By Libby George
LAGOS, Sept 27 (Reuters) - A British judge has given the
Nigerian government permission to seek to overturn a ruling that
would enable Process and Industrial Developments Ltd (P&ID) to
try to seize some $9 billion in assets over a failed deal.
The British Virgin Islands-based firm, which was set up
solely for a project to build a gas processing plant, initiated
arbitration against Nigeria in 2012 after the deal collapsed.
P&ID spent $40 million on design and feasibility but didn't
construct the plant as the government failed to supply the gas
it was meant to process. In 2017, the arbitration tribunal
awarded P&ID $6.6 billion, plus interest, based on what it could
have earned over two decades.
The award is accruing $1.2 million in interest per day,
backdated to 2013, and is now worth more than $9 billion - some
20% of Nigeria's foreign reserves.
The issue has enraged Nigeria, with President Muhammadu
Buhari calling it a "scam" in a speech at the United Nations.
Cabinet members are demanding patriotic Nigerians band against
the award, while a dozen high-level officials were in London for
a court hearing on Thursday.
WHAT DOES THE RULING MEAN?
In August, a ruling in London converted the arbitration
award to a court judgement - allowing P&ID to try to seize
assets in order to collect it. A British judge on Thursday gave Nigeria permission to seek
to set aside that decision, with a date for an appeal hearing
yet to be decided. Legal experts told Reuters that in order to succeed,
Nigeria's lawyers will have to prove there was an error in the
ruling.
The lawyers on Thursday focused on whether the arbitration
tribunal was allowed to determine that England was the
appropriate seat of the arbitration; the Nigerians argue that
only a court could make such a determination.
They also argue that the award itself was "patently and
hugely excessive."
The judge said he did not support one of Nigeria's
arguments, which said the award itself should not be enforced
because a federal court in Lagos set it aside.
WOULD SETTING ASIDE MAKE THE LIABILITY GO AWAY?
Not exactly. While a successful set aside would make the
award unenforceable in the UK, P&ID is also asking federal
courts in Washington, D.C., to convert the award to a judgement
in U.S. courts. That case, an entirely separate process, is
pending.
The arbitration award itself also allows P&ID to seek to
seize assets in any of the other 160 countries that are part of
the New York Convention - a global pact for the recognition and
enforcement of arbitration awards.
Legal experts said there is a long history of successful
asset seizures using the New York Convention. But other
jurisdictions considering seizure requests could take UK court
rulings into account, which means that if Nigeria succeeds in
its set aside, seizure elsewhere becomes harder.
CAN THE AWARD ITSELF BE OVERTURNED?
Possibly. Global law firm Norton Rose Fulbright noted that
arbitration awards can be overturned based on "public policy
arguments" that hinge on allegations of fraud or corruption.
Nigeria's anti-graft unit, the EFCC, is conducting an
investigation into P&ID, and has charged a former petroleum
ministry lawyer with taking bribes related to the contract. The
former official has pleaded not guilty. It also alleged that a
now-deceased petroleum minister broke the law by signing the
contract without proper approvals and protocol. Last week two Nigerians, who the EFCC said worked for P&ID,
pleaded guilty on its behalf to charges of fraud and tax
evasion. Nigeria's attorney general Abubakar Malami said that gave
Nigeria "a judicial proof of fraud and corruption" and "cogent
ground for setting aside the liability."
P&ID said neither man was a current employee or
representative of the company, and that there was "no evidence
produced, no defence allowed, no charges laid, no due process
followed."
A successful fraud argument is not an easy path.
Simon Sloane of law firm Fieldfisher said the Nigerian
government would need to prove that the contract was not merely
tainted by fraud, but that it was "on its face" unlawful or
fraudulent. Sloane called this an "extremely high hurdle."
Thus far, the Nigerians have not presented evidence against
P&ID in an international forum.
P&ID denied any wrongdoing.
"The Nigerian government knows there was no fraud and the
allegations are merely political theater designed to deflect
attention from its own shortcomings," it said in a statement.
ARE THERE OTHER OPTIONS?
Nigeria could settle with P&ID - a common route and one that
would likely cost the country substantially less than $9
billion.
In 2015, at the end of the term of President Goodluck
Jonathan, P&ID proposed a settlement of $850 million. The Buhari
administration did not take the offer.
Both parties have said they are open to negotiations, but
the government said P&ID had not directly approached it to
initiate talks. Experts said that Thursday's ruling allowing an appeal
significantly strengthened Nigeria's negotiating position.
WHAT IS AT STAKE?
For now, Nigeria's assets are safe; the judge on Thursday
ordered a stay of execution on seizures as long as Nigeria puts
$200 million into a court account with 60 days and pays certain
of P&ID's legal fees within 14 days. If they fail to do so, P&ID
could try to seize assets.
Harry Mantovu QC, who represented Nigeria, said that "even
if P&ID seized assets for a short time, it could be serious."
P&ID could target real estate, bank accounts or any kind of
moveable wealth, but it would have to prove that the property is
unrelated to Nigeria's operations as a sovereign state.
State assets that have any diplomatic function - such as a
commercial property that is also used to issue visas - cannot be
seized.
Mantovu noted that the award represents 2.5% of Nigeria's
gross domestic product and half of its earnings from crude oil
last year.
"It is not going to take an Einstein to conclude that this
would have a massive impact on the economy of Nigeria and the
monetary policy of Nigeria," he said in court.