Nigeria faces $11bn payout in London court battle over alleged fraudulent gas deal
Nigeria is facing the possibility of a significant $11 billion payout if it loses a trial starting this week in London’s High Court. The Nigerian government will argue that hedge fund-backed firm Process & Industrial Development Ltd (P&ID) should not be able to collect a massive arbitration award handed down in 2017 following a failed and allegedly fraudulent gas deal.
This amount equals almost a third of Nigeria’s forex reserves, and a payout of this magnitude would deal a severe blow to Africa’s largest economy, which is still recovering from a pandemic-induced recession.
The case centers around a 2010 agreement between the Nigerian government and P&ID, a British Virgin Islands-registered firm controlled by three Irish businessmen. The state had agreed to provide free gas for 20 years to a facility P&ID would build in exchange for processed gas to be used for electricity generation.
P&ID claims that it never built the planned refinery because the Nigerian government failed to tap its natural gas, whereas Nigeria alleges that the deal was secured through bribes to former government officials and that the award should be overturned.
In 2012, P&ID initiated arbitration proceedings, claiming that attempts to resolve the issue privately had failed. Five years later, a closed-door arbitration court in the UK ordered Nigeria to pay $6.6 billion to the firm to compensate for lost profits, an amount which has since swelled to over $11 billion with interest. P&ID has no other known assets.
The stakes were raised in 2019 when a UK judge issued an order enforcing the award. The trial, which is one of the largest in UK history in terms of the amount of money involved, is scheduled to continue until March. Nigeria will hold a presidential election on February 25th.
For its part, Nigeria’s government has alleged that P&ID bribed previous administration officials to secure the gas contract, and colluded with former government lawyers and officials to mount a “sham defense” when the matter landed in court. With a different political party now in power, Nigerian law enforcement agencies are investigating allegations of bribery surrounding the 2010 gas contract and subsequent arbitration.
In earlier hearings, P&ID denied all allegations and characterized the Nigerian government’s claims of fraud as an attempt to dodge liability. P&ID’s spokesperson said, “P&ID vigorously denies that the awards in its favor should be set aside.”
The trial comes in the wake of a London court’s decision to allow the Nigerian government to dispute the arbitration ruling. The country’s anti-corruption agency has also charged the lawyer that represented the state during the arbitration for allegedly bribing public officials involved in the proceedings.
