The English High Court Sets Aside Multibillion-dollar Arbitral Award Against The Republic Of Nigeria

• Published date: 14 February 2024
• Subject Matter: Litigation, Mediation & Arbitration, Criminal Law, Arbitration & Dispute Resolution, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Fenwick Elliott LLP
• Author: Mr Ben Smith and Tajwinder Atwal

Introduction

In The Federal Republic of Nigeria v Process & Industrial Developments Limited [2023] EWHC 2638 (Comm),¹ the High Court upheld a challenge to arbitral awards that had been obtained by fraud. While the facts of the case were highly unusual, the judgment demonstrates the high standard that challenges under section 68 of the Arbitration Act 1996 must meet in order to succeed.

Section 68 and "serious irregularity" - a reminder

Section 68 of the Arbitration Act 1996 (the "Act") allows challenges to awards on the ground of serious irregularity which has caused, or will cause, substantial injustice to the claimant. Under section 68(2)(g), an application may be upheld where an award is obtained by fraud or an award, or the way in which it is procured, is contrary to public policy.

The facts

In January 2010, a 20-year Gas Supply and Processing Agreement for Accelerated Gas Development (the "GSPA") was signed by the Federal Government of Nigeria ("Nigeria") and Process & Industrial Developments ("P&ID"), a company registered in the British Virgin Islands. Under the terms of the GPSA, Nigeria was to build gas pipelines and supply specified quantities of "wet" gas to P&ID while P&ID agreed to construct the gas processing facilities to process the "wet" gas into "lean" gas and deliver it to Nigeria so it could be used for power generation. The GPSA was governed by Nigerian law and provided for arbitration seated in London.

However, by 2012, neither Nigeria nor P&ID had performed their obligations. The parties sought to renegotiate the GSPA, but P&ID subsequently alleged that Nigeria had repudiated the GSPA and claimed damages in an arbitration.

The tribunal issued awards on jurisdiction, liability and quantum. The final award, dealing with quantum, was issued on 31 January 2017 and ordered Nigeria to pay P&ID US$6.6 billion in damages, which, at the time, was material to Nigeria's federal budget, plus 7% interest.

What happened next?

In February 2016, Nigeria used its Economic and Financial Crimes Commission to investigate P&ID and undertook an investigation into the GSPA in 2018.

The investigations led Nigeria to allege that P&ID had committed a fraud by procuring the GSPA through bribery and, significantly, in its conduct of the arbitration. In light of these allegations, on 5 December 2019, Nigeria applied to the High Court for an extension of time to bring challenges against the awards under 68(2)(g) of the Act.

The High Court found that Nigeria...