According to Bloomberg, Nigeria could be asked to pay a debilitating $11 billion after years of stop-and-go litigation if the trial, which started this week in a London court, doesn’t work out.
The Nigerian government has asked the UK High Court to suspend recovery of a large arbitration award handed down in 2017 following a failed gas deal against the hedge fund-backed firm Process & Industrial Development Ltd. I plan to ask you to
The amount is equivalent to almost a third of Nigeria’s foreign exchange reserves, and the payment would deal a heavy blow to Africa’s largest economy, which is still recovering from the recession caused by the pandemic.
The case focuses on a 2010 deal between the Nigerian government and P&ID, a company registered in the British Virgin Islands controlled by three little-known Irish businessmen. .
The state agreed to provide free gas for 20 years to a facility built by P&ID in exchange for the treated gas used to generate electricity. The deal will allow the company to sell its remaining products and boost the country’s electricity supply.
P&ID said the company never built the planned refinery because the Nigerian government failed to develop natural gas. Nigeria claims the deal was made through bribery of former government officials and that the ruling should be reversed.
In 2012, P&ID initiated arbitration, claiming that attempts to resolve the matter privately had failed.
Five years later, a closed-door arbitration court in the UK ordered the West African country to pay the company $6.6 billion to compensate for lost profits. P&ID has no other known assets.
Within a year of the arbitration award, hedge fund VR Capital Group Ltd. invested in P&ID, and P&ID continued to press Nigeria for payment. In 2019, the stakes rose again when a British judge issued an order forcing the award.
The trial, one of the largest in British history in terms of the amount of money involved, is expected to last until March. Nigeria will elect a new president on her February 25th.
dirty money
The Nigerian government alleges that P&ID bribed former government officials to secure gas contracts and colluded with former government lawyers and officials to provide a “false defense” when the matter was brought to court. there is
With another political party now in power, Nigerian law enforcement agencies are investigating allegations of bribery surrounding the 2010 gas contract and subsequent arbitration.
Nigeria said four government officials or their family members were bribed by P&ID before the contract was signed, one of whom overlooked a “clear flaw” in the company’s proposal, according to bank records. He claims to have admitted that
The country’s anti-corruption agency also indicted a lawyer who represented the state during the arbitration for allegedly bribing a public official involved in the arbitration proceedings.
At a previous hearing, P&ID denied all allegations and characterized the Nigerian government’s fraud allegations (made nearly three years after the arbitration award) as an attempt to avoid liability. “P&ID strongly denies withdrawing any awards in its favor,” a spokesperson told Bloomberg.
In response to a request for comment, a VR Capital representative said, “P&ID won an arbitration award in 2017, two years before VR Capital acquired its stake in the company. P&ID will present a full defense in court next week. I am confident that this will expose Nigeria’s baseless allegations.”
A government spokesperson told Bloomberg: “The Federal Republic of Nigeria eagerly awaits the opportunity to bring its case to the High Court in London and is confident that justice will finally be served.”
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This week’s trial follows a London court’s decision to allow the Nigerian government to challenge an arbitration award.
UK High Court Judge Ross Cranston ruled in a 2020 ruling that “the gas processing contract was procured through bribes paid to insiders as part of a larger plot to defraud Nigeria”. He said he believed there would be a lawsuit.
If Nigeria loses in London, the president-elect will have to make an important decision: whether to resume settlement talks with P&ID or continue to claim fraud.
The company plans to seek permission to seize Nigeria’s overseas assets and said the liability from outstanding payments could make it more expensive for Nigeria to raise money on international capital markets.
The trial comes at a time of economic fragility for Africa’s largest oil producer. In the first 11 months of last year, the Nigerian government spent 80% of its income on debt service. This was due to lower oil production and increased spending on fuel subsidies.
The country has also been downgraded by Fitch Ratings and Moody’s Investors Service, pushing its credit rating deeper into junk territory.
Whatever the outcome of the trial, it will likely not be final — the High Court’s decision could be challenged further in the English Court of Appeals and, ultimately, the Supreme Court.
