Promoting Good Governance.

Nigeria to lose $9 billion to firm over breach of contract

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ON Friday, a United Kingdom, UK court granted Irish owned firm Process and Industrial Developments Ltd, P & ID, rights to claim $9 billion worth of assets from the Nigerian government for breaching the terms of their agreement after aborting a gas project.

The engineering and project management company was awarded damages worth $6.6 billion by the English Commercial Court sitting in London while the accrued interests included pegs the total payment to the firm at $9 billion.

The presiding judge, Justice Butcher in his ruling substantiated the arbitration award to a legal judgement, implying that P & ID had legal rights to seize international assets belonging to Nigeria.

Lawyers who represented the Nigerian government stated that the award could not be enforced in the UK because it was not the best place to decide the case, also arguing that the amount awarded was “manifestly excessive.”

The judge dismissed the arguments from the Nigerian lawyers, saying he was open to “receive submissions from the parties as to the precise form of order appropriate.”

Andrew Stafford, the counsel representing P & ID emphasised his client’s resolve to claim its damages from the Nigerian government with urgency.

“P&ID is committed to vigorously enforcing its rights, and we intend to begin the process of seizing Nigerian assets in order to satisfy this award as soon as possible,” he said.

Stafford said that with accrued interest, the award to the firm now tops $9.6 billion, but

Genesis to the tussle

P & ID had over 30 years of experience in engineering projects in Nigeria on its belt when it reached a 20 years Gas and Supply Agreement, GSPA, with the federal government in 2010 to build a gas processing plant in Calabar.

The gas processing plant was to refine associated natural gas into non-associated natural gas to supply gas which would increase the generating capacity of the national electric grid.

Associated gas refers to the natural gas found in association with oil within the reservoir, while the non – associated gas is simply gas without any condensates.

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Nigeria was to receive 85 per cent of the non-associated gas at no cost for electrical generation and industrialisation, while P & ID would receive 15 per cent of the byproducts generated which includes methane, propane, and butane to sell on the commercial market.

However, the country was assured it would retain 10 per cent shareholding stake of the firm.

The Federal government was to supply 150 million Standard Cubic Feet, SCF, of the gas per day to the firm which would have seen 400 million SCF of gas supplied throughout the lifecycle of the project.

The GSPA also required the government to build a gas supply pipeline to the P&ID facility.

Breach in transmission

The firm in its suit stated that it spent years preparing for the project, but the Nigerian government did not meet its end of the bargain because it did not build a pipeline or supply the required quantity of gas as stipulated in the agreement.

With the fracas yet to be resolved, despite a proposed amendment to the agreement, P&ID commenced a full-scale arbitration against Nigeria in August 2012 in London.

In May 2015, while the arbitration was still ongoing, P&ID agreed to settle the dispute upon payment of $850 million by the government.

In July 2015, the dispute was resolved in favour of P&ID but Nigeria later unsuccessfully asked the English Commercial Court to set aside the award completely.

In January 2017, the court ordered Nigeria to pay P&ID $6.6 billion in damages and $2.3 billion in interest.

Nigeria had sought an extension to defend its case to stop the enforcement of the award, which would put the nation’s foreign assets including its external reserves at risk.

However, assets used for diplomatic purposes such as the Nigerian High Commission building in central London are not eligible for seizure, but commercial assets are set for confiscation.

After failing in its bid to sway the court’s ruling in its favour, Nigeria was fined by the court which also ordered the federal government to start paying part of P&ID’s legal costs as soon as possible.

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