As second or third generations take over the reins of family businesses, they may be more open to outside investment to grow their companies. East Africa in particular has a rich seam of such businesses, which canny private-equity investors should be exploring.
Will Nigeria be forced to pay $9bn in damages to UK firm?
Nigeria faces a bill for $9bn in damages – payable to a company that has done a mere $40m worth of work in the country.
The matter will be resolved in a UK court on 21 May, when Nigeria will present its arguments against the award, made up of $6.6bn in damages plus a whopping $2.4bn in interest.
If Nigeria is forced to pay, the amount represents one fifth of the country’s $45bn in foreign exchange – a crippling blow.
The circumstances surrounding the award and the actions of Nigeria before and after lead me to conclude we have a curse chasing us.
In 2010, the Nigerian ministry of petroleum resources entered into a 20-year Gas Supply & Processing Agreement (GSPA) with a British Virgin Island-registered company, Process and Industrial Development Ltd (P&ID).
- Nigeria was to supply “wet gas” to P&ID so that the latter could process it in a newly built facility and return it in the form of “lean gas”.
- In non-technical speak, wet gas is gas that emerges from the oil-drilling process. It is often flared off, rather than processed and turned into the kind of gas that might supply a power station, for example.
Under the agreement, Nigeria was to make certain arrangements for the agreed supply of wet gas, including building the necessary pipelines to enable P&ID do their part.
- Nigeria (you guessed it!) failed to do this for three years.
In March 2013, P&ID treated this failure by Nigeria as a repudiation of the agreement and commenced arbitration in London.
- Please note that PI&D claimed to have invested just $40m in the project. It had not yet acquired the land or built any facilities.
In July 2015, an ad hoc tribunal seated in London decided that Nigeria was liable to P&ID. The quantum of damages had not been decided at this stage.
- Instead of settling, Nigeria’s lawyers decided to file an action in Nigeria to set aside an award rendered in London.
- Indeed, the Federal High Court in Lagos set aside the liability award.
Understandably, the London tribunal treated the Nigerian judgment as they ought to have: as though it never existed.
- More interestingly however, Nigeria’s lawyers continued to participate in the proceedings in London over the quantum of damages.
An article published by consultants Grant Thornton suggests that Nigeria’s lawyers (they know themselves) did not challenge the facts, assumptions and calculations provided by the claimant, nor did they provide alternative evidence to the tribunal.
In the end, in January 2017, the tribunal by a majority of 2-1 (the Nigerian-appointed arbitrator dissenting) awarded $6.6bn in damages to P&ID.
- This was obviously an extraordinary figure.
- The dissenting opinion in fact estimated the loss at $250m over three years.
The Nation in this report claims that the “fine” emanated from a contractual breach by the three previous administrations of presidents Olusegun Obasanjo, Umaru Yar’Adua and Goodluck Jonathan. This is clearly not correct. The contract was for 2010-2013.
I don’t know whether the government played politics with this, but what we do know is that, and as highlighted in this excellent piece by lawyer Joseph Onele, the Goodluck Jonathan government reached a settlement with P&ID to pay just $850m.
The Jonathan administration did not, however, pay the settlement sum and handed over to the Muhammadu Buhari government after losing the elections in 2015.
The government then decided against proceeding with the settlement and instead instructed its lawyers to set aside the award. By this time, the award had risen to $8.9bn ($6.6bn + $2.3bn interest).
- On 16 March 2017, P&ID filed a petition before the US courts to confirm the award.
Believe it or not, Nigeria failed to show up in court.
- As a result, the US court entered a default judgement against Nigeria.
This keeps happening…
To establish a pattern, I digress. There was another award against Nigeria in favour of Enron, arising from a contract for construction of certain electrical facilities that would allegedly have generated 3,000MW of electricity. The contract was terminated nine days later.
- Without going into the merits/demerits of the cancellation, there has to be something damning about negotiating a contract, executing it and then turning around to cancel it nine days later. Why? We may never know. What we know is that our leaders continue to make us a laughing stock.
There is yet another ongoing dispute, this time involving US company Interocean, regarding the Nigerian government’s seizure of the control over Pan Ocean Oil (and the OML 98 block).
- Nigeria recently applied, and failed, to disqualify all the members of the arbitral tribunal.
Oga is not on seat
Back to the P&ID award, for which a whopping $8.9bn was now outstanding (with interest, which continues to run at $1.3m per year). P&ID then brought proceedings in London to enforce the award.
The processes were served on Nigeria. Guess what our officials did…
- Under the English rules, Nigeria had two months and 22 days to file acknowledgment of service.
- This would take Nigeria up to 15 August 2018.
- Nigeria did not file until 12 October 2018.
I will quote verbatim why Nigeria delayed in filing the acknowledgement of service:
- “Although the claim form was passed from the Ministry of Foreign Affairs and received at the Ministry of Justice, it was simply immediately filed and not passed up the chain of command. The relevant senior figures within the Ministry of Justice only became aware of the matter after the deadline for filing and acknowledgment of service had already passed and only after it was drawn to [the attention of Nigeria’s English counsel] following receipt of correspondence from the claimant’s solicitors.”
In the end, the English courts took into consideration the extraordinary amount of the award and the effect on the citizens and tax payers in Nigeria, and allowed Nigeria to file its processes late and defend the enforcement proceedings.
- It is reported that on 15 February 2019 the English High Court reportedly granted Nigeria an extension of time to file its arguments on the merits and has now scheduled the hearing for 21 May 2019.
On 21 May 2019, God willing, I will be present in the court of Justice Brian in Case No CL-2018-000182 to know whether or not Nigeria will successfully resist the enforcement of the award the is now worth more than $9bn.
I now await superior logic to my simplistic explanation that successive Nigerian public officers have a covenant to continually sacrifice Nigeria’s interest for their selfish desires.