US court issues $8.89bn default judgment against Nigeria

A United States District Court on Tuesday issued a default judgement affirming a $6.59 billion arbitral award against the Federal Government (FG), plus $2.3 billion in interest in a dispute that arose over a natural gas supply and processing agreement between it and a firm called Process and Industrial Developments Limited (P&ID).

The judgement was awarded against Nigeria because the FG failed to even appear in court to mount a defence.

The British Virgin Islands Headquartered P&ID on March 16 filed the petition (Process And Industrial Developments Limited V. Federal Republic Of Nigeria, et al., No. 1:18cv594, D. D.C.), to confirm a $6,597,000,000 English arbitral award that was earlier issued in its favour in London.

According to sources, the inability of Nigeria government to show up in court to defend itself led to the presiding Judge giving a default ruling which is a binding judgment in favour of (P&ID).

“Most often, a default judgment is in favour of a plaintiff when the defendant has not responded to a summons or has failed to appear before a court of law, which is what happened to the federal government and it’s a very sad scenario, ” an oil industry source told BusinessDay.

P&ID filed the petition to confirm the arbitral award pursuant to the Convention on the Recognition and Enforcement of Arbitral Awards.

The award was earlier issued in London in favour of P&ID and against the Federal Republic of Nigeria, a “foreign state” within the meaning of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1603(a), and the Ministry of Petroleum Resources of the Federal Republic of Nigeria.

P&ID submits that it entered a gas supply and processing agreement with Nigeria’s Ministry of Petroleum Resources in January 2010. Pursuant to the agreement, P&ID claims that it would build the necessary facilities and then refine natural gas into non associated natural gas for a period of 20 years.

The natural gas would be used by Nigeria to power its electrical grid. P&ID was to strip away heavy hydrocarbons known as Natural Gas Liquids (NGLs) in which P&ID would retain the NGLs as payment under the agreement.

P&ID said Nigeria was to make sure that all necessary pipelines and related infrastructure were installed and that arrangements were made with agencies and third parties to make sure the supply of gas was met pursuant to the agreement.

P&ID alleges that Nigeria failed to secure the agreed-upon quantity of gas and failed to complete the construction of the infrastructure.

P&ID alleges that as a result of Nigeria’s failure to comply with the agreement, it suffered a loss of 20 years’ worth of profits from the potential sale of NGLs.

After series of failed negotiation attempts, P&ID commenced arbitration against Nigeria and the Ministry of Petroleum Resources in London.

On July 3, 2014, the London tribunal found out that it had jurisdiction to decide whether it had jurisdiction over the case, the capacity of the ministry to enter the agreement for Nigeria and the validity of the agreement, considering P&ID’s incorporation in the British Islands, rather than Nigeria.

The tribunal found that it had jurisdiction under the United Kingdom’s Arbitration Act 1996, that the agreement between the parties was valid and that the petroleum ministry had the authority to enter the agreement.

In July 2015, the tribunal found that Nigeria failed to satisfy its obligations under the agreement and that P&ID was entitled to damages.

In response Nigeria filed an application to set aside the liability awarded in the England and Wales High Court, Commercial Court. The High Court dismissed the application, finding that it was untimely and that its objections to the award lacked merit.

Nigeria then filed an action to set aside the award in the Federal High Court of Nigeria, arguing that the seat of arbitration was Nigeria and that the Nigerian courts had jurisdiction over the dispute.

P&ID requested that the tribunal issue an order on the seat of arbitration. The tribunal found that the parties consented to London as the seat of arbitration. However, the Nigerian High Court granted Nigeria’s request to set aside the award.

On January 31, 2017, the tribunal issued a final award, ordering Nigeria and the ministry of petroleum resources to pay P&ID $6.5 billion plus interest.

As of March 16, 2018, P&ID submits that $2.3 billion in interest has accrued and continues to accrue. P&ID submits that Nigeria has not attempted to appeal the award in the United Kingdom or elsewhere.

P&ID asked the District Court in the United States to enter an order pursuant to 9 U.S. Code Section 207, 9 U.S.C. § 207, confirming the final award and enter a judgment in its favour and against Nigeria and the ministry, including interest.

P&ID sought costs and post-judgment compound interest, which was granted on Tuesday.

P&ID also sought an order that the District Court retain jurisdiction over the case for any future proceedings that could be necessary to enforce the award or judgments that it could obtain in Nigeria.

P&ID was represented by Marcus J. Green, Michael S. Kim and Josef M. Klazen of Kobre & Kim in Washington.


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