Libby George
LAGOS (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.
WHAT 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.
The information
minister 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”.
In a statement,
P&ID said government allegations that the gas project was designed to fail
were “entirely fictional” and “will not make the legal obligation to pay go
away.”
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