London Arbitration Tribunal fines Nigeria $8.9b
A London Arbitration Tribunal has awarded $8.9 billion fine against Nigeria in favour of a British firm, Process and Industrial Developments Limited (P & ID).
According to documents obtained at the weekend, P & ID had initiated moves to recover a judgment debt of $6.6 billion in damages plus $2.3 billion in uncollected interest, which was calculated at $1.2 million a day, according to a lead judgement by Lord Hoffman.
If Nigeria fails to pay the judgemnt fine before February 15, P&ID can enforce the award against the country by seizing its assets in the United Kingdom (UK).
Reacting to the development, the Director Press, Ministry of Petroleum, Mr Idang Alibi confirmed the financial obligation.
He said both the Federal Ministry of Petroleum Resources and the Federal Government are aware of the judgment and are doing something about it but gave no further details.
He, however, said the ministry will respond to the matter at the appropriate time.
The fine emanated from the contractual breach of three previous administrations of Presidents Olusegun Obasanjo, Umaru Yar’Adua and Goodluck Jonathan.
According to court papers, the judgment debt arose from the country’s failure to perform its contractual obligations under a gas supply and processing agreement it signed with P & ID. The judgment sum had snowballed into $9 billion as a result of interest calculated at seven per cent from the date the decision was reached by an arbitration tribunal in the UK.
According to the UK Tribunal ruling, it was noted that the agreement was executed on January 11, 2010, by P & ID and the Ministry of Petroleum Resources for and on behalf of the Federal Government to refine associated natural gas (also known as wet gas) into non-associated natural gas to be used by Nigeria in powering its national electric grid.
According to court documents, the ruling also stated that the tribunal found that Nigeria had repudiated the agreement by failing to satisfy its contractual obligations and eventually abandoning the project contemplated there under, causing the British firm to lose substantial profits it would have earned over the 20-year period during which Nigeria was to supply the company with natural gas.
Under the agreement, the P&ID project would have generated 3000 megawatts (Mw) of electricity for Nigeria. Natural gas that was being flared off would instead have been processed and used to generate electricity for Nigerians.
Court documents also showed that March 20, 2013, was the date on which P & ID accepted Nigeria’s repudiation of the agreement, however, the Nigeria did not move to set aside the final award at the seat of arbitration, and under English law, the deadline for doing so has long passed.
The failure to accept and secure a settlement has led to saddling Nigeria with over $9 billion of additional debt. According to court documents, earlier efforts to settle the contractual breach had been stalled by the Nigerian government. On May 3, 2015, P&ID offered to settle the dispute with the Nigerian government for $850 million. On May 30, 2015, the matter was brought before President Buhari and Vice President Yemi Osinbajo. The government rejected the $850 million settlement which was less than 10 per cent of the current judgment sum.
It was also learnt that at present, there is no idea which Nigeria assets would be affected, as this has not been decided but oil revenues might likely be targeted.
It was learnt that if P & ID is successful at the hearing scheduled for this month, it can enforce the award against Nigeria by seizing her assets in the UK. The tribunal ruling would give the company permission to enforce the award.
The consequences of the judgment will be devastating because Nigeria’s foreign currency reserves is about $43.2 billion which means the P&ID judgment alone will take over 11 per cent of the entire reserves.
The government’s contractual breach related to the supply of an agreed quantities of wet gas at first-150 million standard cubic feet per day (scf/pd), and finally, 400 million scf/pd during the 20-year period of supply while the firm was to strip away the heavy hydrocarbons known as Natural Gas Liquids (NGLs) that make wet gas unsuitable for electricity generation and return the lean gas thus created to the country. The refining process was to take place at the gas processing facilities to be built by P & ID on a site in Calabar, the Cross River States capital.