A UK court on Thursday ordered the Nigerian government to pay $200 million pending its appeal against the $9.6 billion awarded to a tiny offshore firm involved in a failed gas deal. The high-stakes dispute pits Process and Industrial Developments Ltd (P&ID); a British Virgin Islands-registered company founded by two Irish business partners against the energy-rich but the troubled nation of 200 million people.
The original settlement against the Nigerian government represented around a fifth of the foreign reserves held by Africa’s largest economy. Justice Christopher Butcher of the Commercial Court in London granted the Nigerian government a stay of execution of the fine pending an appeal. But he also gave the government 60 days to make a $200-million security payment — and 14 days to pay running costs whose sum was not disclosed in court.
Justice Butcher said P&ID had the right to seize Nigerian assets should either of those deadlines be missed. The justice based his decision on the “real risk” that Nigeria’s “assets will not be returned in the event that the appeal is successful and would be lost to the government and to the people of Nigeria.” He added that there was the “risk of immediate, serious and potentially irreparable damage” should P&ID use “third-party agents” to monetise and stash away the assets seized pending an appeal.
Justice Butcher further ruled “that there may be immediate and potentially severe damage to Nigeria if there is no stay.” The appeal relates to a running dispute over which country’s court — and law — has jurisdiction over the explosive case. Government lawyer Harry Matovu claimed Nigeria’s “sovereign immunity rights” were being violated by the settlement amount.
The original contract required the Nigerian government to pay $300 million for P&ID to set up a way to turn a dirty form of natural gas burned off during oil production into electricity for local government use. The deal fell through in 2012 amid mutual recriminations and claims of fraud. The $9.6 billion represents money that added up through accrued interest payments.
P&ID welcomed the ruling and condemned a separate ruling in Nigeria requiring the firm to forfeit its assets to the FG. “The Nigerian government will now have to put its money where its mouth is if it wants to avoid immediate seizure of assets,” P&ID said in a statement, adding: “The Nigerian government knows there was no fraud and the allegations are merely political theatre designed to deflect attention from its own shortcoming.”
The Abuja court ruling came after two local P&ID representatives pleaded guilty to charges of fraud and economic sabotage. P&ID called the Abuja case a “sham investigation.” Its lawyer Ian Mill argued in court that the entire appeal was groundless because the government has provided “no reason why that money should not be paid.” He called it an unlawful “attempt to reargue the case”.
But government attorney Matovu countered that Nigeria should not be forced to turn over such a huge sum when the jurisdiction of presiding courts was still under dispute. He called it a “paradigm case” that would set precedent for similar court battles. The date of Nigeria’s appeal has not yet been set.
In a statement issued from London on Thursday, the Attorney General and Minister of Justice, Abubakar Malami (SAN), expressed satisfaction with the development. He described the court ruling as an important step that would allow Nigeria to defend itself. “I am pleased with today’s development in the court and see this as a positive resolution that constitutes an important step in the government’s efforts to defend itself in a fair and just process. We look forward to challenging the UK Commercial Court’s recognition of the Tribunal’s decision in the UK Court of Appeal, uncovering P&ID’s outrageous approach for what it is: a sham based on fraudulent and criminal activity developed to profit from a developing country,” Malami said.
P&ID had in 2012 instituted the legal battle against Nigeria in the Court of Arbitration in the UK in 2012, following Nigeria’s refusal to carry on with the GSPA agreement entered with the firm in 2010. By the terms of the agreement, P&ID was to build and operate an accelerated gas development project at Adiabo in Odukpani Local Government Area (LGA) of Cross River State. The agreement required the federal government to supply natural gas from Addax Petroleum-operated Oil Mining Leases (OMLs) 123 and 67 for P&ID to refine into fuel suitable for power generation in the country.
According to the terms, the initial volume of gas was about 150 million cubic feet of gas per day, which would be ramped up to about 400 million cubic feet per day during the 20-year period. P&ID alleged that after signing the agreement, the federal government reneged on its obligation after it had opened negotiations with the Cross River State Government for allocation of land for the project.
P&ID claimed that the failure of the federal government to construct the pipeline system to supply the gas frustrated the construction of the gas project and deprived it the potential benefits expected from 20 years’ worth of gas supplies.