Sham litigation or legitimate investor claims? The extraordinary case of P&ID v Nigeria

Author: Spotlight On Corruption

Sham litigation or legitimate investor claims? The extraordinary case of P&ID v Federal Republic of Nigeria 

1. Arbitration Documents 

2. Process and Industrial Developments Limited v The Federal Republic of Nigeria (CL-2018-000182)

3. Process and Industrial Developments Limited v The Federal Republic of Nigeria (CL-2019-000752)

4. Process and Industrial Developments Limited v The Federal Republic of Nigeria (CL-2018-000182) and (CL-2019-000752)

 

Summary

The UK courts are set to hear allegations that a small offshore company, backed by a powerful lobbying operation, used secretive arbitration proceedings in London to extort billions out of the Nigerian government over a failed gas project. 

In September 2020, the Nigerian government won a significant victory in the UK courts to have its case to set aside an arbitration claim, originally calculated at $6.6 billion, and now worth $10 billion with interest, heard in full. The claim had been brought by the British Virgin Islands (BVI) registered company, Process and Industrial Developments Limited (P&ID). The court found a “strong prima facie case” that: 

– the underlying contract “was procured by bribes paid to insiders as part of a larger scheme to defraud Nigeria”

– P&ID’s main witness had given perjured evidence during arbitration including as to whether P&ID was in a position to perform the contract; and

– the arbitration itself had been tainted by the conduct of Nigeria’s advocate.

P&ID was established in 2006 by two Irish businessmen with a history of contracts and contacts in the defence sector, and was described by the court in 2020 as having “no assets, only a handful of employees, and was without a website or other presence.” In 2010 it won a 20-year contract to build and operate a gas processing facility in the Niger Delta. The contract was given to P&ID without competitive tender, and despite several existing contractual disputes between other companies belonging to the same directors and Nigerian government departments and other significant red flags.

The contract was never performed by either side. Just two years later, in 2012, P&ID began arbitration proceedings against the Nigerian government for breach of contract, claiming that the government had repudiated the contract by failing to provide ‘wet’ gas for it to process, when, in real terms, Nigeria does not directly produce gas but does indirectly through partnerships with other oil companies under Joint Ventureship. P&ID itself had yet to begin construction work on the project. 

Following five years of arbitration proceedings before two former British judges and a former Nigerian Attorney General, which resulted in a 2017 award for compensation to P&ID of $6.6 billion with 7% interest per annum (or $1.3m per day), the UK commercial courts have become a high-stakes battleground between P&ID and the Nigerian government. P&ID won an order in 2019 to enforce the award, but this has been stayed pending Nigeria’s appeal. 

In the meantime, P&ID’s ownership has been transferred to two Cayman Islands-based funds, VR Advisory Services Ltd, which has a 25% stake, and Lismore Capital which owns 75%. Lismore Capital is owned by a London based lawyer who acted for P&ID during the arbitration. 

President Buhari has claimed in a speech to the UN that the arbitration case was a “sham” designed to “cheat Nigeria out of billions of dollars”. Despite the country failing to adequately defend against the case for close to seven years, and real questions about its competence in defending the case, the Nigerian government is now heavily contesting the arbitral award and arguing that allowing the Final Award to stand would involve the English courts “being used as an unwitting vehicle of the fraud.” 

In response, P&ID has denied any wrongdoing and stated that the claims are an attempt by Nigeria to avoid paying what it owes to the company. 

The trial will proceed to a full and closely watched hearing in early 2023 in the UK commercial courts, as to whether the award should be set aside. 

 

Why Does This Case Matter?

The case is significant for the following reasons:

1. Huge sums of Nigerian public money are at stake with potentially huge consequences for the Nigerian people. The original award made by the London Court of Arbitration in 2017 – based on the theoretical sum of lost profits claimed by P&ID – was for $6.6 billion but included 7% interest per annum. The award has subsequently ballooned by $4 billion and now stands at $10 billion. This is equivalent to a quarter of Nigeria’s foreign reserves, five times the country’s education budget in 2019, and eight times its national health budget. The real losers in this are the Nigerian public. The Nigerian Bureau of Statistics has calculated that 40% of Nigeria’s population lives below the country’s poverty line, living on less than $1 per day. 

2. The case has involved extensive lobbying, including by UK and US politicians on behalf of P&ID. Priti Patel, current Home Secretary and former International Development Secretary, called on Nigeria on several occasions to honour the debt to P&ID, writing in November 2018, and again in May 2019, that unless it did so “investors inevitably will be very wary of investing in Nigeria.”  

3. If the allegations are proven, it would amount in the words of Bloomberg to “an audacious scheme that made unwitting accomplices of legal professionals, financial institutions and politicians around the world.” A finding in Nigeria’s favour should prompt deeper investigation into the role of legal professionals who may have enabled, or even been complicit in, any fraudulent scheme. The case will also raise real questions for the arbitration tribunal and the UK courts themselves as to whether they were made unwitting accomplices in such a scheme, if proven, and how the secrecy of these hearings helped keep key details about the case out of the public domain.

4. Whether or not the allegations prove true, the case has raised real questions as to whether fundamental reform is needed of how arbitration tribunals and commercial courts deal with corruption, and particularly whether new rules should ensure that such cases are not heard behind closed doors. 

Background

According to court documents, P&ID’s involvement in the gas project started less than a month after it was incorporated in the BVI in May 2006, when it entered into two engineering contracts with a company belonging to Nigerian businessman and former army general, T. Y. Danjuma. On one of these contracts, the company, Tita-Kuru Petrochemicals Ltd (Tita-Kuru), paid P&ID $40 million for engineering work.

P&ID’s move into gas processing came at an important time, when the Nigerian government was seeking to end the practice of oil companies flaring gas in oilfields in the Niger Delta which was causing an environmental and health crisis in the region. 

It was not the first project in Nigeria that P&ID’s owners at the time, Michael Quinn and Brendan Cahill, were involved in. According to an extensive investigation by Bloomberg Businessweek, Quinn, who was very well connected politically in Nigeria, including personally connected with Presidents Yar’adua and Obasanjo, had been involved in two failed military contracts in Nigeria. Quinn had been charged with espionage in Nigeria in 2006, though the investigation was quickly dropped. He had also been under investigation by the EU in relation to a steel contract, where the EU had detected fraudulent activity. 

Bloomberg’s investigation also alleged that P&ID’s other owner, Brendan Cahill, was involved in helping pursue another arbitration award in the UK courts in 2004 – IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation, in which the UK Supreme Court subsequently found that there was a good prima facie case that IPCO had “practised a fraud” on the arbitration Tribunal. 

The Nigerian government has also claimed that Quinn and Cahill are behind the IPCO arbitration. In court filings, the Nigerian government claimed that documents have recently been “disclosed by Deutsche Bank showing that his (Quinn’s) company, Eastwise Trading Limited (“Eastwise”)… made direct payments to IPCO’s employees”.  Cahill has claimed that the payments from his company to IPCO employees were to finance IPCO’s enforcement actions – although this is disputed by Nigeria who state this is “entirely undocumented” and that “there is in any event no good reason why such payments would have been made to individual employees.”

P&ID appears to have used its contract with Tita-Kuru as the basis of its proposal for lobbying for a gas processing contract with Nigeria’s Ministry of Petroleum Resources (the Ministry). Following correspondence with the Ministry, in which P&ID claimed to have spent $40 million on the project already, a Memorandum of Understanding was signed by the Ministry and P&ID in July 2009. The Minister at the time, Dr Rilwana Lukman, is said to have ordered staff to fast-track the contract with P&ID. According to evidence from Nigeria’s Attorney General to the court, the contract did not go through required authorisations from various Nigerian bodies.

 

Bribery allegations

The Nigerian government’s allegations aired in court, and covered in various witness statements, are that bribes were paid by P&ID to a legal director of the Ministry, Ms Taiga, and a member of its technical committee, Mr Tijani. Nigeria also claims that payments were made into the bank accounts of the Minister himself, and a special senior technical assistant although it does not know by whom.

The judge found that there was prima facie evidence that Ms Taiga and Mr Tijani were paid bribes, and was unconvinced by evidence from Mr Cahill that payments to Ms Taiga were for medical expenses. Mr Tijani gave a statement to the court that a colleague of Mr Quinn’s had dropped a black bag containing $50,000 into his car as a “gift” following a meeting involving the Minister – a claim denied by Mr Cahill. The judge noted that even if he accepted P&ID’s claims that this claim could not be proved, there was evidence that P&ID had paid $30,000 into Mr Tijani’s bank account. 

Although relatively small in the context of the court proceedings, these payments represented significant amounts locally where the annual salaries of those paid was $5,000 per annum. Overall, P&ID is alleged to have made roughly $1.4m in payments to individuals relating to the project. Given that the Nigerian government has claimed that P&ID has not made any other investment in the project other than these payments, this would suggest that if P&ID is able to claim the arbitral award, it would in effect make a profit of roughly 7,150 times the bribes it is said to have paid. 

 

Perjured evidence by P&ID

The judge went on to find strong prima facie evidence that Mr Quinn had made false statements to the original arbitration Tribunal to give the impression that P&ID was a legitimate business. This included that P&ID had invested $40 million in the project, had undertaken considerable work including 100 volumes of documentation, and had secured land for the plant. In fact, the judge found that the $40 million had come from Tita-Kuru, that P&ID were unable to present any more than a powerpoint to show the extent of work it had done, and that they didn’t own any land for building the plant.

 

Tainted arbitration conduct on part of Nigerian advocate

Perhaps the most extraordinary part of the case are allegations by the Nigerian government that the original counsel defending Nigeria against arbitration claims, Mr Olasupo Shasore, a former attorney general for Lagos State, “defended the case thinly”, in collusion with P&ID, so that Nigeria would lose.  

The court heard that Mr Shasore’s conduct included failure to challenge P&ID’s claims, and dragging his feet when conduct of the arbitration was transferred from the Ministry to the Attorney General. However, what persuaded the judge of a “prima facie case of dishonesty in Mr Shasore’s conduct” were payments of $100,000 each that he made to two legal directors, Ms Adelore at the Ministry and Mr Oguine at the Nigerian National Petroleum Company, who went on to form part of the team put forward by Nigeria to settle with P&ID. Ms Adelore subsequently gave legal advice to the effect that Nigeria should settle the arbitration with P&ID, while Mr Oguine put forward a witness statement to the arbitration Tribunal that provided no useful evidence to support Nigeria’s case.

The Judge accepted the Nigerian government’s submission that there was a case to be made that these payments had been made by Mr Shasore to “purchase their silence in relation to his conduct of the arbitration and settlement negotiations.”

 

Arbitration and the UK courts

P&ID invoked arbitration proceedings under Nigerian arbitration law, however, with the ‘venue’ of arbitration specified in the contract as London. Arbitration proceeded in London in front of a Tribunal panel which included two former senior UK court judges, Lord Hoffman and Sir Anthony Evans, and former Nigerian Attorney General, Chief Bayo Ojo. 

The Tribunal issued two Final Part Awards in 2014 and 2015, the latter stating that Nigeria had repudiated the contract by failing to perform its obligations, and that P&ID was entitled to compensation. In January 2017 the Tribunal issued its Final Award, albeit with a dissenting voice from Chief Bayo Ojo, ordering the Nigerian government to pay P&ID $6.6 billion with 7% interest per annum.

The specification of London as the venue or ‘seat’ of arbitration was hotly contested by the Nigerian government during arbitration, with Nigeria’s Attorney General claiming in court that this was in contradiction with a government circular at the time of the contract. The issue of venue is important because only the courts in the ‘seat’ have the power to ‘set aside’ an award.  

In March 2018, P&ID sought permission from the UK commercial courts to enforce the arbitral award made by the Tribunal. In an August 2019 ruling, a UK court made an order that the award should be enforced. This would have allowed P&ID to seek the seizure of Nigerian state assets. In September 2019, the Nigerian government was granted permission to appeal and a stay on enforcement of this award if it submitted $200 million to the UK court by way of security.

In December 2019 the Nigerian government launched a challenge to the arbitration award under the UK’s Arbitration Act on grounds of “serious irregularity” affecting the Tribunal decision (section 68 (2)) as well as on jurisdiction (section 67). Nigeria has always contested that the arbitration should have been heard in London, and Nigerian courts ruled that it should not – a ruling that was not accepted by the Tribunal. 

This challenge resulted in the September 2020 ruling which allows Nigeria to bring forward evidence of fraud and corruption despite what the court itself described as an “unprecedented” delay in doing so. The $200 million guarantee posted by the Nigerian government in 2019 was also released back to Nigeria following this ruling.

 

US courts as a back-up battleground

In March 2018, P&ID sought an order and judgement in the US courts to confirm the arbitral award from the Tribunal. Nigeria sought a dismissal of this petition on grounds that it had foreign sovereign immunity. In December 2020, following various court hearings on the issue, the District Court for Colombia issued a memorandum of opinion denying Nigeria’s request for dismissal, declining to stay the case, and asserting its jurisdiction over the case, pending outcomes in the UK courts. Nigeria is appealing this ruling. However, if Nigeria fails in its appeal, even if Nigeria wins the case in London next year, it may still face enforcement proceedings of the arbitral award in US courts. 

In separate US court proceedings, in May 2020, the Nigerian government won a court order allowing it to subpoena VR Advisory Services Ltd, which took a 25% stake in P&ID following the 2017 arbitration award, for information to prosecute government officials in Nigeria for accepting bribes from P&ID. The Nigerian government also won a discovery order allowing it to seek bank account details from ten different banks relating to 60 different individuals and corporate entities, connected to P&ID and its affiliate entities, and to Nigerian government officials (including former President Goodluck Jonathan and former oil minister Alison-Madueke) – an application which P&ID intervened in but did not oppose. Evidence from this discovery process formed part of the basis on which the judge in the UK found prima facie evidence of bribery. 

In November 2020, however, the order against VR Advisory Services was overturned on the basis that Nigeria had improperly used material from this discovery process to contest the arbitration award in English courts rather than solely for prosecution purposes in Nigeria. 

 

Nigerian investigations

According to the UK ruling, Nigeria’s Economic and Financial Crimes Commission (EFCC) was first asked to investigate P&ID in February 2016. Its interim report in June 2016 recommended further detailed investigation of the circumstances surrounding the award and key parties to the transaction.

Despite this recommendation, no further investigation appears to have taken place until two years later in June 2018 when President Buhari directed that ministries make available all relevant documentation to the EFCC so it could investigate the contract given to P&ID. Buhari also directed Nigeria’s National Intelligence Agency to investigate P&ID. According to US court documents, the EFCC opened its investigation into P&ID in August 2018.

Following the August 2019 court ruling allowing P&ID to enforce the arbitral award, efforts in Nigeria intensified. Nigerian police also opened an investigation into the company, as did the Federal Inland Revenue Service. 

Criminal proceedings against P&ID, Mr Cahill, Ms Taiga and an associate of Mr Quinn, Mr Kuchazi, were started on 17 September 2019. Two days later P&ID and P&ID Nigeria pleaded guilty to conspiracy to defraud Nigeria, money laundering, tax evasion and trading without authorisation. P&ID has claimed that this was a sham trial.

Shortly after the guilty plea by P&ID, the EFCC sought the arrest of two British nationals, James Nolan and Adam Quinn for involvement in the arbitration. In early 2021 they also arrested Muhammed Kuchazi, a former director of P&ID, alleging that he stood to gain $300 million from the arbitral award if it was enforced, and in October 2021 the EFCC secured a warrant for the arrest of Neil Murray, an employee of P&ID. Ms Taiga was re-arraigned and granted bail in October 2021, with the trial against her set to take place in Nigeria in January 2022.

The Nigerian government has also implicated former Nigerian Attorney General from 2010-2015, Mohammed Bello Adoke, in the P&ID affair. Adoke, who is under criminal investigation in Nigeria for his role in the OPL 245 scandal, sought an order from the UK court in August 2020 to redact certain passages in the Nigerian government’s witness evidence on the grounds that they were “false, defamatory, scandalous, and malicious.” The Judge refused the application because he lacked standing, the documents were already public, and he had not been given a good enough reason. 

Claims by Nigeria’s Attorney General, Abubakar Malami, that the EFCC had failed to act speedily in the P&ID investigation were one of the reasons given for the suspension of EFCC’s Chairman, Ibrahim Magu, in July 2020.

 

Who owns the award?

Mick Quinn, one of the co-founders of P&ID, died before the arbitration was completed in 2015. According to Bloomberg, P&ID lawyers took the judgement to several hedge funds that specialise in pursuing bad debts. US court documents state that P&ID began discussions in 2017 with VR Advisory Services Ltd, which in 2018 acquired a 25% share in P&ID. VR Advisory Services Ltd is registered in the Cayman Islands. This share has subsequently been sold to Process Holdings Limited, a wholly owned subsidiary of VR Global Partners which is the flagship fund of VR Capital Group.

According to the Nigerian government, documents submitted to the English courts show that in October 2017, another Cayman Islands’ firm, Lismore Capital, acquired 75% of shares in P&ID. The firm is owned by Seamus Andrew, a London based solicitor who represented P&ID in the arbitration from September 2014 until the Final Award was made in February 2017. Lismore Capital and Seamus Andrew were both also involved in the IPCO arbitration, which resulted in a $20 million payment to Lismore as part of a settlement distribution. 

VR Capital Group and Lismore Capital have essentially acquired a share of the substantial arbitration award, given this is the only real asset now owned by P&ID. It is not known how much they acquired their shares for.

 

Lobbying operations

Since the arbitration award, both sides have engaged lobbyists and developed websites devoted to the case.

In the UK P&ID enlisted the services of inHouse Communications, whose co-founder and current chair is Kate Perrior, former Director of Communications to Theresa May at 10 Downing Street. P&ID has also been publicly supported by Priti Patel MP and Shanker Singham, a lobbyist with close ties to the Conservative Party. Patel wrote articles in support of P&ID for City AM in November 2018 and The Telegraph in May 2019. She also wrote the foreword for a report published by Singham in April 2019.

Singham has also been behind calls to get Nigeria’s Attorney General, Abubakar Malami put on the UK’s sanction list. Malami has been a key player in Nigeria’s belated efforts to contest P&ID’s arbitration suit as vigorously as possible and highly critical of the P&ID contract. In one July 2020 paper, ‘Christian persecution in Nigeria’, Singham singled out Malami for sanctions by the UK for failing to prosecute perpetrators of those who have attacked Christian communities, while stating that Nigeria’s abuse of human rights extends to “violating fundamental principles of property rights protection.” Singham made a similar call for Malami to be sanctioned in an article for the Express

In the US, P&ID have enlisted the support of DCI Group LLC, Kobre and Kim LLP (who also act as its solicitors) and Black Diamond Strategies to lobby the US government on their behalf. So far the company has spent half a million ($530,000) on engaging lobbyists in the US on US/Nigerian foreign relations. The P&ID Facts website, which is owned and operated by P&ID, notes approvingly that Senator Charles Grassley asked the US government to sanction Malami and the head of the EFCC. The website refers to a letter dated April 2020 from Terry Schilling, Executive Director of US-based not-for-profit, the American Principles Project, to former US Attorney General William Barr, which called for sanctions against Malami. Schilling previously wrote an article dated September 2019 in which he proposed sanctions against the Buhari regime while expressing his support for P&ID.

The Nigerian government has engaged Portland Communications in the UK in its support.