➥ CASE SUMMARY OF:
The Federal Republic of Nigeria (FRN) v. Process & Industrial Developments Limited (P&ID) [2023] EWHC 2638 (Comm)
by Branham Chima.
➥ SUBJECT MATTER
Corruption in arbitral panel among parties;
Disclosure of documents;
➥ CASE FACT/HISTORY
On 11 January 2010, in Nigeria, a document was signed between two parties, one a state and one a company. Twenty pages long, not counting a schedule of works that was proposed to be attached, the document bore the title “Gas Supply and Processing Agreement for Accelerated Gas Development” (“the GSPA”). One party to the GSPA was the Federal Government of Nigeria (“Nigeria”). Nigeria did almost nothing to perform the GSPA after signing, but, according to Nigeria, neither did the other party. On the face of things, a dispute followed and then an arbitration to resolve that dispute. The result, according to the decision of an arbitration tribunal in 2017, was that Nigeria owed the other party US$6.6 billion, a sum so vast that it is material to Nigeria’s entire federal budget. With interest at the rate awarded by the Tribunal, the amount now exceeds US$11 billion. The other party to the GSPA was a company registered in the British Virgin Islands. Its name was Process & Industrial Developments Limited (“P&ID”). It was one of many companies co-founded by two Irish businessmen, Mr Michael Quinn and Mr Brendan Cahill. The GSPA has its place part of the way along a timeline that spans two decades. Nigeria had a chronic shortage of electric power. Yet gas from the recovery of oil in Nigeria was being flared rather than used to generate electricity, causing harmful pollution in the process. The GSPA came as Nigeria embarked on a policy named the Accelerated Gas Development Project to tackle this. As summarised by the parties, under the GSPA Nigeria was to supply specified quantities of “wet” gas to Gas Processing Facilities (GPFs) constructed by P&ID. P&ID was to strip the wet gas into “lean” gas, to be delivered to Nigeria to be used for power generation. The remaining natural gas liquids were to be retained by P&ID for onward sale either domestically or by export. The stated duration of the GSPA was 20 years (or more, on one scenario). It is common ground that in the event Nigeria did not supply any wet gas to P&ID, and nor did P&ID construct any Gas Processing Facilities. In the third year of the GSPA, the arbitration (“the Arbitration”) was commenced by P&ID against Nigeria, relying on an arbitration clause in the GSPA. The arbitral tribunal (“the Tribunal”) was of the greatest experience and standing. Sir Anthony Evans was nominated to the Tribunal by P&ID. Chief Bayo Ojo SAN was nominated by Nigeria. Lord Hoffmann was appointed Chairman on 29 January 2013. After rejecting a challenge to its jurisdiction, the Tribunal in due course found, by a part final award dated 17 July 2015 (“the Award on Liability”), that Nigeria had committed a repudiatory breach of the GSPA, that the GSPA was terminated on P&ID accepting that repudiatory breach, and that Nigeria was liable in damages. The Tribunal published a further award dated 31 January 2017 dealing with quantum (“the Final Award”). Chief Ojo SAN published a dissenting opinion. The Final Award required Nigeria to pay P&ID US$ 6.6 billion. Interest was awarded at the rate of 7%. Before this Court, the Commercial Court in London, Nigeria challenges the Award on Liability and the Final Award (“the Awards”), and an award on jurisdiction. It makes allegations of bribery, corruption and perjury. The allegations extend to the GSPA, but they then extend further across the arbitral process as a whole from arbitration agreement to Final Award.
➥ ISSUE(S) & RESOLUTION(S)
[APPEAL SUCCEEDED]
RESOLUTION:
A. BRIBERY OF MRS. GRACE TAIGA BY P&ID WAS ESTABLISHED
[‘166. It will be recalled that on 24 January 2008 P&ID wrote to NNPC to apply on behalf of Tita-Kuru for that project to be included in Nigeria’s Gas Master Plan. The Investors Road Show for the Gas Master Plan was on 5 May 2008. 167. A week after the Investors Road Show, on or around 12 May 2008 Mrs Grace Taiga received EUR1,372.00 by Western Union transfer. On 28 October 2008 a payment of £3,500 was made to her, described as “Grace Taiga – PR”. Her daughter Vera received US$5,856.87 on 30 October 2008 and US$6,995.91 on 1 December 2008, each from Marshpearl. On 19 January 2009 and 12 February 2009 Vera Taiga received the further sums of US$5,614.10, US$1,500 and US$751.72 from Marshpearl. 168. Then shortly before the GSPA was entered into, Mr Cahill signed a payment instruction dated 29 December 2009 to Bank of Cyprus on Marshpearl letterhead for a transfer of US$5,000 to Ms Vera Taiga. This was described as a “commission payment” on the payment instruction. It is logged in the name of “Grace Taiga” in the associated Excel spreadsheet emailed from Mr Smyth to Mr Cahill on 1 January 2010. A later email from Mr Smyth to Mr Cahill of 2 September 2019 had attached a pdf schedule “Taiga G – Sept 2019” showing a number of payments including from among others Marshpearl, Kristholm and Hobson Industries, against the name “Grace Taiga” with US$5,000 on 28 December 2009. Some of the payments were marked with the narrative “Eye Op.” but not this one. The sum (slightly reduced, no doubt allowing for bank charges) is also shown as a payment to Ms Vera Taiga on the last page of a 319 page WhatsApp/SMS thread between Ms Aisha Taiga and Mr Cahill from 6 September 2019 to 29 January 2021. 169. Shortly after the GSPA was entered into, on 29 March 2010 Ms Vera Taiga was paid £5,000 by Hobson Industries. The payment instruction was again signed by Mr Cahill. The pdf schedule “Taiga G – Sept 2019” showed this payment against the name “Grace Taiga” and marked with the narrative “Gas Contract”. 170. The timing of the payments is highly material, just before and just after the entry into the GSPA. The fact that, within the ICIL Group, they came from accounts of Marshpearl and Hobson Industries and not P&ID is neither here nor there; ICIL Group was not run rigorously between companies. In authorising the payments Mr Cahill was, I find, acting for P&ID to incentivise and reward Ms Taiga in connection with the entry of the GSPA. They were deliberately kept secret from Nigeria. I am quite satisfied that Nigeria is correct in its allegation that these payments in December 2009 and March 2010 were bribes paid on behalf of P&ID to Mrs Grace Taiga’s benefit in connection with the entry into the GSPA. I reject as untrue the evidence of Mrs Grace Taiga and Mr Cahill, in particular, to the contrary. 171. By some standards the sums received were not large in absolute terms, but they were in context: US$5,000 was, on her account, an amount equal to the annual salary of Mrs Grace Taiga before allowance and entitlements. The payments I have described were not disclosed to Nigeria, her employer, by Mrs Grace Taiga, or by P&ID and ICIL Group, and this was deliberate … 177. I am satisfied that the payment in March 2010 was made, and kept secret from Nigeria, in recognition on the part of P&ID of Mrs Grace Taiga’s assistance to P&ID in getting the GSPA with Nigeria in the terms achieved. It postdates the GSPA but I consider it was to help embed it. In relation to this payment and the December 2009 payment I find that P&ID, and Mr Michael Quinn and Mr Cahill individually, and Mrs Grace Taiga were dishonest and their motivation was corrupt, applying the standards of ordinary decent people. It is not necessary to show they appreciated that by those standards they were being dishonest, but in my view they did.’]
B. PROOF OF CORRUPT PRACTICE BY THE POSSESSION OF NIGERIA DOCUMENTS WHICH OUGHT NOT TO BE IN P&ID’S POSSESSION
[‘212. Nigeria alleges: “P&ID has offered no sensible explanation for why these documents were leaked by [Nigeria’s] lawyers and has presented this Court with a conspiracy of silence. The obvious and correct inference is that they were obtained through corruption of [Nigeria’s] legal advisers carried out by P&ID and Mr Adebayo. … Mr Murray all but admitted in his oral evidence that [they] were procured by corruption, and no P&ID witness proffered an otherwise honest explanation”. 213. As with many features of this matter the position was more complex. I accept that on limited occasions Nigeria’s Internal Legal Documents were individually made available by Nigeria to P&ID as a means of showing P&ID that Nigeria really was doing something or was serious in what it was doing. But on other occasions that was not the reason at all. No-one who saw the document in question for P&ID could have mistaken the latter type of document for the former type. 214. Mr Andrew, Mr Burke KC and Mr Cahill were among those who received Nigeria’s Internal Legal Documents. As legal professionals Mr Andrew and Mr Burke KC appreciated that these at least included documents that were privileged. They did not know how the documents had come into P&ID’s hands. Mr Burke KC gave oral evidence from the witness box that he had conducted an enquiry into where and how; this evidence did not appear in his written evidence and was false. I reject as untrue Mr Andrew’s oral evidence that the documents were shared as part of settlement discussions. 215. Mr Andrew and Mr Burke KC knew that P&ID and they were not entitled to see these documents. Their decision not to put a stop to it, at least by informing Nigeria or immediately returning the documents they knew were received, was indefensible. The reason Mr Andrew and Mr Burke KC behaved in this way was because of the money they hoped to make. Mr Burke KC told me in his evidence that: “[t]he money is a complete irrelevance here … [r]eputation and career are far more important to me than this notional money”. But that is now, and was not then. Even Mr Cahill and Mr Murray appreciated that P&ID should not have the documents. But their attitude was that this was the sort of thing you took advantage of if it happened. Mr Murray accepted that the receipt and use of Nigeria’s Internal Legal Documents was “less than honest” … 217. When I refer in this judgment to P&ID retaining Nigeria’s Internal Legal Documents I mean its choice, rather than returning the documents immediately and unread, to read them and to take the benefit of the information they conveyed. P&ID’s improper retention of Nigeria’s Internal Legal Documents, received at various points during the Arbitration, enabled P&ID to track Nigeria’s internal consideration of merits, strategy and settlement during the Arbitration. P&ID’s improper retention of Nigeria’s Internal Legal Documents also allowed it to monitor whether Nigeria had become aware of the fact that the Tribunal and Nigeria were being deceived.’]
C. MRS. GRACE TAIGA AND THE P&ID COUNSEL ACTED DISHONEST AND CORRUPT
[‘401. But so also, and again deliberately concealed from the Tribunal and Nigeria, the payments to Mrs Grace Taiga and members of her family continued through the Arbitration at the instigation of P&ID. 402. On 6 July 2015, as P&ID awaited the Award on Liability from the Tribunal, Mrs Grace Taiga sent a WhatsApp message to Mr Cahill stating “I keep remembering Papa telling me Grace u will be so wealthy u will travel all over d world as much as you wish! Hmmm!”. Just before the Award on Liability, on 14 July 2015 a deposit was received into Mrs Grace Taiga’s account of NGN 100,000 (approx. US$400) under the reference “Adebayo” (line 1565). 403. On 14 August 2015 a cash deposit was received into Mrs Grace Taiga’s account of NGN 20,000 (approx. US$100) under the reference “Adetunji Adebayo”. Mr Cahill arranged a payment of US$1,000 on 14 September 2015 by Eastwise into Mrs Grace Taiga’s account: the SWIFT payment instruction refers to “expenses”. On 30 September 2015 a deposit of NGN 100,000 (approx. US$400) was made into Mrs Grace Taiga’s account under the reference “Adebayo Adetunji” (line 1622). Mr Cahill arranged a payment of US$3,000 to Ms Vera Taiga on 14 June 2016 following a request from Mrs Grace Taiga referring to her daughter’s health. 404. The continued payments directed through Arbitration period were, in my judgment, to help to suppress from the Tribunal the truth that Mrs Grace Taiga had been bribed when the GSPA was entered into. They were “to keep her ‘on-side’, and to buy her silence about the earlier bribery” and to suppress “the fact that the contract had been passed through with no [proper] scrutiny”; “to keep their secrets” as Mr Howard KC put it. I reject P&ID’s case that it did not make any payments during the Arbitration with the intention of “suppressing” anything, and that the payments were for legitimate reasons. 405. I find that P&ID, and Mr Cahill and Mrs Grace Taiga individually, were dishonest and their motivation was corrupt.’
‘After the Final Award 406. Payments to or to those connected to Mrs Grace Taiga have continued after the Award and include the following. On 18 December 2017 Mr Cahill and Mr Smyth arranged a payment of US$10,000 by Swift from ICIL Ireland into her account. On 27 June 2018 another payment of US$10,000 was made in the same way, followed in March 2019 by two payments of EUR 500. All were deliberately concealed from Nigeria.’]
D. THE PROCEEDING IS RIDDLED WITH CORRUPTION ON P&ID’s PART THEREBY DEFEATING THE PURPOSE OF THE ARBITRATION ITSELF
[‘476. The objection under consideration in section 68(2)(g) [Arbitration Act 1996], that of “the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy”, is of fundamental character to the arbitration process because it goes to the integrity of that process. No policy of arbitration law calls for section 68(2)(g) to be given other than its plain meaning. An award obtained by fraud or contrary to public policy (or procured in a way that was contrary to public policy) and which has caused or will cause substantial injustice is not what the parties agreed to when they agreed on arbitration. To support it in the name of supporting arbitration as a process achieves the opposite. Unless the right to object is lost for reasons of finality (the business of section 73, below), and subject to the procedural restrictions in section 70(2) and (3), there is no sanctuary. This architecture meets the requirements of justice.’
‘509. In the present case the core is the bribery of Mrs Grace Taiga when the GSPA was being made. It is the fact of that bribery that Mr Michael Quinn falsely concealed by the words of his witness statement, and that the continued bribery or corrupt payments sought to suppress. It is that that P&ID was monitoring (among other things) by its retention of the Nigeria’s Internal Legal Documents. 510. In its written closing P&ID argues that “… any perjury that took place did not cause any substantial injustice within the meaning of s. 68 as it did not bring about the Awards (or any of them)”. I respectfully disagree. The Awards were the result of the Arbitration that happened. There is no question to my mind that the Arbitration would have been completely different, and in ways strongly favourable to Nigeria, had the fact of bribery of Mrs Grace Taiga when the GSPA was being made been before the Tribunal. It would have brought in the issue whether the GSPA was procured by fraud, and as a result voidable. Discovery of the concealment would have completely altered the Tribunal’s approach to the rest of Mr Michael Quinn’s evidence. 511. I have no hesitation in concluding that Nigeria suffered substantial injustice within the meaning of the section. And that is even before taking into account what P&ID did with Nigeria’s Internal Legal Documents.’
‘515. Section 68 asks not only whether the award was obtained by fraud but whether the way in which the award was procured was contrary to public policy. The focus here is on the process by which an award was achieved. Approached with the extreme caution mentioned by Moore-Bick J in Cuflet Chartering (above), the language of the section in my judgment applies where (as here) Nigeria was comprehensively deprived of its right to legal professional privilege throughout the process. 516. I reach these views of the matter without reluctance. P&ID has the Awards only after and by practising the most severe abuses of the arbitral process. As a result Nigeria had a “right to object” under section 68(2)(g) of the Arbitration Act 1996. True, there were other causes of the Awards, including incompetence and neglect throughout the Arbitration on the part of Nigeria (acting through a number of individuals). But the presence of these causes does not detract from the effects of P&ID’s abusive conduct. If this was a fight it was not a fair one, and could not lead to a just result.’
‘573. Under section 73, Nigeria has shown me that, at the time it took part or continued to take part in the Arbitration, it did not know and could not with reasonable diligence have discovered the grounds for its objection under section 68(2)(g). Accordingly it did not lose its “right to object” under section 68(2)(g).’]
.
.
.
✓ DECISION:
‘574. In the circumstances and for the reasons I have sought to describe and explain, Nigeria succeeds on its challenge under section 68 [Arbitration Act 1996]. I have not accepted all of Nigeria’s allegations. But the Awards were obtained by fraud and the Awards were and the way in which they were procured was contrary to public policy. 575. What happened in this case is very serious indeed, and it is important that section 68 has been available to maintain the rule of law. 575. What happened in this case is very serious indeed, and it is important that section 68 has been available to maintain the rule of law.’
➥ FURTHER DICTA:
⦿ ASCERTAINING DISHONESTY
I have approached dishonesty as guided by Lord Hughes in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67, [2018] AC 391, at [74]: “74. … When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.” — R. Knowles CBE.
⦿ P&ID DID NOT ENTER THE CONTRACT TO JUST GET A SETTLEMENT VIA ARBITRATION, WITH THE INTENTION OF NOT PERFORMING
- Here, I am satisfied P&ID did intend to perform the GSPA when it entered into it, and that there were means by which it could have done so. Nigeria has characterised the GSPA as a sham and contended that P&ID as a BVI-registered company with no obvious assets, no relevant experience and few employees, had no genuine intention of performing the GSPA, and would never have been able to do so. However P&ID did not have to contemplate performing the GSPA itself with its assets, experience and employees. This is not, as it represented, because it could simply use the work on Project Alpha to perform the GSPA. It is rather because ICIL Group had shown in the past that they could contract in. 491. Whilst P&ID was prepared to bribe in the course of its business, I do not accept it was of the sophistication to conceive at the contract stage a plan to extract large sums of money from Nigeria by means of an arbitration or a corrupt settlement. Consistently, P&ID did not use the GSPA to move directly to arbitration at the first available opportunity. I have found it did not (as alleged by Nigeria) corrupt Mr Shasore SAN. And it appointed, in Sir Anthony Evans, an arbitrator of unquestioned experience, expertise and independence. 492. It is in these circumstances that I have reached the conclusion that the present is not a case in which, when the parties entered into the GSPA, P&ID’s intention was not to perform it but simply to use it as a device to get an award or settlement. However that is not the end of Nigeria’s section 68(2)(g) challenge. — R. Knowles CBE.
⦿ FROM THE FACTS AND CIRCUMSTANCES OF THIS CASE IT SHOWS THAT ARBITRATION MAY BE LESS OPEN TO FRAUD
- Regardless of my decision, I hope the facts and circumstances of this case may provoke debate and reflection among the arbitration community, and also among state users of arbitration, and among other courts with responsibility to supervise or oversee arbitration. The facts and circumstances of this case, which are remarkable but very real, provide an opportunity to consider whether the arbitration process, which is of outstanding importance and value in the world, needs further attention where the value involved is so large and where a state is involved. 583. The risk is that arbitration as a process becomes less reliable, less able to find difficult but important new legal ground, and more vulnerable to fraud. The present case shows that having (as here) a tribunal of the greatest experience and expertise is not enough. Without reflection, then a case such as the present could happen again, and not reach the court. — R. Knowles CBE.
⦿ DRAFTING MAJOR COMMERCIAL CONTRACTS INVOLVING A STATE
- It was a complete imbalance in the contributions of the parties that enabled the GSPA to be in the form it was. Many reading this judgment will recognise that, although in the present case bribery and corruption were behind that imbalance, it happens in other cases without bribery and corruption but simply where experience, expertise or resources are grossly unequal. This underlines the importance of professional standards and ethics in the work of contract drafting, including in the approach to other parties to the proposed contract. It is why some contributions of pro bono work by leading law firms to support some states challenged for resources (this is not to say, one way or the other, that Nigeria is one of those) is so valuable, in the interests of their, often vulnerable, people. In the present case there were other contracts too, with different counterparties. Their terms and circumstances are not identical, but the overall risk could have been a multiple of the US$11 billion now involved in the present case. — R. Knowles CBE.
⦿ IMPORTANCE OF PUTTING GOOD REPRESENTATION IN ARBITRAL PROCEEDINGS BY PARTIES
- Notwithstanding Nigeria’s allegations, I have not found Nigeria’s lawyers in the Arbitration to be corrupt. But the case has shown examples where legal representatives did not do their work to the standard needed, where experts failed to do their work, and where politicians and civil servants failed to ensure that Nigeria as a state participated properly in the Arbitration. The result was that the Tribunal did not have the assistance that it was entitled to expect, and which makes the arbitration process work. And Nigeria did not in the event properly consider, select and attempt admittedly difficult legal and factual arguments that the circumstances likely required. Even without the dishonest behaviour of P&ID, Nigeria was compromised. 588. But what is an arbitral tribunal to do? The Tribunal in the present case allowed time where it felt it could and applied pressure where it felt it should. Perhaps some encouragement to better engagement can be seen as well. Yet there was not a fair fight. And the Tribunal took a very traditional approach. But was the Tribunal stuck with what parties did or did not appear to bring forward? Could and should the Tribunal have been more direct and interventionist when it was so clear throughout the Arbitration that Nigeria’s lawyers were not getting instructions, or when at the quantum hearing Nigeria’s then Leading Counsel, Chief Ayorinde, was failing to put necessary points to experts to test their opinion and Nigeria’s own experts (for whatever reason) had not done the work required? Should the Tribunal have taken the initiative to encourage exploration of new bounds of contract law and the law of damages that may today be required where major long term contracts are involved? — R. Knowles CBE.
⦿ IMPORTANCE OF COURT IN RESOLVING DISPUTES AS AGAINST ARBITRATION
- The privacy of arbitration meant that there was no public or press scrutiny of what was going on and what was not being done. When courts are concerned it is often said that the “open court principle” helps keep judges up to the mark. But it also allows scrutiny of the process as a whole, and what the lawyers and other professionals are doing, and (where a state is involved) what the state is doing to address a dispute on behalf of its people. An open process allows the chance for the public and press to call out what is not right.
- And Lord Wolfson KC will forgive my quoting his submission for his client in oral closing argument: “Section 68 is not there to give you a remedy if you instruct an honest lawyer who makes a mess of it or doesn’t take an available point. That is just tough. You have made your arbitration bed and you lie on it”. Blunt and correct. But, unless accompanied by public visibility or greater scrutiny by arbitrators, how suitable is the process in a case such as this where what is at stake is public money amounting to a material percentage of a state’s GDP or budget? Is greater visibility in arbitrations involving a state or state owned entities part of the answer?
— R. Knowles CBE.
➥ PARTIES:
⦿ APPELLANT
The Federal Republic of Nigeria
⦿ RESPONDENT
Process & Industrial Developments Limited
➥ LEAD JUDGEMENT DELIVERED BY:
Hon. Mr Justice Robin Knowles CBE
➥ APPEARANCES
⦿ FOR THE APPELLANT
Mr Howard KC, Mr Riches KC, Mr Ford, Mr Pascoe and Mr Mellab.
⦿ FOR THE RESPONDENT
Lord Wolfson KC, Mr Milner KC, Mr Hoskins and Mr Evans.
➥ MISCELLANEOUS POINTS
➥ REFERENCED (LEGISLATION)
➥ REFERENCED (CASE)
⦿ CONSIDERATIONS OF PUBLIC POLICY IN ARBITRAL PROCEEDINGS
As to public policy, in Cuflet Chartering v. Carousel Shipping Co Ltd [2001] 1 Lloyd’s Re 707 Moore-Bick J (as he then was) said: “Considerations of public policy can never be exhaustively defined, but they should be approached with extreme caution … It has to be shown that there is some illegality or that the enforcement of the award would be clearly injurious to the public good or, possibly, that enforcement would be wholly offensive to the ordinary reasonable and fully informed member of the public on whose behalf the powers of the state are exercised.”
➥ REFERENCED (OTHERS)