UK judge overturns $11 billion award against Nigeria due to corruption

Mr Justice Robin Knowles, sitting in the Commercial Court in London, stated that while he did not accept all of Nigeria's allegations, he was convinced that the British Virgin Islands company Process & Industrial Development (P&ID) had secured the award through fraud.

Handing down his decision, the judge found that P&ID had engaged in a series of abusive practices within the arbitral process, including bribing a government official to secure the underlying contract and ensuring her silence during the arbitration. He added that P&ID had improperly retained Nigeria's confidential internal legal documents in order to monitor the state's awareness of the bribery during the arbitration. Some of these documents were found to be confidential and subject to legal professional privilege.

Mr Justice Knowles said poor custodianship and loss over time meant both sides suffered from gaps in their documentation – but noted that the disclosure process in the case had “enabled the truth to be reached”. He added: “In all the recent debates about where disclosure or discovery matters, this case stands a strong example for the answer that it does.”

Rob Wilkins, international arbitration expert at Pinsent Masons, said the case highlighted how crucial rigorous and efficient discovery processes are to the success of a claim – particularly after Nigeria’s initial challenge to the award was dismissed for being filed too late. He emphasised how emerging technology, including artificial intelligence (AI), could improve discovery standards without creating additional costs.

“There are now tools available that use machine learning to quickly find important documents. These tools can be helpful not only for reviewing documents during the document creation process but also for helping parties find and develop their key documents, which is essential for building a strong case early on in the arbitration process,” Wilkins said.

The case stems from a 2010 contract signed between P&ID and Nigeria's Ministry of Petroleum Resources for the construction of a gas processing plant. The plant was never constructed, and in 2012, P&ID initiated arbitration – claiming that the government had failed to provide adequate infrastructure and ‘wet’ gas.

The arbitration, which took place in London in 2015, issued an award in favour of P&ID. In a final award two years later, the tribunal ordered Nigeria to pay $6.6bn as compensation for two decades of lost gas contracts. Taking into account an annual fixed interest rate of 7%, the award was eventually worth over $11bn.

Nigeria initially attempted to challenge the award in 2016 but this was dismissed as being filed too late and having “no merit”. In 2020, however, the government successfully applied for an extension to challenge the award, along with relief from sanctions, after the High Court in London found that it had established a "strong prima facie case” that the contract with P&ID had been procured by fraud.

At an eight-week trial that began in January 2023, Nigeria successfully argued that the gas plant contract was a sham from the beginning and had been obtained through extensive bribery of government officials. P&ID, on the other hand, denied these allegations, attributing the arbitration loss to "institutional incompetence."

Mariam Hassaballah of Pinsent Masons said: “Nigeria is likely to have taken on lessons learnt as a result of their experience in this London-seated arbitration against P&ID. Interestingly, Nigeria’s new Arbitration and Mediation Act, which came into force earlier this year, includes a unique set of provisions that address the use of a so-called ‘Award Review Tribunal’ (ART).”

She added: “These ARTs have been devised to perform a review function akin to a court of the seat, considering a challenge of appeal to an arbitral award. ARTs have been given a significant amount of discretion as to the procedure it adopts for the resolution of the challenge or appeal. Practitioners worldwide will be interested in seeing the relationship ARTs will have with the Nigerian countries.”