£3 billion to the lawyers? Arbitration in the spotlight: reflections on Nigeria v P&ID

Challenges to arbitral awards are common, but they do not often involve quite the extent of salacious conduct that occurred here.  As summarised nicely in his judgment, Mr Justice Knowles explains that: “[t]his case has also, sadly, brought together a combination of examples of what some individuals will do for money. Driven by greed and prepared to use corruption; giving no thought to what their enrichment would mean in terms of harm for others”.

What was it all about?

The underlying arbitration proceedings arose of out an agreement reached between Nigeria and a BVI company, Process & Industrial Developments Limited (“P&ID”), for the construction of gas processing facilities in Nigeria: the Gas Supply and Processing Agreement for Accelerated Gas Development (“GSPA”). The facilities to be constructed were intended to help alleviate the chronic shortage of electric power in Nigeria.  The GSPA appeared simple on the face of it:  P&ID were to construct the facilities, and Nigeria would provide the gas for processing.  However, the project never got off the ground, with the parties finding themselves in a “chicken and egg” situation where each side appeared to be of the view that the other had to fulfil their side of the bargain before they could do what they had promised.

P&ID brought arbitration proceedings against Nigeria for repudiatory breach of contract, and on 31 January 2017, a final award was made against Nigeria for payment to P&ID of damages in the sum of US$6.6 billion plus interest at 7%.

What did P&ID do wrong?

The allegations of bribery in these proceedings run deep, and contaminated not only the initial contract negotiations between Nigeria and P&ID for the GSPA, but also the conduct of the arbitration proceedings themselves.

The stand-out points in the judgment were (i) the string of bribes paid to a Mrs Grace Taiga and her daughter; (ii) the extent of the legally privileged and confidential material belonging to Nigeria that found its way into the hands of P&ID; (iii) concerns by Mr Justice Knowles as to the competence or diligence of Nigeria’s legal team and officials in the arbitration; and (iv) the conduct of P&ID’s English lawyers in the arbitration proceedings.

Bribing Mrs Grace Taiga

Mrs Grace Taiga, who initially worked at the Nigerian Ministry of Petroleum Resource and was one of Nigeria’s lawyers in relation to the GSPA, received a series of payments from P&ID that were “deliberately kept secret from Nigeria”.

These included payments just before and just after the entry into the GSPA, as well as payments throughout the arbitration to Mrs Taiga and her family.  Mr Justice Knowles found that the purpose of these payments was to “help to suppress from the Tribunal the truth that Mrs Grace Taiga had been bribed when the GSPA was entered into. They were “to keep her ‘on-side’, and to buy her silence about the earlier bribery” and to suppress “the fact that the contract had been passed through with no [proper] scrutiny”; and “to keep [P&ID’s] secrets””.

Mrs Taiga’s personal interest in the outcome of the arbitration proceedings was evident from WhatsApp messages she sent to representatives of P&ID, including one sent while they awaited the award on liability that said: “I keep remembering Papa telling me Grace u will be so wealthy u will travel all over d world as much as you wish! Hmmm!”

Nigeria’s Internal Legal Documents

Throughout the course of the arbitration, P&ID were provided with many of Nigeria’s internal (privileged) legal documents.  These included copies of the formal legal advice provided to Nigeria by its lawyers on the merits of its defence to the claim brought by P&ID, correspondence to the Nigeria Ministry of Finance seeking funding for the proceedings, advice to the Nigerian attorney general, and internal minutes discussing settlement proposals.

It was found that the provision of this privileged material allowed P&ID to track Nigeria’s internal consideration of merits, strategy and settlement during the Arbitration, including whether Nigeria had become aware that it and the Tribunal were being deceived by P&ID.

The Conduct of P&ID’s English Lawyers

P&ID’s solicitor, Mr Seamus Andrew, and its counsel, Mr Trevor Burke KC, were described as having “significant personal interests” in the outcome of these arbitral proceedings, which involved “life-changing sums of money” if P&ID were successful.  That is one way of putting it: Mr Andrew is said to have stood to gain up to £3 billion, with Mr Burke KC looking at a potential recovery of £850 million.

Having a financial interest in the outcome of the proceedings is, in itself, not problematic.  However, both Mr Andrew and Mr Burke KC were also found to have come into possession of Nigeria’s internal legal documents, and their failure, in breach of their professional obligations, to inform Nigeria or to return the documents immediately was found by the Judge to be “indefensible”.

Both individuals have since been referred to the Solicitors Regulation Authority and the Bar Standards Board, respectively, in relation to their conduct concerning Nigeria’s internal legal documents and their financial interests in the outcome of the arbitration proceedings.

The outcome

Nigeria’s own legal team in the arbitration were not found to be blameless, with findings that they did not do their work to the proper standard, that experts did not do what was asked, and that civil servants failed to ensure that Nigeria participated properly.

Nevertheless, and while many of Nigeria’s allegations of bribery, dishonesty, and corruption were not upheld, enough were that the judge found that Nigeria succeeded on its challenge to the arbitration award under section 68 of the Act.

Our comments

The lessons we can take from this are obvious, but it reinforces the importance of the courts having the ability to scrutinise the integrity of awards and, perhaps more so, demonstrates the value of the duties that we owe as legal professionals, and the severity of the consequences when those duties are not met, and we fall below the standards expected of us.

This decision also highlights the inherent risks with arbitration proceedings, especially where vast sums are involved and one of the parties is an under-resourced state, suggesting that in that context arbitration risks becoming “less reliable, less able to find difficult but important new legal ground, and more vulnerable to fraud”, even with a highly experienced and competent tribunal.  The privacy of arbitration proceedings shields them from much of the public scrutiny that is given to court proceedings.  In his conclusion Mr Justice Knowles suggests there is a pressing need for the arbitration community to reflect on the issues highlighted by this case: “…the fact is that the Arbitration was a shell that got nowhere near the truth”. That observation is certainly correct for this matter. But it leaves open the question of what protections would have been in place had the dispute been conducted in court.

The full judgment can be read here.

Our Disputes team has considerable experience in international disputes. This includes complex, multi-jurisdictional disputes involving concurrent proceedings in foreign jurisdictions; disputes exceeding US$100m; and the enforcement of judgments and arbitral awards, including asset tracing.

We’ve recently also written about enforcing the unenforceable involving the Dubai courts, see our article on ‘Unenforceable foreign judgments can still be enforced in England and Wales’ here.

Our team has acted for parties in ad hoc arbitration and proceedings under the auspices of major arbitral institutions, including the ICC, LCIA, SIAC and UNCITRAL, as well as specialist shipping and trade procedures such as LMAA, GAFTA, FOSFA and SCMA.

If you need help with an international dispute, please get in touch with Euan Palmer.