- Considers negotiated settlement
- Senior advocates divided on Nigeria’s options
- Revealed: How poor coordination landed Nigeria in trouble
Davidson Iriekpen, Ejiofor Alike in Lagos and Alex Enumah in Abuja
The federal government Thursday said it was considering all options, including negotiated settlement, to resolve the $9.6 billion arbitration award and enforcement judgment an Irish firm, Process and Industrial Developments Limited (P&ID), secured against Nigeria in the United Kingdom.
Minister of Information and Culture, Alhaji Lai Mohammed, gave the update on the government’s position while featuring on a breakfast programme, ‘Good Morning Nigeria,’ on the Nigerian Television Authority (NTA).
The update aligned with the tough stance displayed on Tuesday when Mohammed along with his counterparts in the Ministry of Finance, Budget and National Planning, Mrs. Zainab Ahmed; Attorney General of the Federation and Minister of Justice, Mr. Malami Abubakar (SAN); and Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, addressed the press on the matter.
At the Tuesday’s press briefing, the government described the botched gas to power contract over which P&ID secured an arbitration award and the enforcement judgment as fraudulent and a breach of foreign contract rules.
It also said President Muhammadu Buhari had ordered a multi-agency probe of the contract, which would be carried out by the Economic and Financial Crimes Commission (EFCC), National Intelligence Agency (NIA) and the Inspector General of Police.
The UK court, in a ruling, authorised the company to seize $9.6 billion in Nigerian assets over the failed contract.
The court judgment was a fallout of the contract entered into in 2010 between the Federal Ministry of Petroleum Resources and P&ID and the subsequent award made in favour of the company in July 2015 by an arbitration panel sitting in London.
However, while fielding questions on the matter yesterday during the television programme, Mohammed said the government was well aware of the consequences paying the judgment debt would have on the nation’s economy and was ready to negotiate with P&ID to find a way out.
But some Senior Advocates of Nigeria (SANs), who spoke to THISDAY on the desirability or otherwise of the government’s rethink, expressed divergent views on the options Nigeria should choose to handle the judgment debt.
While some of the senior lawyers advised the federal government to negotiate with the Irish firm, others said the government should opt for an appeal as it had initially announced.
However, despite efforts by the Buhari administration not to accept responsibility in the $9.6 billion awarded against it by the UK arbitration tribunal, THISDAY gathered it was poor coordination on its part that led to the huge damages awarded.
Mohammed said although the federal government had not yet dropped its earlier decision to appeal the judgment, it was now ready for negotiations too.
“We’re leaving no stone unturned to resolve this matter. We are ready to sit down with them and negotiate what is reasonable to all parties. You don’t inflict this kind of injury on a country and its people,” the minister stated.
According to him, “The country’s first eleven would be engaged to take over the case. We are making wide consultations on the matter. Nigerians can be rest assured that everything is being done to make sure that the country is not shortchanged in this case.”
He accused P&ID of engaging the services of some unpatriotic Nigerians in spreading misinformation about the contract, which was not executed.
He restated government’s determination to ensure that Nigerians involved in the contract are exposed and prosecuted.
Mohammed argued: “The contract itself was not justifiable and I know that the EFCC (Economic and Financial Crimes Commission), Ministry of Justice and other bodies investigating the contract will come up with facts on how the whole thing was done. The government will not sleep until this matter is resolved in a manner that will not injure the interest of Nigeria.
“The P&ID have the resources to hire the best PR agencies in the world to spread this falsehood. And without internal collaborators, external conspirators will not succeed. We will find those involved in this scam, either inside or outside government.
“The Ministry of Justice has enough experts to know that this would not be in the interest of our country. On the surface it was scam ab initio and the actors knew what they were doing.”
He admitted that Nigeria has learnt hard lessons, pointing out that before the African Continental Free Trade Agreement (AFCFTA) was signed, Buhari had ensured that there were extensive consultations.
“So, it was about leadership. We must have political leadership doing the right thing because the Ministry of Justice can only advise. It is left for the leadership to be patriotic and effective to avoid this kind of pitfall in the future,” he said.
He also denied the allegation that government did not diligently defend the case leading to the award of the $9.6 billion judgment debt.
He stated that the insinuation in certain quarters that the government did not defend the case both at arbitration and court stages was untrue and unfair.
“It is not true that we did not defend it or we were not represented,’’ he said.
He said the government successfully applied to have the award set aside by the Federal High Court in Lagos, but the tribunal ignored this decision.
The minister explained: “The contract was entered into in 2010 and from the records made available, there were three arbitrators.
“The arbitrators were the parties to be nominated by the company, the other by the Ministry of Petroleum Resources while the two of them will agree on the third arbiter.
“Nigeria was represented on the arbitration by the former Attorney-General of the Federation and Minister of Justice, Chief Bayo Ojo (SAN).’’
The minister said after the award in July 2015 by the arbitration panel sitting in London, the government went into negotiations with the company, but all to no avail.
Mohammed said when the company also filed the case for the enforcement order in both the UK and the U.S. courts simultaneously, the government engaged services of solicitors to defend the action.
“We succeeded to some extent in the U.S. court and our lawyers are still there trying to defend the action,” he added.
Senior Advocates Differ on Nigeria’s Next Step
Some senior lawyers, who spoke on the issue yesterday expressed divergent views on what steps the country should take to tackle the situation.
The lawyers, however, agreed that time was of the essence in this case taking into consideration the peculiarity of the jurisdiction the judgment was made.
According to Mr. Akinlolu Kehinde (SAN), the federal government has three options- paying the judgment debt, renegotiation or appealing to have the judgment dislodged.
Kehinde, however, stressed that if the government should decide to go on appeal, it must provide enough facts to prove that P&ID obtained the judgment without placing enough fact and evidence before the British court, which gave the order.
“So, we have three options, like in any other judgment debt, you can renegotiate, re-compromise it, that is parties involved can sit down and agree and say, look, we are not going to enforce the judgment; this is how much we can pay you as full and final settlement of your fees without prejudice of the judgment you have,” he said.
Another senior lawyer, Mr. Ahmed Raji (SAN), told THISDAY that the best option before Nigeria now was to go into negotiation with the company.
Raji said the country should look for people highly skilled in the art of negotiation to prevent further damage.
He said Nigeria should be careful in how it would handle the matter since the judgment was made by a foreign court.
“The country should hire skillful negotiators to handle the matter before further damage is done. This is not the judgment of a domestic court hence we need to be careful. I humbly suggest we negotiate out of the logjam we have found ourselves,” he said.
Another senior advocate, who opted to speak off the record, also advised the federal government to go for negotiation.
“Nigeria is notorious for not respecting contracts. The collateral damage is on all of us. Emotions and sentiments don’t solve problems. The late Dr. Rilwan Lukman initiated this contract and President Muhammadu Buhari, as far as I know, respects Lukman. If I were President Buhari, I will hire experts to negotiate for me,” he said.
But Chief Mike Ozekhome (SAN) suggested that the urgent step Nigeria should take is to appeal the judgment.
He stressed that allowing its execution would spell doom for the country.
“The best option open to the federal government to halt the looming disaster is to immediately appeal the judgment and ask the courts for stay of execution. To allow execution of the judgment will plunge Nigeria’s already battered, pilfered and mismanaged economy into irreversible doldrums and recession of unimaginable proportions,” he said.
He advised Nigerians to discountenance the position of the minister of information, who had earlier at a press conference assured that none of the country’s foreign assets would be surrendered to anyone as a result of the judgment.
According to Ozekhome, P&ID does not need Nigeria’s permission before going after the country’s assets abroad, adding that all the company needs is to obtain a garnishee order and attach Nigeria’s assets to it.
He said: “No one should take Lai Mohammed serious when he boastfully asserted that Nigeria will not surrender any of her foreign assets. He easily and shockingly forgets that UK is not Nigeria where court judgments and orders are treated with disdain, levity, derision and violated with utmost impunity.
“The judgment creditors will not seek Nigeria’s permission to go after her foreign assets. They will simply use the legal option of garnishee proceedings to attach and fyfe all available Nigerian bank accounts, assets, monies, property, wherever they find them. It is not a matter given to puerile lachrymal effusion, chest beating, and adventurous swash buckling and grandstanding. It’s a matter of cold law and facts.”
Revealed: How Poor Coordination Landed Nigeria in $9.6bn Judgment Debt
Meanwhile, despite efforts by the Buhari administration not to accept responsibility for the $9.6 billion awarded against Nigeria by the UK arbitration tribunal, THISDAY gathered that it was shoddy coordination on its part that led to the huge damages.
Information available to THISDAY showed that federal government had the opportunity to negotiate its way out of the award quagmire but bungled the process.
Once the arbitration panel was constituted in 2013 and Nigeria submitted to its jurisdiction, the country’s representative, Chief Bayo Ojo SAN, seeing the trend of the case, advised the President Goodluck Jonathan administration to step out of arbitration and seek settlement with the company.
The Jonathan administration, THISDAY gathered, took Ojo’s advise and agreed to $850m bailout to be paid in two or three instalments. Although Jonathan felt the settlement sum was high and would prefer something in the region of $500m, he was prevailed upon to approve the settlement, insisting, however, that the incoming Buhari administration should approve payment since his tenure would expire in a couple of days.
In early July, 2015, according to a THISDAY source, the matter came up before the Buhari administration, which suspecting the contract was a scam, opted for renegotiation. But this broke down as both parties could not agree on the sum for compensation to the company.
“The company was offered about $200m, which it felt was way below its costs, including litigation and sundry arbitration expenses,” the source said.
Following the breakdown of renegotiation, P&ID returned to arbitration and got a liability award, stating that Nigeria was liable for the frustration of the contract.
Nigeria’s response was to approach a Federal High Court in Lagos to set aside the award.
Armed with the Nigerian court order, the federal government approached the arbitration panel sitting in the UK, seeking to stop the second proceeding, the compensation proceedings. The panel disregarded the court order on the grounds that the seat of arbitration was England, therefore, assume jurisdiction. It then went ahead to make an award, which along with interests came to $9.6billion as of March 2018.
Legal Battle in Lagos
Documents on the legal battle, exclusively obtained yesterday, showed that the Federal High Court in Lagos had in April 2016 actually set aside the arbitration process instituted by P&ID against the federal government in London.
THISDAY gathered that with the order setting aside the arbitral award by the Federal High Court, the federal government was not supposed to send representatives to participate in the tribunal proceedings.
But despite the judgment from the Federal High Court, a group of lawyers were mobilised to take on the case, thereby leading to the current debt overhang.
Checks revealed that following the dismissal of the preliminary objection of the federal government at the arbitration tribunal, it approached a Federal High Court in Lagos, presided over by Justice Ibrahim Buba, which first restrained parties – Ministry of Petroleum Resources and P&ID – and their agents, privies and representatives from participating directly in the arbitral proceeding, which resulted in the award of $9.6billion.
The order by Justice Buba read: “That an order is granted to the application restraining the parties in this suit whether by themselves or through their agents, servants, privies, assigns, representatives or anybody whatsoever from seeking and or continuing with any step, action and or participate directly or indirectly in the arbitral proceedings between parties before: Lord Leonard Hoffmann (presiding Arbitrator), Sir Anthony Evans and Chief Bayo Ojo, SAN pending the hearing and determination of the motion on notice dated 5/42016.”
THISDAY gathered that after the order, following another suit instituted by the Ministry of Petroleum Resources, the same Justice Buba in May 2016, gave an order setting aside the award by the tribunal against the federal government.
The order setting the award read: “That an order is granted to the applicant setting aside and/or remitting for further consideration all or part of the arbitration award of Lord Leonard Hoffmann, Chief Bayo Ojo, SAN and Sir Anthony Evans and for such further or other orders as this honourable court may deem fit make in the circumstances.”
The case started after the Ministry of Petroleum Resources, then headed by the late Rilwanu Lukman, had struck the agreement in January 2010 with P&ID, which was founded in 2006 by two Irishmen, Michael Quinn and Cahill.
By the terms of the agreement, P&ID was to build and operate an accelerated gas development project at Adiabo in Odukpani Local Government Area (LGA) of Cross River State. The agreement required the federal government to supply natural gas from Addax Petroleum-operated Oil Mining Leases (OMLs) 123 and 67 for P&ID to refine into fuel suitable for power generation in the country.
According to the agreement, the initial volume of gas was about 150 million cubic feet of gas per day, which would be ramped up to about 400 million cubic feet per day during the 20-year period.
But P&ID alleged that after signing the agreement, the federal government reneged on its obligation after it had opened negotiations with the Cross River State Government for allocation of land for the project.
P&ID claimed that the failure of the federal government to construct the pipeline system to supply the gas frustrated the construction of the gas project and deprived it the potential benefits expected from 20 years’ worth of gas supplies.
The company said attempts to settle out of court with the federal government failed.
The British firm, in August 2012, served the federal government a Request for Arbitration.
THISDAY gathered that those who represented the federal government at the tribunal in October 2013, filed a preliminary objection where it was argued that the GSPA entered by the Ministry of Petroleum Resources on behalf of the federal government with P&ID was void under the Nigerian law because the ministry lacked the legal capacity to sign contract.
It also claimed that P&ID failed to comply with section 54 of the Companies and Allied Matters Act Cap 20 LFN 2004.
Also, Clause 20 of the GSPA states: “The agreement shall be governed by, and construed in accordance with the laws of the Federal Republic of Nigeria. The parties agree that if any difference or dispute arises between them concerning the interpretation or performance of the agreement and if they fail to resolve such difference 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 LRN 2004) which, except as otherwise provided herein, shall apply to any dispute between such parties under this agreement.
“Within 30 days of the notice of arbitration being issued by the initiating party, the parties shall each appoint an arbitrator and the arbitrators thus appointed by the parties shall within 15 days from the date of the arbitrator was appointed, appoint a third arbitrator to complete the tribunal.”
It was gathered that the federal government had alleged that the arbitration agreement was itself void for lack of capacity and that the tribunal lacked jurisdiction.
The jurisdiction stem from the fact that since the contract was awarded in Nigeria by the government, and to a company registered in Nigeria, the arbitral tribunal ought to sit in Nigeria.
THISDAY also gathered that it was a former Chief Justice of Nigeria, Justice S. M. A. Belgore, who in his objection to the federal government’s argument, urged the tribunal to dismiss the government position.
He argued that where a country was registered is inconsequential in arbitration proceedings.
After a strenuous argument, the preliminary objection was dismissed which made the federal government to resort to the federal High Court.
While sources have claimed that the contract was wrong ab initio, they doubted the capacity and sincerity of the Irish firm to execute the contract.
One of the sources told THISDAY that P&ID at no time did not apply to the Cross River State government for land or Certificate of Occupancy (C of O) to show that it was serious with the project.
Another area where the sincerity of the energy firm was faulted was who the contract was actually awarded to.
It was gathered that when bidding for the contract, the firm used Process and Industrial Developments (Nigeria) Limited, but as soon as it won the contract and Memorandum of Understanding (MoU) signed, it started using the name of its parent company, Process and Industrial Developments BVI.
“The firm awarded $9 billion judgment debt against Nigeria never scratched the ground to commence the project.
“The contract was designed to fail ab initio. It was fundamentally flawed from the onset,” said a source who confided in THISDAY.
When contacted, the federal government’s lead counsel in the case, Mr. Bolaji Ayorinde (SAN), declined comment, saying: “I may not give an opinion except with the permission of my client.”
