$9.6bn Judgement Debt: US Appeal Court okays Nigeria’s suit against American firm

Nigeria’s quest to nullify the $10 billion arbitral award, granted to Process and Industrial Development (P&ID) by a United Kingdom Tribunal, received a major boost, last week, as the United States Court of Appeals for the Second Circuit reinstalled a suit filed by the country against VR Advisory Services Ltd. Nigeria, had in 2020, dragged VR Advisory Services Ltd, a Manhattan Asset Manager that acquired a 25 per cent stake in Process and Industrial Developments Ltd in 2018, before United States District Judge, Paul A. Engelmayer, seeking information it hoped would bolster criminal proceedings in Nigeria.

In the suit, Nigeria urged the judge to compel VR Advisory Services Ltd to provide information that would assist in the prosecution of former government officials who allegedly accepted bribes from P&ID in exchange for the contract for a lucrative gas supply and processing agreement, which later led to the massive arbitral award. But in his judgement, Judge Paul A. Engelmayer dismissed the suit on the ground that Nigeria’s petition appeared to be an attempt to avoid United States Department of Justice (DOJ) scrutiny of its request.

The judge held that Nigeria hadn’t given a good reason why it had opted to use Section 1782 of the U.S. Code, which authorises courts to order discovery for certain foreign proceedings, rather than a mutual legal assistance treaty for criminal matters, under which the DOJ would decide whether to approve the request. Dissatisfied with the judgement, Nigeria lodged an appeal at the United States Court of Appeals for the Second Circuit and in a judgement delivered on February 3, 2021, the Appellate Court remanded the case, holding that Judge Engelmayer had improperly analysed whether the country should have gone through its mutual legal assistance treaty with the U.S. before turning to a U.S. foreign discovery statute.

The Second Circuit agreed with Nigeria that the judge had, through his opinion, “effectively erected an impermissible ‘extra-statutory barrier’ to discovery,” according to the decision. “The mutual legal assistance treaty in question expands access for Nigeria and the U.S. to criminal evidence within their borders, and it specifically states that the assistance it provides shall not prevent or restrict” either of the two countries from granting assistance under other agreements or laws. “To be sure, parts of the United States-Nigeria MLAT do impose limits on the assisttance that the Department of Justice or Nigerian Attorney General will provide in response to an MLAT request, according to the decision, which provides as an example a section of the treaty authorizing the relevant authorities to deny certain requests, such as those relating to political offenses.

“But reading those limiting provisions together with Article [19]’s rule of construction, it is clear that they are intended only as internal limits applicable to MLAT requests, not as restrictions on proof-gathering means external to the treaty,” the panel added. The court later noted that it is “hardly surprising” that there would be greater limits on information available under the treaty since it obligates the DOJ to assist the Nigerian authorities in their search for information.

The Appeals Court further held that neither the U.S. Supreme Court nor any Federal Appellate Court had previously considered whether a foreign sovereign that has a mutual legal assistance treaty with the U.S. circumvents that treaty by filing a Section 1782 application in the district court. Moving on to Judge Engelmayer’s conclusion that it would be “improper” for Nigeria to use the materials being sought in a related proceeding in England focusing on the corruption allegations, the panel agreed with Nigeria that this was an error since the English proceedings clearly qualify as a “proceeding in a foreign or international tribunal” within the meaning of Section 1782. The dispute between the parties which has lasted for nearly a decade was borne out of a contract Process and Industrial Developments (P&ID) signed with Nigeria’s Ministry of Petroleum Resources in 2010.

Under the pact, Nigeria agreed to supply the company with natural gas for a gas processing facility that was to be built on Nigerian coastland with the goal of resolving the country’s growing electricity crisis. But the project never materialized, falling apart after the government failed to uphold its end of the bargain. P&ID later took the dispute to Arbitration in 2012, and the Tribunal concluded that Nigeria was liable for breaching the agreement. It consequently awarded the company $6.6 billion in early 2017, an amount that had ballooned to more than $10 billion with interest as of early 2021. However, in recent years, Nigeria has been pushing courts in the U.K. to set aside the award on the basis of recently uncovered evidence of alleged fraud.

The country argued that the facility would not have been built anyway, since P&ID lacked the infrastructure or ability to perform under the deal, and that the contract had been obtained through bribery. Nigeria also accused the company of building its case before the Arbitral Tribunal on fabricated evidence and perjured testimony from its Co- Founder, Michael Quinn, “a notorious music promoter and weapons dealer”. A court in the United Kingdom is expected to hold a trial on these allegations in early 2023. On its part, P&ID had strenuously objected to any allegations of wrongdoing, saying criminal investigations and prosecutions in Nigeria were “part of an illegitimate and abusive campaign designed to evade a politically damaging commercial debt.” (New Telegraph)