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A-List Celebrity No. 9: The Nigeria v P&ID case

This article is part of the series A-List: The Celebrities of Arbitration Cases. A series delving into the most renowned cases that have shaped the landscape of international arbitration.


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Parties: The Federal Republic of Nigeria v. Process & Industrial Developments Limited

Decided by: High Court of Justice, The Business and Property Courts of England & Wales, King’s Bench Division, Commercial Court ([2023] EWHC 2638 (Comm))

Date:  23 October 2023



Why is this case famous?


This case is one of the biggest arbitration scandals in recent history—an $11 billion award that nearly went uncontested until the English courts stepped in and called foul. Nigeria challenged the massive arbitral award, arguing that the entire deal was tainted by bribery and fraud. After years of legal battles, the High Court of England and Wales sided with Nigeria, ruling that the award was secured through deceit. This landmark ruling is a game-changer for the arbitration world, spotlighting the challenges arbitral tribunals face in detecting fraud and reaffirming the crucial role of national courts in safeguarding justice.


The Arbitration


At first, this case looked like your ordinary arbitration case: in 2013 P&ID started an arbitration against Nigeria, alleging a breach of the Gas Supply and Processing Agreement for Accelerated Gas Development (“GSPA”) signed between them in 2010.


In 2015, the arbitral tribunal issued an Award on Liability finding that Nigeria had committed a repudiatory breach of the GSPA, that the GSPA was terminated on P&ID accepting that repudiatory breach, and that Nigeria was liable in damages. In 2017, an Award on Quantum required Nigeria to pay P&ID US$ 6.6 billion. Interest was awarded at the rate of 7%. The total amount grew over time due to the applicable interest rate and, by 2023, reached $11 billion (!).


As the seat of arbitration was London, Nigeria challenged both awards before the English Courts alleging bribery, corruption and perjury.  


The signs of corruption


Nigeria alleged that bribery and corruption occurred both during and after the time they entered into the GSPA. They claimed that some of their own lawyers at the time of arbitration, including two Leading Counsel, were compromised by P&ID. P&ID, of course, characterized Nigeria’s case as “false and dishonest.”


The English High Court looked into it, and here are some of the key signs of corruption identified:


  • Failure to Follow Due Process: The original gas processing contract was awarded without a fair competitive bidding process, raising concerns about the transparency and integrity of how the contract was procured.


  • Suspiciously Short and Vague Contract: Despite being a multi-billion-dollar deal, the contract was only 20 pages long, lacking the level of detail typically expected in such high-value, complex energy agreements, raising doubts about its legitimacy.


  • Neither Party Executed Their Obligations: Neither Nigeria delivered the promised gas nor did P&ID build any processing facilities, raising questions about whether the contract was ever intended to be executed in good faith.


  • False Evidence and Misrepresentation: P&ID misrepresented its technical skills and financial ability to carry out the gas processing project, crafting a misleading narrative to secure the contract and the arbitration award.


  • Bribery of Government Officials: P&ID made payments to influential Nigerian officials, including to a former legal director at the Ministry of Petroleum Resources, to help secure the contract's approval and ensure favourable terms for the company.


  • Suspicious Timing of Payments: Payments were made to Nigerian officials at key moments during the negotiation and arbitration process, hinting at a pattern of influence intended to sway decisions in P&ID’s favour.


  • Improper Access to Confidential Documents: P&ID obtained and kept privileged Nigerian government legal documents inappropriately, giving them inside knowledge of Nigeria's legal strategies and vulnerabilities during the arbitration.


While not all of its arguments were accepted, Nigeria did succeed in its challenge. The court understood that the awards were obtained by fraud, making them (and the way in which they were procured) contrary to public policy.


English Courts take on the arbitration’s role in the story


Justice Knowles said in its decision that “the Arbitral Tribunal was of the greatest experience”. Nevertheless, in reviewing the events and discussions held during the arbitration, he also said:

I do not know whether those of these points that were known to the Tribunal troubled the Tribunal. I respectfully anticipate they would have. I appreciate that views on what a Tribunal should do in this situation will differ. Respectfully, I do not consider the Tribunal did all that it could to find out more about the points, by questions of Nigeria’s legal representatives.  

Even more importantly, in the last 4 pages of its decision, Justice Knowles reflects on the GSPA, the arbitration and the awards. He makes four points.


Point One: Drafting Major Commercial Contracts with a State

Imbalanced negotiating power often results in unfair contract terms, as shown by bribery in this case. Without corruption, experience and resource disparities can also have serious effects. This underscores the need for professional ethics in contract drafting and the importance of pro bono legal support for resource-limited states to safeguard public interests.


Point Two: Importance of Document Disclosure

The case shows that document disclosure was key to uncovering the truth. Court-ordered disclosure across jurisdictions provided essential evidence, including Nigeria’s internal communications and third-party documents. This highlights the vital role of disclosure in achieving justice and maintaining transparency in complex disputes.


Point Three: State Participation in Arbitrations

Nigeria’s poor arbitration participation, due to substandard legal representation and insufficient government guidance, weakened its defence. The tribunal struggled with fairness and was restricted by the evidence. This raises concerns about arbitrators taking a more active role in ensuring an adequate standard of defence is achieved.


Point Four: Confidentiality in Arbitrations Involving States

Arbitration’s confidentiality limits public scrutiny of Nigeria’s case handling. Unlike courts, arbitration lacks transparency needed for accountability, particularly with public funds. This judgment raises the question of whether greater public visibility is necessary in state arbitrations, given their substantial financial and policy implications.

To use the words of the Justice Knowles once again:

But this is a highly unusual case, although one that draws attention to matters of wider importance. Quite apart from the consequences for the parties, the matter touches the reputation of arbitration as a dispute resolution process.

 


Nigeria v. P&ID reveals it’s more than a legal battle; it’s a wake-up call for arbitration. While often praised for speed and efficiency, arbitration can be manipulated and fall victim to fraud, highlighting the detrimental impact of corruption on major international disputes. Nigeria’s victory not only promotes transparency but also raises the question: is arbitration the best method for resolving disputes involving billions in public funds?

 
 
 

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