A significant advance has been made in the court battle between P&ID and the Federal Government of Nigeria. Last Friday, the English Commercial Court rightly ruled in P&ID’s favour, and comprehensively rejected the Nigerian Government’s efforts to evade the payment of the arbitration Award – which is now approaching $10 billion.
The arbitration took place in England because that was the venue agreed to by the Nigerian Government in the signed contract with P&ID, under the rules of the Nigerian Arbitration and Conciliation Act – a point which the English Court confirmed once again.
The English Commercial Court’s ruling has affirmed that the Award can be enforced in the UK. The Commercial Court rejected the Nigerian government’s arguments and agreed with P&ID on every point. The English Court’s key conclusions include:
- London was the seat of the arbitration;
- The Award does not violate UK public policy; and
- Nigeria cannot now challenge the Tribunal’s awarding of pre-award interest.
The conclusion regarding the seat of the arbitration is especially important. That determination means that only the English Court had “supervisory jurisdiction over challenges to awards in the arbitration.” Nigeria’s applications to challenge the Tribunal’s rulings in the Nigerian court were therefore without any effect. Moreover, the ruling stated many of the arguments purported by the Nigerian government were, “not analogous to the facts (Paragraph 66),” that the Commercial Court “[did] not accept th[e] submission (Paragraph 66),” and was “was wholly unpersuaded (Paragraph 79)” by the assertions made by the arguments raised by Nigeria based on the alleged jurisdiction of the Nigerian courts.
This ruling is a damning verdict on years of missteps by the Nigerian Government:
- FRN failed to uphold its contractual commitments to P&ID. The gas project, therefore, could not be completed as planned;
- The Arbitral Tribunal, which included a former Attorney-General of Nigeria, unanimously determined that FRN was at fault for the project’s failure;
- The Tribunal then awarded P&ID $6.6bn in compensation plus interest for loss of profits; and, finally:
- The Nigerian government opposed enforcement of the Award at court hearings in the UK; their arguments have now been comprehensively rejected by the English Court.
Here is a quick refresher on P&ID. P&ID is a sole purpose company founded in 2006 by Michael Quinn and Brendan Cahill, who had over 30 years’ experience of project management and delivery in Nigeria – including delivering complex energy projects.
P&ID and the Nigerian Government entered into a 20-year Agreement – known as the Gas Supply and Processing Agreement (GSPA) – to refine natural gas for powering Nigeria’s electricity grid. The GSPA would have been very profitable for both P&ID and Nigeria and have generated an additional 2,000 megawatts of power for the national grid. Such a major increase in low-cost electricity supply brought by the P&ID project could have been transformative for millions of Nigerians. At present, the World Bank estimates that only 59% of the country have access to reliable supply of electricity. This is one of the major consequences of the Nigerian government’s decision to repudiate its contract with P&ID. The GSPA failed when the government did not uphold its commitments. In August 2012, after several attempts over two and a half years by P&ID to salvage the agreement, including offers to renegotiate the deal, the company initiated arbitration proceedings. In January 2017, the tribunal ruled that the Nigerian government was liable for $6.6 billion in damages, which by now has increased to well over $9 billion with interest accruing daily.
The English Court’s judgment is clear and decisive. It is also consistent with prior legal findings, including those of the original Tribunal, which identified the Nigerian Government as at fault and determined that compensation must be paid. By this point—seven years after P&ID was forced to start the arbitration—it should be abundantly clear that Nigeria mishandled the gas project and must pay compensation to P&ID.
But instead of accepting responsibility or pursuing a negotiated settlement – the Buhari Administration has regrettably chosen to continue its campaign of misinformation and misdirection.
Following the judgment, the response included a statement from the Buhari Administration’s Solicitor-General, Dayo Apata, polemical commentary by Chika Amanze-Nwachuku and an unsubstantiated claim by Nigeria’s Central Bank Governor Godwin Emefiele. It was as predictable as it was misleading.
One overall fiction that both Buhari’s Solicitor-General and the commentators from This Day want you to believe is that the P&ID project was some type of fraudulent litigation scam. To be clear, it was not. Tellingly, at no time during any of the legal proceedings (even the Nigerian legal proceedings) did the Buhari Administration allege fraud or “scam” by P&ID. Dozens of opportunities have presented themselves for substantive arguments to this effect to be raised in court by Nigerian representatives: this has not happened.
Only now, having lost the English Commercial Court case and with a judgment approaching $10 billion judgment confirmed, are they making this false allegation (and only in the Nigerian press, without any supporting evidence). The validity of the P&ID case has been consistently affirmed by some of the most esteemed legal minds in England and Nigeria, over years of multiple court proceedings. By contrast, the Buhari Administration’s fantasies of escaping this liability through continued defiance and false claims, supported by nothing other than heated rhetoric, is a pitiful attempt to rewrite the facts.
Here’s a review of the various claims made and the facts in response to the judgment.
Myth: The Solicitor General of the Federation and Permanent Secretary, Federal Ministry of Justice, Dayo Apata states, “P&ID never began the construction of the project facility.”
Fact: The Tribunal determined that the Government had to secure the supply of wet gas, first, before P&ID were obliged to start construction (paragraphs 63-66 of the liability award). It is not accurate to state that P&ID had any requirement to undertake construction before the supply of wet gas was secured by the government.
The project failed because the Nigerian government failed to live up to its end of the contract– namely, it did not secure the supply of gas for processing and it did not build the pipeline it had agreed to construct. This has already been definitively established by the Tribunal, which rejected the same arguments Mr. Apata makes now. Rather than repeat debunked claims about how Nigeria did nothing wrong, which won’t help Nigeria in any event, the Government should take responsibility for its mistakes and resolve this dispute as soon as possible.
It is a tragedy for the people of Nigeria that the project was not concluded. P&ID were ready to build a state-of-the-art gas processing plant to refine natural gas (“wet gas”) into “lean gas” that Nigeria would receive free of charge to power its national electric grid. P&ID would receive no payment for this work: instead, they would own the by-products created by the refining – such as propane, ethane and butane, known as Natural Gas Liquids (NGLs) – and would have the right to sell them on the international markets. This market would be worth billions of dollars over the 20-year lifespan of the contract. It was a win-win project.
Myth: The Solicitor General of the Federation and Permanent Secretary, Federal Ministry of Justice, Dayo Apata stated the P&ID project used “a novel and unproven technology.”
Fact: The Solicitor General claims that P&ID was using “novel” and “unproven technology.” This is nothing more than a continuation of the Buhari administration’s misinformation campaign aimed at misleading the Nigerian people.
The Tribunal found that the project would have succeeded, having heard expert evidence submitted by both P&ID and the Buhari administration. The technology was well-established and far from novel: in fact, the Nigerian Government is currently tendering for projects where similar technologies will be used to cut down on gas flaring. Sadly, a decade has been lost. The consequences of the Nigerian government’s failure to deliver on its commitments to P&ID have been immense and have continued to leave millions of Nigerians in the dark without reliable electricity. Sadly, the government continues to this day with uncontrolled, wasteful flaring of natural gas that is released during oil drilling, which is squandering Nigeria’s natural resources and leaving a big hole in the country’s exchequer. A government taskforce – Nigerian Gas Flare Commercialisation Programme (NGFCP)– found that in 2016 alone, Nigeria failed to earn over $1.1 billion in potential gas revenue, as a result of flaring as much as 275 billion cubic feet of natural gas. New data from the Nigerian National Petroleum Corporation (NNPC) showed that between Q1 and Q3 2018, oil and gas firms flared a total of 251.9 billion standard cubic feet of natural gas for a total loss of ₦197 billion (approximately US $547 million) in potential revenue. Worse still, the flared gas could have provided desperately needed electricity in a country where four million out of 32m households do not have access to electricity. Were it not for the Nigerian government’s decision, an additional 2,000 megawatts of power for the national grid could have provided electricity for more than 7.5 million people. The technology exists and was proven at the time, and it remains so today. What did not exist – and still does not exist today – is a responsible approach from the Nigerian Government.
Myth: The Solicitor General of the Federation and Permanent Secretary, Federal Ministry of Justice, Dayo Apata stated, “this matter was inherited from the previous Administration by the present one.”
Fact: Nigerian officials’ campaign of blame-shifting for their own political benefit has produced only two decisive results: 1) as a result of Friday’s decision by the English Court, the repeated delays and evasion by the Buhari administration and the failure by the Goodluck Jonathan administration to reach an amicable settlement will end up costing Nigeria considerably more, and 2) the only party that continues to be hurt by their leaders’ failure to address the P&ID dispute are the Nigerian people.
The agreement P&ID had with the Nigerian government is well-documented and provided successive governments with ample opportunity to solve the situation. The GSPA was signed during the administration of President Umaru Yar’Adua. President Goodluck Jonathan had nothing to do with the initiation of the project or signing of the Gas Supply and Processing Agreement (GSPA). Mr. Quinn proposed the project to President Yar’Adua in August 2008, a year and half before Jonathan became acting President. Rilwanu Lukman, a 2-time OPEC Secretary-General of unblemished reputation, who was President Yar’Adua’s Minister of Petroleum Resources at the time, was the Minister who signed the GSPA.
The project, after nearly 4 years of negotiations, discussions, and planning was signed in January 2010. It was well on its way when Goodluck Jonathan came into office. His administration failed to move forward with the project, even though Nigeria was contractually obligated to do so. After it was certain the project would not go forward, P&ID attempted to find an amicable settlement with the Goodluck Jonathan Administration. On the eve of his Administration’s departure a settlement agreement was reached, and rather than sign, Goodluck Jonathan kicked it to incoming President Buhari who let the agreement flounder – again, mismanaged to the very end.
The important point, though, is what happens next. The Buhari Administration is in power today and must decide on a course of action. Will they continue to evade legal responsibility, and increase the damage to Nigeria? Or will they choose the path of responsibility, and respect the rule of law?
The Solicitor General’s statement is, as a whole, intentionally misleading, and its allegations have been roundly rejected by the independent arbitration panel and now by Judge Butcher of the English Commercial Court.
Yet, the misleading campaign continues through Buhari’s allies in the media.
Myth: Chika Amanze-Nwachuku writes about the P&ID project, “Going by the UK judicial affirmation of an obviously sham $6.597 billion (N2.3 trillion Naira) judgement debt, for an apparent fraudulent contract…oust the jurisdiction of Nigerian courts through sham arbitration clauses, pull out after some time without doing anything or investing a dime, and return to their countries to make huge claims for breach of contract through the loopholes already embedded in the flawed contract agreements.”
Fact: At no time has any evidence been produced to support a claim of fraud in the formation of the GSPA or a “sham” in the conduct of the arbitration – because there was no fraud or sham. In fact, at no time during any of the legal proceedings (even the Nigerian legal proceedings) did the Buhari Administration allege that P&ID had defrauded the Nigerian government. Only now are they making this allegation, and only in the Nigerian press.
This author, clearly singing from the same script as Nigeria’s Solicitor General, offers nothing more than a rehash of unsupported allegations straight from the Twitter and press trolls of those close to the Buhari administration. The arbitration, conducted in London under the rules of the Nigerian Arbitration and Conciliation Act as part of the agreement signed by both parties, was no sham. The arbitration:
- Lasted for well over four years;
- Was presided over by two former senior English Judges and a former Attorney General of Nigeria;
- Went to appeal in the English Commercial Court; and
- Involved live testimony and the cross-examination of experts in the oil and gas industry.
In 2016, this tribunal of independent arbitrators, who examined the very contract, which the Nigerian press now attempts to discredit, ruled unanimously that Nigeria was liable to P&ID, which has led to the current situation. The panel were not “British arbitrators” as the authors would like you to believe. Rather, the panel comprised arbitrators who were both independent and extremely experienced: Lord Hoffmann (appointed independently by neither party) was a former Law Lord in the U.K. House of Lords and is a current member of the Hong Kong Court of Final Appeal, Sir Anthony Evans (appointed by P&ID) formerly sat in the English Court of Appeal and is now the Chief Justice of the Dubai International Financial Centre Courts, and Chief Bayo Ojo SAN (appointed by Nigeria) had formerly been Attorney General of Nigeria. These eminent jurists ruled unanimously that Nigeria was liable to P&ID.
Myth: Chika Amanze-Nwachuku writes, “In 2010, the British firm, P&ID, walks into Nigeria, signs a contract with NNPC and Petroleum Ministry officials to turn wet gas into dry gas for Nigeria’s power grid. Walks out in 2012 claiming the NNPC did not meet up with its side of the agreement and heads to arbitration tribunal in London where it got almost $6.6 billion windfall.”
Fact: Quite the contrary. Brendan Cahill and Michael Quinn, the founders of P&ID, had over 30 years’ experience of engineering projects in Nigeria when they launched P&ID along with an experienced team of engineers and project managers. This includes projects that had a real and measurably positive impact for the Nigerian economy and people, such as upgrading the port infrastructure at Nigerian ports in Lagos and Calabar and establishing Africa’s first-ever gas pressure vessel manufacturing facility – including installation at nine sites across Nigeria (known as the “Butanization Project”). These projects delivered billions of dollars of value for the Nigerian economy, and created thousands of jobs for Nigerians. The gas pressure vessel manufacturing is now a significant industry in Nigeria, helping to train skilled local workers, and benefitting families and communities.
The founders of P&ID, contrary to the misinformation from Chika Amanze-Nwachuku, first “walked into Nigeria” over 30 years ago.
Among the various projects they launched in Nigeria was the gas-processing project that gave rise to this dispute. After they spent several years designing the project and negotiating the GSPA, Nigeria reneged on its commitments and stopped carrying out its contractual obligations. Messrs. Quinn and Cahill tried for over 2.5 years to salvage the P&ID agreement, including offers to renegotiate the deal, and only once these efforts failed, did the company initiate arbitration proceedings.
Myth: Chika Amanze-Nwachuku writes, “Questions are now being asked as to the basis of the contract which is subject matter of the litigation by P&ID. Can civil servants without authority sign contracts ousting the jurisdiction of Nigerian courts for arbitration processes? Was the obviously illegal fraudulent contract with NNPC approved by Nigeria’s Federal Executive Council? Did it have the authority of the Attorney General? On what basis are British arbitrators awarding such a colossal sum as judgment debt and further affirming it by a British court when no money was spent or investment made by the British Firm?”
Fact: The authors clearly don’t know the facts of the case, or have simply been fed talking points from the Buhari team. The agreement P&ID had with the Nigerian government is well-documented and provided the government with ample opportunity to provide input and affect decisions. Here’s a good overview of how well-documented this agreement was between parties:
- Article 9 of the GSPA establishes that a Joint Operating Committee had been set up on 22 July 2009, “comprising of two representatives from the Ministry of Petroleum Resources and two representatives from NNPC nominated by the Government and two representatives nominated by P&ID.”
- In a letter from the Ministry of Petroleum Resources, signed by Mrs. Grace E.O. Taija for the Minister of Petroleum Resources, to the Department of Petroleum Resources on 15 January 2010, states “The Hon. Minister of Petroleum Resources has approved the Agreement.”
- In a follow-up letter from P&ID to the Group Managing Director of NNPC, dated 14 May 2010, reporting on the progress of the project, the Group Managing Director of the NNPC verifies receipt of the letter and notes, “Please proceed as prayed and appraise me subsequently.”
- Moreover, minutes from a Ministerial Stakeholders meeting on the P&ID project from 10 August 2010 confirm the Ministry’s Permanent Secretary directed the National Petroleum Investment Management Services (NAPIMS) to “obtain a Letter of Undertaking from Addax Petroleum confirming that 150MMSCuFD of associated Wet Gas from OML123 will be made available to P&ID in conformity with the Government’s obligations under the terms of the Definitive Agreement dated 11th January, 2010 with P&ID.”
Myth: The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele now claims there was “certain anomalies in the process leading to the award of that contract.”
Fact: As it relates to “certain anomalies” levelled by Emefiele, this is clearly a desperate move having been roundly defeated in Court. Emefiele is likely referring to the fact that the GSPA was signed by the Minister without being “vetted” by the Attorney General. However, the authority of the Minister of Petroleum Resources to sign the GSPA was specifically challenged by Nigeria in the liability phase, and the Tribunal found in favour of P&ID (see paragraphs 41 – 54 of the Liability Award).
The facts could not be clearer. All the spin in the world cannot disguise the fact that experts, judges and arbitrators have consistently agreed with the evidence put forward by P&ID, and have just as consistently rejected the arguments advanced by the Nigerian Government.
You can learn more about Michael Quinn and Brendan Cahill in this exclusive expose by Biz Watch Nigeria.