Nigeria, P&ID battle in US appeals court

The Nigerian government and the British Virgin Islands registered company Process and Industrial Development (P&ID) are currently in litigation for a $ 10 billion arbitration claim in the United States Court of Appeals.

Documents viewed by PREMIUM TIMES showed how the Nigerian government intends to overturn a district court’s dismissal of Nigeria’s motion to dismiss a motion for lack of jurisdiction due to Nigeria’s sovereign immunity from lawsuits in the United States.

The documents also showed that the controversial British company P&ID is seeking the court to confirm the District Court’s rejection of Nigeria’s motion to dismiss the petition.

Last year, a court in the United States ruled against Nigeria’s desire to bring more than $ 10 billion in dispute with the British Virgin Islands-registered company.

US District Judge Paul Engelmayer in New York upheld the hedge fund’s motion, overturned a verdict and overturned subpoenas from Nigeria.

Backstory

The P&ID saga dates back to January 11, 2010 when the company signed a gas supply and processing agreement with the Ministry of Petroleum Resources on behalf of the Nigerian government.

Under the terms of the agreement, P&ID was to build and operate an accelerated gas development project to be located in Adiabo in the Odukpani Local Government Area of ​​Cross River State. The Nigerian government should source natural gas from Oil Mining Leases (OMLs) 123 and 67 operated by Addax Petroleum and deliver it to P&ID for upgrading into fuel suitable for power generation in the country.

However, P&ID alleged that after the agreement was signed, the Nigerian government failed to honor its commitment after negotiations began with the Cross River state government over land allocation for the project.

The company said the failure to build the pipeline system to deliver the gas thwarted construction of the gas project, thereby depriving it of the potential benefits of over 20 years of gas deliveries.

Attempts to reach an out-of-court settlement with the Nigerian government have failed.

In August 2012, P&ID filed a request for arbitration with the Nigerian government, but Nigeria argued before the tribunal that “P & ID’s failure to acquire the land and build gas processing plants was a fundamental violation and that no gas could be delivered until it was done “. . “

The tribunal ruled that Nigeria’s Article 6B obligations did not depend on P&ID building the gas processing facilities.

In the final judgment of the tribunal, the damage P&ID suffered was the loss of the net income the company would have received had the government stuck with its contracting party. Two members of the three-man tribunal, Lord Hoffmann and Anthony Evans, believed that P & ID’s expenses and income should have been approximately $ 6.597 billion if the GSPA had been properly implemented by the government.

Both officials said the award should be paid starting March 20, 2013, along with 7 percent interest.

The other member, Nigeria’s former Attorney General and Justice Minister Bayo Ojo, said in his minority ruling that while P&ID was entitled to compensation for the violation, the damage would not last more than three years from the date of the alleged violation. Aside from being a new company founded in 2006, Mr Ojo noted that the project couldn’t have started any earlier than 2015.

In September 2020, the Nigerian government obtained a ruling from a UK court to suspend the unfavorable verdict on the scandal. A UK commercial court upheld Nigeria’s appeal to suspend enforcement of the $ 8.9 billion (approximately N 3.2 trillion) award in favor of P&ID.

Counter arguments

In their argument, P & ID’s lawyers argued that the district court rightly rejected Nigeria’s application for dismissal on the grounds that it had tacitly waived immunity.

“The exception to the waiver of the FSIA is because Nigeria has acceded to the New York Convention and agreed to arbitration under this treaty,” they argued, adding that the sovereign immunity of a foreign state is not absolute.

“Before 1952, the US State Department required ‘immunity in all actions against friendly foreign sovereigns’, but that changed when ‘the State Department announced its adoption of the’ restrictive ‘theory of foreign state immunity’ by the so-called Tate. announced letter. “

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In another breadth, the company argued that Nigeria does not provide a compelling reason for the court to deviate from its earlier decision.

In summary, the company said that Nigeria implicitly waived judicial immunity because it acceded to the New York Convention and then agreed to settle its dispute in a New York Convention country.

“The district court has correctly applied the well-reasoned decisions of that district and its order should be upheld accordingly,” argued the company. It added that the court should also determine that the district court has jurisdiction under the FSIA’s arbitration exception.

In a counter-argument filed on June 11, Nigerian attorneys found that the court should reverse the denial of Nigeria’s motion to dismiss the motion to dismiss due to Nigeria’s sovereign immunity from lawsuits in the United States.

“None of the exceptions required by P&ID apply,” they argued.

Nigeria did not tacitly waive its sovereign immunity in the United States by allowing its courts to enforce foreign arbitration awards in Nigeria or by agreeing to arbitrate in England under Nigerian law, they argued.

“In addition, the arbitration enforcement exception does not apply because P&ID does not have a valid arbitration award.

“The court should therefore overturn the district court and order that this lawsuit be dismissed in its entirety due to lack of jurisdiction.”

PREMIUM TIMES assumes that no hearing has been scheduled and no date has been set for the hearing.

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