Thank Goodness, the Hon. Justice Robin Knowles, CBE has finally brought relief to all Nigerians by his judgement in the appeal by Nigeria against an arbitration tribunal judgement in 2017 awarding some Six Billion dollars ($6Billion) against her. That judgment debt, accruing compound interest at 7%, would have ballooned to $11Billion by now. You will appreciate the full impact of an $11Billion judgment debt against Nigeria when you consider that, for the past five months, we have been struggling unsuccessfully to secure a $3Billion credit line to stabilise our exchange rate. That sum is more than twice our annual capital expenditures! So, how did we get into this sorry bind?
The first wrong step was a result of the arrogance of power, a characteristic quite common with many Nigerians occupying very high and influential Government positions. They make pronouncements and give directives, resulting in commitments way beyond their remit. In this instance, the Ministry of Petroleum Resources initiates a large volume gas supply agreement with a purported gas processing company when they do not produce a single molecule of gas! They did not even have the presence of mind to refer the proposal to their parastatal NNPC for consideration. The Honourable Minister of Petroleum Resources went ahead to execute an agreement forwarded to him by the Director of Legal Services, committing to supply 400Million standard cubic feet per day of gas over a twenty year period when both of them were well aware that the Ministry does not produce gas. How do you commit to give what you do not have? The absurdity of this agreement did not end there. The processing company was being offered 15% of this gas volume (amounting to the shrinkage upon extraction of condensate, gas liquids and LPG from the gas volume supplied) for free! For those conversant with this kind of transaction (I have, in my previous jobs executed a few of them) this shrinkage is priced in the range of $3.5 to $4.25 per thousand cubic feet. This means that, at $3.50 per thousand cubic feet, the gas supplier should earn about $73.5Million per annum on a 15% shrinkage for 400MMscf/d supplied. This amounts to $1.47Billion over the 20-year contract period. This was given out free to the gas processor. You will now understand why the P.&ID party described the agreement as “a very sweet deal”. If the gas supply obligation was met, they begin business with a whopping discount of almost $1.5Billion, and if the obligation is breached, they resort to arbitration for even higher damages. Head or tail, they were big winners and we were losers from day one.
After executing the agreement, the Honourable Minister directed his staff to instruct Addax and ExxonMobil to supply the gas. They were not parties to the agreement, and could not have entered into an agreement so schewed against them. Out of courtesy to their “big brother” Joint Venture partner, NNPC they initially pretended to go along until they eventually refused to commit to any gas supply arrangements. Then P. & ID declared a breach and initiated arbitration proceedings against Nigeria. Our legal team was faced with two major hurdles. The Ministry had no budget for, and therefore, no funds to pay their legal fees. They also could not pay for badly needed expert opinion on legal, commercial and technical aspects of the transaction. Worse still, not being in the business of gas production and supply the Ministry could not provide their legal team with data and information with which to prepare their case. Faced with these hurdles, they kept asking for adjournments while their counterparty was assembling an iron-clad representation before the arbitration tribunal, albeit with perjured information and the support of bribed officials and Nigerian partners. In this circumstance, the Nigerian legal representation was shallow, half-hearted and unconvincing. They found more comfort in pursuing a negotiated settlement, having in the face of their handicaps, internally accepted defeat at the arbitration tribunal.
A negotiated compensation of $1.1Billion was first arrived at, which looked attractive in the face of a $6Billion arbitral award. When they could not secure government approval for this sum, they negotiated it further down to $850Million and forwarded it to the President for approval. With only three days left to hand over, on May 26, 2015, President Jonathan refused to approve, minuting on it “Please pass this on to the incoming President”.
When President Buhari inherited this complicated mess, he ordered a full-scale investigation into the circumstances and actions that brought us here. In January 2017, the tribunal issued the final award of $6Billion to P. & ID which at 7% interest had ballooned to $9.6Billion. At this point, the Federal Government assembled a crack team of English lawyers to appeal against the ward and seek to set it aside. By this time, the Nigerian Attorney General, and the EFCC were scrambling to prove a case of fraud, bribery and corruption by practically labelling all members of the Government Team that had been involved in this case as “compromised”. They even got one top Ministry official to confess that he had been bribed by P. & ID officials ten years earlier. Justice Robin Knowles was not swayed by these “findings” and infact specifically exonerated the Nigerian Lead Counsel of any corrupt practices.
The English legal team, on the other hand, subpoenaed different banks, communication networks and other institutions to assemble unassailable evidence that:
- The Director of Legal Services in the Petroleum, Ministry, while serving and in retirement was continuously being paid monies by P. & ID officials before, during and after the entire litigation process and was anticipating sharing in the award proceeds.
- All confidential correspondences (legal privileged data) between the different parties working for Nigeria and top officials of government were intercepted by and circulated among P.&ID Officials.
- The P.&ID principal witness statement was perjured as verifiable lies were told under oath.
With their detailed preparations and a very strong, persuasive argument in court, Justice Robin Knowles was swayed that a corrupt process, unknown to the arbitration tribunal had led to the award of a quantum of costs that was almost embarrassing to the English justice system. In fact, he alluded to the fact that if the award was allowed to stand, it would cast a pall on the credibility of the arbitration principle, especially as it is usually not open to the media and public scrutiny that make open courts more circumspect in their judgements. Here again, the performance of the English legal team made ours a laughing stock, a tragedy. It would appear that the endemic corruption in our judicial system, where justice is obtained more by corrupt means than the quality and depth of legal representation is rubbing off on our learned attorneys as evidenced from their shallow preparations and poor representation in this case. Their representation was so poor that the tribunal judges simply treated Nigeria with disdain and proceeded to award P.&ID all that they asked for even when it was glaringly unreasonable. P.&ID would have smiled home to share $9.6Billion with their cohorts from a transaction where their total expenditure was less than $3Million!
In reflecting on the tragedy of this case, I can only wonder when we are going to produce a generation of Nigerians who will truly love this Country, stand by her and sacrifice for her.
November 3, 2023