Monday, 2 September 2019

More Facts Emerge On How P&ID Obtained $9.6bn Judgement Against Nigeria

More facts emerged at the weekend of how insistence by Nigeria not to pay anything above the $250 million and P&ID’s decision not to earn less than $2 billion led to the breakdown of negotiations on the $9.6 billion London arbitration award.

The arbitration commenced against the Ministry of Petroleum by Messrs Process & Industrial development (P&ID), a limited liability company with which the Ministry of Petroleum signed a Definite Agreement dated 11th January 2010 for Accelerated Gas Development in OML 123 and 67 for a period of 20 years.

A document from the Federal Ministry of Justice obtained  “in its final award on 31st January, 2017 but released on 10th February, 2017 the Tribunal awarded the claimant the sum of $6, 597 billion plus interest at the rate of 7% from 20th March 2013.

“This award represented the present value of the 20years income P & ID would have received for the sale of the Natural Gas Liquid (NGL), minus capital and operating expenditures the company would have incurred in the course of building and running the facility.

“The only dissenting opinion on the award was from Chief Bayo Ojo (one of the arbitrators) who opined that P & ID ought to have mitigated its loss and cannot sit and fold its arms for 20 years expecting a windfall from the government.
“Therefore, P & ID was only entitled to damages for three years of operation and should therefore receive only $250 million.

“As at date, the total sum being owed to P & ID plus interest is above USD8.4Billion.”

Upon being served with the final award in February 2017 according to the document, the Attorney General, Mr. Abubakar Malami suggested recommendations that will resolve the situation on the matter to Vice President, Prof. Yemi Osinbajo, which he approved.

Osinbajo’s approval include a negotiation of the award with the P & ID.

Based on the VP’s approval, both Malami, Minister of State for Petroleum Resources, Dr. Ibe Kachikwu their delegation along with FGN counsel, Chief Bolaji Ayorinde SAN, on 16th May, 2017, met with representatives of P & ID and its counsel to negotiate the award.

The document noted at meeting, FGN team was able to negotiate the award from $8.4Billion to $600 million on the condition that “$100 million will be paid to P & ID within 14 days by FGN after execution of the Stay of Enforcement of Award Agreement” and that “the outstanding sum (USD500Million) will be paid through an asset that will be determined by the MPR.”

However, after the Ministry of Petroleum Recourses forwarded its comment on the draft Stay of Enforcement Agreement by P & ID, the company totally rejected the comments “on the ground that what was agreed on to be executed was a Draft Stay of Enforcement Agreement and not a Settlement Agreement as proposed by the Federal Government.

“Based on the rejection a letter was written by the Attorney General and Minister of Justice on 3rd November 2017 to the VP seeking approval to re-negotiate the award with the P & ID.”

“The P&ID in April 2018 began enforcement proceedings in the United States of America against the MPR and FGN and it now claiming an amount above US$9 billion.

“In response, the HAGF engaged the American law firm of Curtis, Mallet-Prevost, Colt & Mosle LLP to represent the interests of the Federal Government of Nigeria and Ministry of Petroleum Resources with regards to the Arbitral Award Enforcement Proceedings involving Process and Industrial Development (P & ID) and ensure Federal Government is diligently defended.

“In the US proceedings, the Petitioner (P&ID) had filed for entry of default on 4th June, 2018 which was entered as a clerk’s entry of default on 5th June, 2018. It is however noted, that the Clerk’s entry of default is not a default judgement but a mere notice of an application for a default judgement.

“In response to the Petitioners application for default judgement, the FGN Counsel (Law Firm) on 12 June, 2018 filed a motion to set aside the clerk’s entry of default for defective service which was conceded to by the Petitioner (P&ID) and it applied to the court to cure the deficiency by serving a fresh process on the Ministry of Foreign Affairs and Ministry of Petroleum Resources through courier or normal mail.”

On 26 June 2018, President Buhari directed Kachikwu and Malami to ensure strong efforts are made by the Federal Government engaged Solicitor, Curtis, Mallet-Prevost, Colt & Mosle, to seek ways of protecting the interest of the Federal Government in enforcement proceedings.

He also directed the two to “reopen negotiations with P&ID, with a view to arriving at a settlement in the neighbourhood of $250million in line with the recommendation/dissenting view of the Nigerian appointed arbitrator (Chief Bayo Ojo). The settlement could be in the form of cash and Marginal Oil and Gas Field or cash only.”

At the resumed negotiation, P & ID declared it was no longer looking to accept marginal field assets as part of the settlement but would rather expect monetary payments and that it would be looking for a sum in excess of USD2Billion in the settlement of the claim and may consider a stand-still agreement backed by a part payment and specific arrangements on payment of the balance.

Federal Government’s team on the other hand insisted it “would only consider monetary payments to P & ID, and in this regard offered a sum of USD250 million (Two Hundred and Fifty Million US Dollars) to P & ID which was rejected by the P&ID, which was rejected.

Meanwhile, on 15 February 2019, the Court of Appeal in the United States issued a decision in favour of FGN by dismissing P&ID’s motion requesting the court to dismiss Nigeria’s appeal for lack of jurisdiction or to summarily affirm the scheduling order of the District Court.

“The proceedings therefore are currently on-going in the United States”

Also on 16 August, 2019, the UK Commercial Court recognised the Arbitral Award with a caveat that enforcement cannot take place immediately because the Judge ordered that enforcement can only begin after a further hearing on the matter and a date is yet to be fixed for that.

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