Nigeria v P&ID Ltd: the battle between Fraud and Justice in the English Court
02. 11. 2023
On 23 October 2023, the High Court of England and Wales (“Court“) rendered a landmark decision in which it ruled that the Award on Liability as of 17 July 2015 and Final Award as of 31 January 2017 in Process & Industrial Developments Ltd v. Ministry of Petroleum Resources of the Federal Republic of Nigeria made in ad hoc arbitration with Leonard Hoffmann as President, Anthony Evans and Christopher Bayo Ojoas co-arbitrators nominated by Process & Industrial Developments Ltd. (“P&ID“) and the Ministry respectively in London as the seat of arbitration (the “Awards“) “were obtained by fraud and the awards were and the way in which they were procured was contrary to public policy“. In the words of the Court, it was “a highly unusual case, although one that draws attention to matters of wider importance“.
In 2010, a 20-year supply contract (“Contract“) was entered into between P&ID and the Nigerian Government. Under the Contract, Nigeria undertook to supply so-called “wet” gas which P&ID was to process and return to Nigeria for power generation.
Both parties violated their obligations under the Contract.
A few years later in an arbitration initiated by P&ID, the tribunal found Nigeria liable for repudiatory breach of contract. By a separate decision, P&ID was awarded USD 6.6 billion in damages, which was “material to Nigeria’s entire federal budget” with 7% interest per annum.
Nigeria challenged the Awards under section 68 (2)(g) of the Arbitration Act 1996 alleging that fraud and conduct of arbitration contrary to public policy had taken place that had caused substantial injustice to Nigeria.
The Court’s findings
The Court sided with Nigeria finding that it showed that there had indeed been several instances of corruption and misconduct related to legally privileged information that undermined the validity of the Awards in question.
Namely, the Court held that:
- P&ID provided to the Tribunal and relied on evidence before the Tribunal that was material but was evidence that P&ID had known to be false;
- an investor continued bribery of or corrupt payments to Nigerian government employee to conceal from the arbitral tribunal and Nigeria the fact that she had been bribed when the Contract was concluded;
- P&ID improperly retained Nigeria’s documents subject to legal privilege that it had received during arbitration, to monitor Nigeria’s position as the arbitration continued.
In the Court’s opinion, each thing “amounted to fraud by which the awards were obtained, and by reason of them the awards or the way in which the awards were procured was contrary to public policy“.
It should be noted that the test of serious irregularity under section 68 of the Arbitration Act 1996 was intended to limit intervention to “extreme” cases. Furthermore, as the Court mentioned “the test of “substantial injustice” is intended to be applied by way of support for the arbitral process, not by way of interference with that process. Thus, it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the court to take action“.
Regardless of how high the threshold of section 68 is, the Court ruled that it was crossed in Nigeria’s case. All the mentioned actions in their core aimed at concealing the initial bribery that led to the conclusion of the Contract. As the Court observed, if the fact that the Contract was made by fraud had been brought before the Tribunal, it would have raised the issue of whether the Contract was voidable. Furthermore, misuse of the professionally privileged documents in the Court’s opinion “utterly compromised Nigeria’s right to confidential access to legal advice throughout all or most of the Arbitration“.
Finally, the Court concluded that “Nigeria succeeds on its challenge under section 68“, however, it is still to decide whether the Awards should be entirely set aside or remitted to the arbitral tribunal after hearing the parties’ arguments on this matter.
This judgment is of high importance since it serves as a potent reminder that compliance with high professional and ethical standards is expected of arbitration practitioners and that bribery and corruption would not be tolerated in the London-seated arbitration. Furthermore, even where chicaners succeed in fooling an arbitral tribunal the English courts will be available to victims watchfully making sure that justice is not only done but is seen to be done in the most complicated of cases.