had to do with the power sector, ensuring that we have adequate power supply in the country.
Unfortunately, along the line, Nigeria did not meet up its own end of the deal thus P &ID took us to arbitration because there was an arbitration clause in the contract that if there was any dispute or feeling that the other party is not going to play its part, which is what Nigeria did. Before getting to this point of arbitration the deal was already a mess right from the stage of the contract, because there was nothing there stating that if P &ID did not perform their own part, Nigeria would be able to take certain similar actions or any at all. It was left open ended. Normally, when dealing with investors at the pre-contract stage there are certain clauses you need to add, in case there is a change in the circumstance or a change in the conditions of operation that the deal can be renegotiated or parties can step out of the deal or contract. But this was not done. What we did was to give P&ID free will to do what they want, which is what they did.
Is it that the Attorney General at that time was not aware of these clauses in the negotiations?
With due respect, I think one of the issues we face in Nigeria is that we think because someone is in a particular position the person can provide the required expertise. In a situation like this, what Nigeria needed was core professionals, people that have expertise in contact negotiations and drafting; people that have expertise in public and private partnership contracts, those are the people that should have been on the team. If you do a background check you would find out that there was no such expertise available to Nigeria, because if we did have, they would never have signed a contract like that. For your information, P & ID did not fulfil their own part of the contract.
Were there no talks about them promoting the contract?
Their own part of the contact was that they were going to build the gas plant facility while the Nigerian government was to produce the pipelines to transmit gas to the facility.
Do you logically and technically think that since they did not build any gas facility and Nigeria did not provide any pipeline, there was no reason for a case?
It may look like that, but technically speaking you have to look into who defaulted, what led to fundamental breach and who did it. According to P & ID, it was ready to build the gas facility, but the federal government frustrated the contract because they did not provide the pipelines.
How do you frustrate a contract knowing there would be arbitrary repercussions?
If you sign a contract and then you do not respect the terms of the contract that is what is going to happen. Unfortunately, over the years, down the line we have formed this habit of not keeping to our own terms of contracts.
As an institute, when the Nigerian Institute of Chartered Arbitrators started seeing the flames of this manifest since 2010, what did you do to control the tides of this?
As at 2010 when they went into arbitration, they could still have negotiated, they could still have said come out of arbitration. From my understanding, after Jonathan’s tenure, there was an agreement to pay P & ID $800 million, considering the fact that they had done feasibility studies, pre-contract steps, and have incurred certain amount of liabilities. So, they needed to be compensated for that and also for the loss of income for the 20-year period the contract would have ran was what they asked for. Initially, there were moves to negotiate which made them arrive at some form of agreement. However, at that point in time there was a change in government in Nigeria, Jonathan was coming out of power and President Buhari was coming in. I do not know why this present regime did not revisit the matter and ensure that it did not get to this level. Some say it is because at that point in time Nigeria was in recession, but even so we could have gone to say there is changed conditions here, things were not the way it was when we signed this contract, thus can we now renegotiate it or do it in phases because the truth of the matter was that this deal was meant to favour Nigerians. How do you cancel a gas contract that would end gas flaring in Nigeria? If you live in the Niger Delta, you would know that gas flaring is one of the major environmental hazards that they face. So there are so many issues involved in this matter, unfortunately when we got to hear about this matter and made certain steps to try intervening, it did not work out. I do not know if it is the way Nigeria’s bureaucracy is structured. Even as at three months ago, we offered to help. I wrote an article stating that there are no easy ways out of this, let us come up with a team that would assist the federal government to negotiate this thing even though they are at the enforcement stage, we did not get any feedback about it. One of the major problems we face in this country is no proper records. There is no depository of data that can tell you that in the last 60 years, these are the contracts that the federal government has entered. Asides from that, I remember and recall that there was some form of hand over about this arbitration award by the present regime, but there was no follow through and at the point they decided to follow through, the issue of national interest was not taken into consideration. You do not follow through a case like this by shopping for foreigners to represent us. When you get a Nigerian team they understand that it is a national affair and go all out to do the needful. Part of the thing that I see as an issue again is that there is no consultation between the public sector, private sector and professional organisations. In a contract like this, you needed to have engineers, lawyers, petroleum engineers and all manner of technocrats. If nothing is done to nip it in the bud, it would continue like this. It may shock you to know that there are more awards coming our way from different courts, both in the United Stated and United Kingdom. The lesson that needs to be learnt here is that when we want to go out into negotiations of deals like this, we must go out with our best 11, we must not compromise on the basis of bureaucracy, party affiliations, rather go out there with the people that possess the expertise needed, round pegs in round holes. That is the only way forward. I want to let you know this, it is not only Nigeria that is going through this, even Pakistan in the same July, when the matter broke, Pakistan had a $5.8 billion award against it for something similar to this, for failing to fulfil its own part of a mining lease.
A lot of people say even the bulk of our Paris Club debts were from arbitrations, contracts not being fulfilled, side of government bargain not fulfilled, is that true?
Yeah, a good part of it is. You can go as far back as 30 years ago, if you know the story of the mono rail for Lagos State.
What happened in the case of the mono rail project?
Jakande was a leader with foresight. He knew that where we are today, we are going to get here; so he was like, let us create more jobs, open up the state to investment which at that point Lagos was growing at a fast rate. The period the contract was awarded there was a transition from Shagari’s regime to Buhari’s military regime and then the contract was cancelled which led to us paying more than what it would have cost us to construct the mono rail. Firms, banks agreed to support the project because they saw the benefits and they knew they had to do it for Lagos state. The Lagos state government said they were going to fulfil their own part of the deal by coming up with 10 per cent, but I do not think that was the case. There is a lot that has been going on in this country for a long time. As a Nigerian I am sad, my heart bleeds seeing us in this position with all the resources God has blessed us with; people at the end of leadership have failed to do the right thing. It does not cost us anything as a country to put together a qualified team. When you look at the names of the people Nigeria sent to negotiate deals and contracts like this, it would sadden you to discover that there were no experts on the team. So, how can you expect them to protect the interest of Nigeria even when they want to. They are not subject master experts; they do not understand the factors that go a long way to determine whether the contract is in your favour or not.
Earlier you said we are already at the enforcement stage, looking at Nigeria’s objection what’s your take on it?
It failed because they rose the issue of state immunity. But they should know that in international law state immunity is not absolute, it is only absolute when you are talking about issues that have to do with jurisdictions, issues that are critical to the existence and welfare of the state. In this instance where the federal government of Nigeria has gone out to enter into a business transaction to take a gain from it, automatically your immunity becomes restricted and then you go forward and sign a contract that has arbitration clause, you have said to the parties and everyone else listening that I have stepped out of my immunity, I have willed my right to sovereign immunity, and therefore on the terms of the contract I have signed, I can be taken up as an entity in commercial space or international commercial space.
Considering that the UK court has ruled, what kind of assets do you think they can seize from Nigeria?
Under international law, they cannot touch assets that has to with the welfare and existence of Nigeria. For instance, they cannot touch the Central Bank of Nigeria because Nigeria as a nation depends on the central bank to run its economy. If you go against the central bank’s assets, you ruin Nigeria’s economy. However, there are other assets they can go after, and if these people have been at it for five years and have spent a whole lot of money to get to this point, there are some assets that you and I do not know about that they would go after. They are going to go for assets Nigeria makes profit from, that is, of business concern for Nigeria. They are able to go after our asset because when it gets to enforcement stage of arbitration cases the law that is operational is the law of the state where the matter is before. You can see that in Nigeria we talk about absolute sovereignty and immunity because like the Spanish law Nigerian law takes the conservative line, saying immunity is absolute.