Nigeria’s quest to stop the
enforcement of a monumental $9 billion arbitration award will now be heard by
the English Commercial Court on June 14.
The case could not be heard on
May 20 as previously scheduled because of an administrative hitch.
The court is
likely to make a pronouncement on the merit of Nigeria’s defence at the next
sitting.
Process and Industrial
Developments Limited (P&ID), a British engineering and project management
company, had dragged Nigeria to arbitration in London in August 2012 alleging
breach of contract by the federal government.
In July 2015, the dispute was
resolved in favour of P&ID but Nigeria later unsuccessfully asked the
English Commercial Court to set aside the award completely.
In January 2017, the tribunal
ordered Nigeria to pay P&ID $6.6 billion in damages and $2.3 billion in
interest.
Along with accrued interest, the
fine has risen to about $9 billion.
Nigeria had sought an extension
to defend its case to stop the enforcement of the award, which will put the
nation’s foreign assets — including external reserves — at risk.
After failing to file its
defence, Nigeria was fined by the court which ordered the federal government to
start paying part of P&ID’s legal costs.
TheCable understands that even
after the court had granted a second extension, Nigeria almost missed the
deadline — only filing its defence one working day to the May 20 hearing date.
Officials of the ministry of
justice arrived London ahead of the hearing to discover that it would not hold
as scheduled.
What is at issue?
P&ID, founded by Irishmen
Michael Quinn and Brendan Cahill — with over 30 years of experience in
engineering projects in Nigeria — had entered into a 20-year gas and supply
processing agreement (GSPA) with the federal government in 2010 to build a
state-of-the-art gas processing facility.
The plant, in which Nigeria was
to have a 10 percent stake, was to refine associated natural gas into
non-associated natural gas to power the national electric grid as conceived in
2006 when President Olusegun Obasanjo was in power.
The agreement stipulated Nigeria
would receive 85% of the non-associated gas at no cost for electrical
generation and industrialisation. P&ID would receive the remaining 15% of
byproduct – methane, propane, butane – to sell on the commercial markets, of
which Nigeria would receive proceeds from their 10 percent stake in the
company’s ownership.
Based on the agreement,
government was to supply 150 million standard cubic feet (scf) of the gas per
day to P&ID — rising to 400 million scf in the life of the project. The gas
was otherwise being flared by the oil-producing companies.
The GSPA also required the
government to build a gas supply pipeline to the P&ID facility.
What went wrong?
P&ID said after spending
several years preparing for the project, the project collapsed because the
Nigerian government did not build a pipeline or secure a supply of gas as
stipulated in the agreement.
With the ensuing crisis
unresolved even after proposing an amendment to the agreement, P&ID
commenced arbitration against Nigeria in August 2012 in London, UK.
In May 2015, while the
arbitration was still ongoing, P&ID agreed to settle the dispute upon
payment of $850 million by the government, according to documents seen .
However, President Goodluck
Jonathan, who was about to leave office having been defeated in the
presidential election, provoked by P&ID’s offer, countered, but indicated
they would hand over the negotiations to the incoming administration of
President Muhammadu Buhari.
The arbitration award was made
two months after Buhari assumed office in 2015.
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