By Libby George
LAGOS, Aug 29 (Reuters) - A British judge has said he will
grant a firm called Process and Industrial Developments Ltd
(P&ID) the right to attempt to seize some $9 billion in assets
from the Nigerian government over an aborted gas project.
The company was awarded $6.6 billion in an arbitration
decision over the failed 2010 project to build a gas-processing
plant in the southern Nigerian city of Calabar. With interest,
the sum now tops $9 billion - 20% of Nigeria's foreign reserves.
Nigerian officials vowed not to surrender any assets.
IS AT STAKE?
P&ID can target real estate, bank accounts or any kind of
moveable wealth, but it has to prove that the property is
unrelated to Nigeria's operations as a sovereign state.
"The onus will be on the claimant to prove that the property
is exclusively in use for commercial purposes," Simon Sloane of
law firm Fieldfisher said. "It's quite a difficult hurdle to
overcome."
State assets that have any diplomatic function - such as a
commercial property that is also used to issue visas - cannot be
seized.
But state asset seizures "happen all the time", said James
Langley, a partner with international law firm Dentons and an
expert in arbitration.
In a 2008 case against Chad, a UK judge ruled that proceeds
of oil sales held for the purpose of making repayments to the
World Bank qualified as commercial assets.
And in 2018, a U.S. judge cleared the way for a Canadian
mining firm to target shares in a U.S. oil refinery owned by
state oil company Petroleos de Venezuela SA (PDVSA) over an
arbitration debt owed by Venezuela.
The Nigerian government holds bank accounts in foreign
jurisdictions including Britain. Nigeria's state oil firm NNPC
also owns some of the oil cargoes that sail from the country's
shores. Ultimately, a judge would have to rule on whether any
individual asset was subject to seizure.
ARE NIGERIA'S ASSETS SAFE?
The Aug. 16 ruling converts the arbitration award to a
judgement, giving it the same force as a British court ruling.
This would be recognised across the European Union as long as
Britain remained a member.
Sloane said Nigeria's best protection would be to ensure it
had no significant commercial assets in any jurisdiction that
could be exposed to an asset execution.
But the arbitration award itself also allows P&ID to seek to
seize assets in any of the 160 countries that are part of the
New York Convention - a global pact for the recognition and
enforcement of arbitration awards.
Sloane and Langley said there was a long history of
successful asset seizures using the New York Convention.
WHAT ARE NIGERIA'S OPTIONS?
Nigerian officials said they would appeal. In Britain, their
prospects are limited, experts told Reuters.
"Nigeria would have to apply to set aside the order for
enforcement and that may be difficult to achieve," Langley said.
A set-aside request would have to prove there was an error
in the ruling. Langley said the judge's decision was not legally
controversial.
Lawyers representing the Nigerian government argued the
award should not be enforced because England was not the correct
place for the case, and even if it were, the amount awarded was
"manifestly excessive".
But the decision on the UK as the seat of arbitration was
made in 2016, and the arbitration award was made in 2017.
Nigeria had 28 days in each case to appeal. It appealed the
former decision, but missed the deadline by several months and a
judge dismissed it. It never appealed the latter decision.
Nigeria successfully applied to have the award set aside by
the Federal High Court in Lagos.
But in English law, judges do not typically review either
the decision on the seat of arbitration or the underlying award
once the window for appeal has passed, Sloane and Langley said.
Nigerian information minister Lai Mohammed said there was no
imminent threat to Nigeria's assets while the case was underway.
But once the court makes its judgement into an order, which
is expected in September, P&ID could start targeting assets.
To delay this, Nigeria would also have to request a stay of
enforcement while the set-aside request is considered. A
set-aside request ruling is quick in legal terms - a matter of
weeks or months rather than a year or more, Langley said.
IS $9 BILLION AN UNUSUALLY LARGE AWARD?
Arbitration awards in the billions are not uncommon. Langley
said the method used to determine the figure, based on expected
earnings over the life of the contract, was standard for
commercial arbitration.
A co-founder of P&ID testified during the arbitration that
the company spent $40 million before the project failed, but
Langley said the sum was not necessarily relevant.
The award, Langley said, is "just a function of the kind of
contract this was", reflecting potentially large profits.
Parties at this stage would typically reach a settlement
that is often well below the award, the experts said.
WHAT IS NIGERIA DOING?
In addition to fighting the UK ruling, Mohammed said Nigeria
"will strongly avail itself of all defences customarily afforded
to sovereign states ... to stave off any enforcement of the
award".
Nigeria is also fighting a P&ID effort to convert the
arbitration award to a judgement in a U.S. federal court.
He made no mention of seeking a settlement.
The government has also asked its anti-graft agency,
intelligence agency and police inspector general to investigate
P&ID and the circumstances surrounding the deal, which, it said,
"includes commencing a full-scale criminal investigation".