English Court Upholds Challenge to US$11-Billion Arbitration Award for Fraud

The English Court has upheld a challenge to an US$11 billion arbitration award against Nigeria on grounds that it was obtained fraudulently and “only by practising the most severe abuses of the arbitral process”, contrary to public policy under section 68(2)(g) of the Arbitration Act 1996. It is very rare for such challenges to succeed, but this case illustrates the key importance of parties choosing a seat of arbitration with neutral, thorough and robust courts willing to overturn awards when appropriate. In addition, the Court observed that this case provides “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.”

The case, The Federal Republic of Nigeria v Process & Industrial Developments Limited [2023] EWHC 2638 (Comm), is discussed further below.

Background to the Dispute

In January 2010, Nigeria entered into a Gas Supply and Processing Agreement for Accelerated Gas Development (GSPA) with British Virgin Islands company Process and Industrial Developments (P&ID). Nigeria was to supply “wet” gas to P&ID, which would process it for use in power generation.

P&ID commenced arbitration in London against Nigeria, alleging it had repudiated the GSPA by failing to make arrangements for the supply of wet gas. Nigeria’s defence included allegations that P&ID had misrepresented the status of the financing it had in place and the land acquisition that was required under the GSPA.

In an award on liability issued on 17 July 2015, the Tribunal found in favour of P&ID, and on 31 January 2017 ordered Nigeria to pay US$6.6 billion plus interest at a rate of 7%.

Allegations of Bribery, Corruption and Professional Misconduct

In 2018, an investigation by the Nigerian Economic and Financial Crimes Commission (EFCC) found corruption in relation to the GSPA. In particular, Mrs Grace Taiga, a Legal Director at the Ministry of Petroleum Resources of Nigeria, was found to have received bribes from P&ID shortly before and after entry into the GSPA. She gave evidence as a witness of fact for P&ID in the arbitration, and was later found by the English Court to have also received bribes during the arbitral process.

In 2019, Nigeria applied to the English Court to set aside the arbitral awards under sections 67 and 68 of the Arbitration Act 1996 on the grounds that they were procured by fraud and/or other conduct that is contrary to public policy, and that the Tribunal lacked jurisdiction. The time for making such an application had passed, so Nigeria also applied for an extension of time, as well as relief from sanctions to rely on new evidence. In September 2020, the judge in those applications, Sir Ross Cranston, found in Nigeria’s favour, finding that there was a “strong prima facie case” that the awards had been procured by fraud.

Following that decision, it also came to light that during the course of the arbitration, P&ID had been provided with certain of Nigeria’s internal privileged legal documents.

The Present Decision

In a forensically detailed 140 page judgment, Mr Justice Knowles accepted Nigeria’s challenge and concluded that there were three key issues which brought the case within section 68(2)(g) as an irregularity:

1. P&ID providing knowingly false information to the Tribunal. Mr Michael Quinn (one of P&ID’s co-founders) was found to have provided knowingly false information in his evidence in the arbitration. Specifically, he failed to say that bribes had been paid to Mrs Taiga to procure the GSPA and had falsely claimed that all of the project finance was in place.
2. Continued bribery or corrupt payment of Mrs Grace Taiga. Throughout the arbitral proceedings, bribes or corrupt payments were made by P&ID to Mrs Taiga to “keep her ‘on-side’” and to prevent her from sharing information about the corruption which caused Nigeria and P&ID to enter into the GSPA.
3. P&ID’s improper retention of Nigeria’s privileged documents. Throughout the arbitration, P&ID retained more than 40 internal legal documents so as to monitor Nigeria’s position and its understanding.

On the basis of the above and the new evidence provided, Mr Justice Knowles concluded that substantial injustice had been caused to Nigeria. Discovery of the corrupt payments made by P&ID, which he considered to be the “core” of the case, may have altered the Tribunal’s approach to the evidence provided and may have painted a very different context.

He also found that Nigeria had not lost its right to object to the arbitral proceedings under section 73 of the Arbitration Act 1998 since it could not have known about the circumstances of the corrupt practises that later came to light.

The court will decide on a later occasion whether to (i) remit the award to the Tribunal, in whole or in part, for reconsideration, (ii) set the award aside in whole or in part or (iii) declare the award to be of no effect, in whole or in part.

The full judgment is available here.