FIRMS WHICH WON MULTI-BILLION DOLLAR SUIT AGAINST NIGERIA IN UK COURT ARRAIGNED FOR FRAUD AND TAX EVASION BY EFCC

On Thursday, 19^th September, 2019, the Economic and Financial Crimes Commission (EFCC) arraigned two firms Process and Industrial Development (P&ID) Ltd, Virgin Island and its Nigerian affiliate, P&ID Nigeria Ltd, on 11-counts bordering on fraud and tax evasion. Both pleaded guilty.

P&ID Ltd, Virgin Island is the beneficiary of the $9.6bn judgment – about 20% of Nigeria’s external reserves – recently awarded against Nigeria by a British High Court for breach of contract of gas supply and processing between the Federal Government of Nigeria and (P&ID), a company based in the British Virgin Island. Pursuant to that agreement Nigeria was obligated to construct pipelines and arrange facilities for the supply of natural (wet) gas to P&ID’s facility in Nigeria over a 20 year period. In exchange P&ID agreed to deliver 85% of all emergent lean gas to Nigeria as well as other deliverables, in taxes, earnings and equities. The project was expected to provide gas to boost Nigeria’s electricity generation profile while enlarging its natural liquefied gas outputs along with the foreign earning that came with it.

Interestingly, Clause 20 of the agreement, provided that any disputes were to be resolved by arbitration with the seat of arbitration being London, England or any other place agreed by the parties. Nigeria’s subsequent effort to relocate the arbitration to Nigeria failed. At the tribunal, P&ID claimed that it had invested $40 million in the project even though it had not acquired the land or built any facilities for gas processing. The company also claimed damages of about $6.6 billion dollars representing the net income it projected that it would have earned over the 20-year period of the agreement.

In response, Nigeria argued that the claimed damages claimed were not a fair and reasonable consequence of the government’s breach of the agreement especially as P&ID never even commenced building the gas processing facility. It also argued that P&ID should be awarded only three years’ worth of income as by that time, the company should have found some other profitable investment which would reduce its losses from the breach.

In July 2015 the tribunal decided that Nigeria by failing to fulfill its obligations, is deemed to have repudiated the agreement. P&ID was therefore entitled to damages. In January 2017, the tribunal by a majority of two to one made a final award of $6.597 billion together with interest at the rate of 7% starting from 20 March 2013 until payment is made. The 7% interest represented what P&ID would have paid to borrow the money or earned by investing the money in Nigeria.

Following the tribunal’s award of damages, in March 2018, P&ID brought an action before the Queen’s Bench Division of the English Commercial Court seeking for permission to enforce the damages awarded by the tribunal against Nigeria. The order was finally granted on Aug. 16, 2019 to enforce the arbitral tribunal’s final award which had grown to $9.6 billion. In making this award, the court noted that the damages awarded were purely compensatory and not intended to punish the Nigerian government. The court also confirmed that there were no public policy grounds on which the award should not be enforced. Thus, the decision effectively converted the arbitration award to a legal judgement.

The proceedings before the Nigerian Courts by the EFCC was brought subsequently. Curiously, the firms, through their representatives admitted all the counts levelled against them by the EFCC.( While P&ID Ltd, Virgin Island was represented by its Commercial Director, Mohammad Kuchazi, P&ID Nigeria Limited was represented by a lawyer, Adamu Usman). Trial Judge, Justice Inyang Ekwo, in his ruling, and relying on provisions of section 19(2) of the Money Laundering Prohibition Act, 2011, and section 10(2) of the Advance Fee Fraud and other related offences Act, 2006, ordered the Federal Government to wind up the two firms and confiscate all their assets and properties in the country.

What is however uncertain is how this latter development will affect the orders of the Courts of the United Kingdom – or aid Nigeria’s efforts to appeal same successfully since orders of Nigerian Courts and evidence admitted them before have no recognition in the Courts of the United Kingdom, being a separate sovereign entity. What is however clear is that the assets of the two entities within Nigeria are insignificant compared to the $9.6bn award they are entitled to in the UK jurisdiction. How Nigeria’s intends to leverage the judgment to mitigate or set off its exposures or negotiate an accommodation different from its current liabilities remain to be seen.

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