English Court stayed enforcement of a multi-billion award for an abandoned gas plant against Nigeria

Posted in Western Africa Blog post

In August this year the English High Court allowed enforcement of a US$9.6 billion arbitration award against Nigeria in favour of a BVI gas company (P&ID) founded by two Irish individuals. The award is quoted as one of the largest financial liability in Nigeria’s history, constituting approximately 2.5% of its GDP. Nigeria subsequently appealed the Court’s decision and obtained a temporary stay of the execution. However, whilst granting Nigeria the right to appeal against the award, the court ordered it to pay a security of $200m within 60 days.  

The dispute between the parties arose out of a Gas Supply and Processing Agreement under which P&ID agreed to build a gas processing plant in the Niger Delta. The state party was in turn obliged to supply natural gas to the facility via a government pipeline over a period of 20 years. Under the contract P&ID were to retain and sell natural gas liquids from the refinement process. Although the plant was never completed, P&ID invested US$40 million in the project, which was subsequently abandoned by Nigeria who never supplied any gas to the facility.

The parties embarked on a prolonged legal battle with awards on jurisdiction and liability rendered in P&ID’s favour by a tribunal consisting of two retired English judges, Lord Hoffman and Sir Anthony Evans QC, and a former Nigerian attorney general Chief Bayo Ojo. In the course of the proceedings Nigeria questioned London as a proper seat of the arbitration (which was described as a ‘venue’ in the arbitration agreement) and on this basis obtained an injunction from a Nigerian court restraining further conduct of the arbitration. Notwithstanding the injunction, the arbitrators proceeded to issue the final award (with Chief Bayo Ojo dissenting) against Nigeria for repudiating the agreement with P&ID.

In the English High Court enforcement proceedings Mr Justice Butcher held that the seat was correctly determined by the arbitrators, and therefore the Nigerian court injunction was of no relevance to the award. It was held that the public policy in favour of enforcing arbitral awards “outweighs any public policy in refusing enforcement of an award of excessive compensation”, particularly in circumstances where Nigeria failed to challenge the award. Nigeria subsequently applied for permission to appeal the High Court judgment. Granting the application the Court had regard to the quantum of the award as “an issue of national importance to Nigeria”, whilst making a substantial interim security order to protect the rights of the judgment creditor. The legal battle will continue in the Court of Appeal.

The case demonstrates an interesting balancing act between the typical non-interventionist approach of the English courts towards arbitration and the courts’ recognition that matters touching upon the most pertinent interests of the state may have a bearing on their willingness to grant relief and lead to enhanced scrutiny of the award. It also underlines the importance of careful drafting of arbitration clauses to be clear as to the seat and obtaining legal advice in the country of potential enforcement of the award at all stages of the arbitral process.

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