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Vol 64 No 22

Published 2nd November 2023


Nigeria

Hedge fund-backed firm loses bet against Abuja

A judge in the London High Court has ruled against an award which could have cost Nigeria US$15 billion, but the shadow of corruption in the affair remains

'Victory is claimed by all,' said Tacitus, a historian of ancient Rome, 'failure by one alone.' His point resonates with the 23 October verdict in the case of Nigeria versus Process & Industrial Development (P&ID), which seems to have been going on since the classical chronicler's days. President Bola Ahmed Tinubu welcomed a verdict that forensically dismantled the grounds for an award against Nigeria, with interest, exceeding US$11 billion, a third of the country's reported foreign exchange reserves and more than it spends a year on health and education (Dispatches 24/10/23, Abuja gets $11bn claim on gas deal overturned in London's High Court). Tinubu's predecessor, former President Muhammadu Buhari, claims the ultimate cost to Nigeria could have reached US$15bn.

A host of other officials in Nigeria have congratulated themselves on the outcome, or have had praise singers do so on their behalf. But Justice Robin Knowles in London's High Court was more nuanced and circumspect than many have acknowledged. 'I end the case acutely conscious of how readily the outcome could have been different,' he said, 'and of the enormous resources ultimately required from Nigeria as the successful party to make good its challenge.'

Justice Knowles outlined three reasons why he was ruling that 'the Awards were obtained by fraud and… the way in which they were procured was contrary to public policy,' in effect saying that not only had the lengthy and expensive arbitration process in London been wrong to find in favour of P&ID originally, but also that the size of the award had been disproportionate and unfair.

The three reasons were that P&ID had paid bribes to Grace Taiga (who died this year), a senior official at the Ministry of Petroleum Resources, before, during and after the P&ID contract was signed; that P&ID co-founder Michael Quinn had committed perjury in his witness statement by failing to disclose the bribes; and that P&ID had failed to explain how it came to acquire Nigeria's internal legal documents.

Matters of concern
Much of the rest of Nigeria's evidence of corruption left Justice Knowles less convinced. He noted that six-figure sums in cash would change hands between lawyers, and in at least one instance, the government's lead counsel at arbitration had paid a colleague who then seemingly leaked government documents to a businessman close to P&ID. 'These are matters of concern,' said Knowles. 'But I am cautious in my approach as I do not know enough about them.'

Knowles did not accept there was enough evidence to prove that the P&ID deal had been rotten from the beginning, or that Nigeria's lawyers had been bribed to underperform at the original arbitration. He rejected Nigeria's case that Lagos lawyer Supo Shasore, who helped run the arbitration in London, had been corrupt (AC Vol 61 No 15, Fight in the last chance saloon).

He was far more critical of Nigeria's former Attorney General Abubakar Malami, who declined the opportunity to appear as a witness. Malami, legal advisor to the family of the hyper-corrupt military ruler General Sani Abacha, declined to answer claims by P&ID that he had lied about his conduct to Vice-President Yemi Osinbajo, who was then acting as Nigeria's president while Muhammadu Buhari was recovering from a long illness.

Until Buhari's astute chief of staff Abba Kyari examined the P&ID case, it seemed to be Malami's view that it should be settled out of court – perhaps for a few hundred million dollars. That looked a less risky option once the London arbitration panel had found against Nigeria.

Knowles also noted the startlingly inept performance at the original tribunal of Chief Bolaji Ayorinde, appointed by Malami as Nigeria's counsel, and his purported claim for fees of N200m and $197.5m.

Knowles reserved his most severe sanction for two English lawyers, closely bound up in the process: Seamus Andrew, a solicitor who later came to own a significant share of P&ID and stood to make £3bn ($3.46bn) if the award was upheld, and Trevor Burke KC (nephew of Quinn), who would have collected £850m. Knowles did not accept their explanation that they did not know how Nigeria's internal legal documents found their way into their position, saying they had made false statements under oath. They deny misconduct.

The effect of this fraud, he said, was that: 'In the Arbitration the Tribunal did what it did with what it had. The English Court too saw nothing of what truly lay underneath when it first, briefly, came across the Arbitration in 2016. But the fact is that the Arbitration was a shell that got nowhere near the truth.'

Knowles noted that Nigeria's case effectively put London's hugely lucrative commercial dispute resolution industry on trial, noting that while Nigeria had been able to prove corruption in this, in other cases there were poorly drafted contracts and weaker arguments or political will.

'The risk is that arbitration as a process becomes less reliable, less able to find difficult but important new legal ground, and more vulnerable to fraud. The present case shows that having (as here) a tribunal of the greatest experience and expertise is not enough. Without reflection, then a case such as the present could happen again, and not reach the court, that might be more difficult to do.'

Knowles suggested what was needed was better drafting of contracts, more effective disclosure of documents, greater expertise in representation and greater transparency around arbitration. These are conclusions that might be well received in any number of capitals, where disputes with significant but less eye-popping sums are regularly settled out of court. President Tinubu has yet to indicate the lessons Nigeria might learn from the P&ID case, and how to stem the haemorrhaging of funds in cases different only because of the lack of profile and settlements in only the tens or hundreds of millions of dollars.

As Knowles concluded: 'This case has also, sadly, brought together a combination of examples of what some individuals will do for money. Driven by greed and prepared to use corruption; giving no thought to what their enrichment would mean in terms of harm for others. Others that in the present case include the people of Nigeria, already let down in so many ways over the history of this matter by a number of individuals in politics and administration whose duty it was to serve them and protect them.'

The ruling is a devastating setback for P&ID but not quite the last word in the saga. The company says it is 'considering the steps available to it in the light of the judgement'. With the clarity of Knowles ruling, P&ID's room for manoeuvre looks slim.

Its shareholders had fallen out before the court ruling and their responsibility to pay the massive legal costs in the case may spark further dissension. The New York-based hedge fund VR Capital took a 25% stake in P&ID for which it paid $45m and contributed to some of the legal costs but stood to make over $3bn if the London High Court had ruled against Nigeria.

VR Capital insists that the court's findings of corruption and collusion refer to events before it bought equity in P&ID. After it fell out with the other P&ID shareholders, VR Capital started arbitration against them for failing to disclose critical information before it bought its stake. Given the detailed coverage of this saga in Africa Confidential and Bloomberg News going back to 2011, VR Capital may choose to pay closer attention to its due diligence checks.

So too might Britain's former Home Secretary Priti Patel, who was opining in favour of P&ID in the British media. 'Nigeria must seriously tackle corruption rather use it as a smokescreen,' Patel wrote in 2018 in City AM, a free sheet distributed in London's financial district. Dismissing any possibility of P&ID's grand corruption as claimed by Nigeria's lawyers and later confirmed by Justice Knowles, Patel advised Abuja in her opinion column: 'it [Nigeria] must honour its obligations to companies like P&ID. Until then, investors will inevitably be very wary of investing in Nigeria.'

Perhaps the only player in this drama to emerge with much credit is former President Buhari, who insisted, against some high-level legal advice, that Nigeria should fight this case to the highest level to deter future judgement debt schemes. If Nigeria had lost in London, it would have been the final blow to Buhari's reputation. Instead, he has earned some grudging praise from his many critics.

No one has produced fully attested figures so far but insiders in Abuja have told Africa Confidential that over the past two decades the federal government has been paying out hundreds of millions of dollars in highly contested judgement debts on state contracts, often helped by collusion between corrupt businesspeople and suborned state officials.


THE P&ID ROAD TO RICHES AND REVERSES

Process & Industrial Development (P&ID) was a British Virgin Islands company with no track record in engineering or construction, with little in the way of staff or assets. It was owned by two Irish contractors, Michael Quinn (who died in 2015) and Brendan Cahill, who had been doing business with government for 20 years, from deals to fix tanks to the supply of HIV testing kits.

When the Umaru Yar'Adua government (2007-2010) looked like it was serious about plans to stop gas flaring, they partnered with an old associate, General T.Y. Danjuma, former chief of army staff, defence minister and oil billionaire, to develop plans for a gas processing plant. They later ditched the general (who contributed to a Bloomberg News report in 2019 that presented a devastating portrait of their business credentials and practices) and went on to sign their own deal with government and were supported by more shadowy backers in 2010.

Yar'Adua, who had been suffering from a long illness, died shortly after the deal was signed by Rilwanu Lukman, his oil minister (who died in 2014). Within two years, the deal was in dispute. Far from beginning construction of the plant, P&ID had not yet even bought the land on which it was to be built. But it complained that the government had not sourced the gas it needed in order to move forward and so began the dispute which was finally settled on 23 October 2023. Along the way, Nigeria put up a dismal performance in formal arbitration in London, while trying on many occasions to settle out of court, with offers and demands of between $400 million and more than a billion dollars turned down by one side or another.

In 2017, the tribunal found in P&ID's favour, although tellingly, Bayo Ojo, Nigeria's panel member, suggested a penalty of $250m, the kind of sum that sometimes anonymously drifts through the books, rather than the $6.6bn (the profits P&ID claimed they would have made over 20 years, if they had built a plant) and interest of 7% per annum that P&ID's panellists and Lord Hoffman, the tribunal chair, were to agree (AC Vol 61 No 11, The $10 billion gas plant that never was). A liberal retired judge, Lord Hoffman was a former chairman of Amnesty International and ruled against Chilean dictator Augusto Pinochet's claims to immunity from prosecution for war crimes. His ruling in the P&ID case, which could have hugely damaged Nigeria's economy, was less celebrated.

When the English courts agreed in 2019 that P&ID could seize Nigeria's assets, President Muhammadu Buhari's government changed tack: after years of leaving the matter with Abubakar Malami, his son-in-law and Attorney General, Buhari told Abba Kyari, his chief of staff who died of Covid-19 the following year, to find new lawyers in London and better evidence to contest the award. In September 2020, it was enough to persuade Sir Ross Cranston to send the saga back to court (AC Vol 61 No 15, Fight in the last chance saloon).



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