The Federal Republic of Nigeria Vs. Process & Industrial Developments Limited [2023]

One of the major undermining destructive forces which weakens development, stability and governance of a nation is Corruption. It erodes a nation’s geographic resources, citizens’ hard earned money, degradation of public institutions, discouragement of foreign investments and ultimately the trust of subjects of the nation. When public servants in the public sectors grant the freedom to corrupt the nation, then it will infiltrate every sector of the government. The judgement of the High Court of UK in the year 2023 has exposed the fraudulent activities carried out in the commercial contracts by means of deceptive schemes between private and public sector, leading to the exploitation of natural resources as the direct result of corruption.

Brief Facts:

The Claimant is the Federal Government of Nigeria (“Nigeria”) and the Defendant is the Process and Industrial Developments Limited (“P&ID”) they have both entered into a Gas Supply and Processing Agreement for Accelerated Gas Development (“GSPA”) in the year 2010. Due to the non-performance of the contract by both the parties an arbitration case has been initiated by the Defendant and the final award being granted in 2017 to pay US$6.6 billion at the rate of 7% interest totalling US$11 billion to the Defendant. The Award was further challenged by the Claimant before the Commercial Court, UK on the ground that the contract itself was procured by the defendant by means of bribery.

Major issues Involved:

Whether the Defendant procured the GSPA contract by means of fraud, bribery and corruption activities?
Whether the Defendant intentionally sabotaged the contract to later claim damages out of the contract?
Whether the arbitral award should be enforced considering the fact that the GSPA is itself obtained through fraud and will it undermine public policy?
Whether Arbitration can be used as an exploitation tool against the public sector?

Claimant’s Arguments:

The Claimant argued that the GSPA was procured through bribery and fraudulent means and has submitted evidence of secret payments and undisclosed benefits. This ulterior evidence was intentionally misrepresented by the defendant to influence both the award process and the award.

With regard to the performance of the GSPA the defendant does not have the main resources like land, fund, engineers, technical capacity to perform the contract. So, the main motive is to tackle the Claimant into breach and claim damages through arbitration.

The Claimant invoked Section 68 of the Arbitration Act, 1996 of the UK to set aside the Arbitral Award and argued that the same stating that GSPA is itself a document which is obtained by bribery and corruption means and misrepresentation of the same throughout the arbitration proceeding. Hence it should be set aside for serious irregularity. Further enforcing it would undermine public finance and anti corruption law considering it is a corrupt contract.

The Claimant argued that Arbitration has been used by the Defendant to conceal the corruption act, further arbitration proceedings lack transparency and can easily bypass the public accountability mechanism. This makes vulnerability to the public sector for the fraudulent schemes harvested by the private entities.

Defendants Arguments:

The Defendant argued that the GSPA was obtained through lawful bidding and there exists no evidence of bribery influencing the award.

The Defendant claimed that the Claimant has breached the contract due to non performance of obligations such as securing land on time, providing infrastructure to perform contract and laying down pipelines. The Defendant had technical partnerships and engineering plans which showed legitimate intention to perform the contract and delays were the resultant on the part of Claimant. Thus, it is justified to claim damages.

The arbitral award has been passed by experienced arbitrators after due consideration of evidence and the award has been passed on the merits of the claim.The claim of public policy cannot be used as a shield for the incompetence of the sovereign.The claim of fraud and bribery were used at the last stage of the proceeding to avoid granting of damages

The Arbitration was a tool standardly used for high value gas contracts and confidentiality is one of the legitimate features of Arbitration and it was not used to hide corruption which the Defendant denies existence of. The lack of transparency cannot undermine the value of a valid award.

Judgement:

The Court found that the defendant procured the GSPA through corruption. Bribes were paid to Nigerian officials namely Mrs. Grace Taiga of the Ministry of Petroleum Resources, to facilitate the agreement. The Defendant concealed the corrupt payments during arbitration while providing false evidence about the contract’s origins.

The Court established that defendant never intended to perform its contractual obligations and made no effort to secure financing, acquire land, or construct the gas processing facility. The evidence revealed a fraud where the contract was designed to fail and enabling a manufactured damages claim against Nigeria.

The Court further held that the arbitral award is unenforceable stating that award worth USD 11 billion obtained through severe abuse of the arbitral process is against public policy. Not only to procure GSPA but also continued making corrupt payments during arbitration and illegally obtained Claimant’s privileged legal documents. The Court ordered the award to be set aside entirely under Section 68(2)(g).

The Defendant was ordered to pay the Claimants costs, protecting states from fraudulent exploitation.

Legal Reasoning and Personal Commentary:

The court reasoned that an arbitral obtained based on pure fraud is not sustainable. Under Section 68(2)(g) of UK Arbitration Act, 1996 the court held that the defendant has obtained the GSPA through bribery and misrepresentation and concealment throughout the arbitral proceedings which ultimately deprived the arbitral tribunal to assess the dispute on merits undermining the integrity of arbitration.

This case reveals that how corruption can mislead an international arbitral tribunal even when abundant precaution is taken to deliver justice. In this case arbitration has been used as a tool to monetise fraudulent activities. Henceforth this judgement stands out as a reminder to safeguard the justice delivering institutions and public sector from similar activities. This judgement also remind the public sector to strengthen their internal policy towards corruption.

Jurivine