The United States government of President Donald Trump will not intervene in any effort to ensure compliance after a court in Washington DC domesticated a September 2017 decision by the London court of arbitration that sentenced the Nigerian government to pay $9 billion to Process & Industrial Development (P&ID); a gas firm established in the British Virgin Islands, Huhuonline.com has learnt from a source at the US Department of Justice, who explained that: “a foreign judgment recognized or upheld by a US court also known as a domesticated judgment has the same authority as a judgment first issued in the United States.“
Nigeria has invoked its immunity as a sovereign state to block the enforcement of the ruling by the court in Washington. The Justice Department source, who elected anonymity, disclosed to Huhuonline.com that the Nigerian government filed a motion with the United States Court of Appeals on April 1, asking for its “sovereign immunity” to be recognized under the American Foreign Sovereign Immunities Act, which prevents actions against foreign states.
But the Justice Department source dismissed the action by the Nigerian government as a public shadow-boxing gimmick to buy time, saying Nigeria will eventually pay the $9 billion fine because even if the US Appeal Court decides to stay enforcement proceeding pending the appeal, pending appeal proceedings does not necessarily mean that a judgment is unenforceable where rendered; should the client decide to proceed with liens and seizure of Nigerian assets in the US.
The dispute dates to 2010 when Process & Industrial Development (P&ID); headed by an Irishman, Michael Quinn signed contracts with the Nigerian government for the transformation of natural gas on the outskirts of Calabar, in the south, to supply the country’s power stations. The Nigerian government’s failure to deliver 150 million cubic feet of gas per day precipitated the collapse of the project; prompting P&ID to seek arbitration in London, demanding that Nigeria pays the equivalent of what the firm would have received over the 20 years covered by the contract, namely $9 billion.
After requesting, in vain, for a London court to cancel the arbitration, in 2016 the Nigerian government turned around and filed a lawsuit against (P&ID in a Lagos High Court, which ruled in its favor. Angered by what P&ID considered as a miscarriage of justice, the firm, in 2018, filed to have the arbitration ruling upheld by the Washington court, which in October last year, asked the Nigerian government to answer the accusations held against it; before proceeding to uphold the London court verdict.
The Buhari administration has appealed the Washington DC court’s decision, which for P&ID was purely a move to buy time. The firm claims it has served notice of the recognition and enforcement proceeding on Nigeria through the embassy in Washington DC. The Nigerian government reacted by contesting the proceeding and filed a motion of appeal within the statutory 30 days to do so.
The Justice Department source however, explained that, although there are no international treaties governing US court recognition and enforcement of non-US court judgments, the US is party to multilateral conventions that apply to enforcement of foreign arbitration awards; and many US States, including the District of Columbia have adopted the Uniform Foreign Money Judgments Recognition Act (UFMJRA), drafted by the National Conference on Uniform State Laws. The UFMJRA provides a standard framework for courts to recognize and enforce non-US money judgments.
Huhuonline.com understands that a foreign judgment granting recovery of money can only be recognized in the US if the judgment is final, conclusive and enforceable where rendered. All three UFMIRA criteria are applicable in the present case against Nigeria. Even as the Nigerian economy is struggling to maintain stability after managing a recovery from one of the worst recessions in its history, Nigeria appears to be sitting on a tinderbox that could wipe off a sizeable chunk of its foreign reserves, derail the 2019 budget and plunge the country back into an economic recession.
It is worth-recalling that on March 20, 2013, a three-man arbitration panel, constituted under the rules of the 1996 Arbitration Act (England and Wales) and the 2004 Nigerian Arbitration and Conciliation Act, awarded $6.6 billion to P&ID Ltd. That fine has since attracted additional $2.3billion in accumulated interest at 7% per year for the over six years it remained unsettled. The amount due for enforcement today is about $9 billion.
Although the fine emanated from the contractual actions of three previous administrations – the Olusegun Obasanjo, Umaru Yar’Adua and Goodluck Jonathan – it does appear efforts by the Buhari administration bot to pay the fine have failed, leaving it with no option than to honor the judgment obligations. Neither the junior Oil Minister, Ibe Kachikwu, nor the Minister of Justice and Attorney-General of the Federation, Abubakar Malami, was available for comment as both men did return calls and text messages to their phones.
The potential impact of the $9 billion fine is further compounded by another $21.24 million fine in favor of Enron Nigeria Power Holding (ENPH) Ltd, which signed an agreement with Lagos State government for the construction of power projects in the state. The Nigerian government guaranteed the agreement and has now been held liable after Lagos state breached it. The Enron award, which has been affirmed by an Appeal Court in the United States, has been awaiting settlement since April 26, 2017.
The enforcement of these fines poses a threat not only to Nigeria’s assets abroad; they obviously would cause a significant drain of Nigeria’s foreign exchange reserves, which stood at US$43. 230 billion, even as the IMF has expressed anxiety over Nigeria’s ability to repay its rising foreign debts
A senior official of the bank who commented on the issue on condition of anonymity said any unforeseen development at the moment that might have a direct consequence on the country’s foreign reserves would spell doom for the economy.
“I cannot imagine what would happen,” the official said. “All I can say is that the country would not be able to survive it. Remember, it did not take yesterday to build the level of reserves we have today. So, pulling out a staggering $11.3 billion in one fell swoop would be too much to bear.”
An investment analyst, Xavier Austin, said such awards could pose damaging consequences to the country’s economy at this time, particularly as the economy is still standing on wobbly legs barely a year after exiting recession.
The National Bureau of Statistics (NBS) said in its latest Nigerian Gross Domestic Product (GDP) Report that the economy recorded a -0.16 percent marginal decline in the first quarter of 2018 after attaining about 2.11 percent growth in the fourth quarter of 2017.
Apart from the immediate impact on the country’s economy, Mr Austin said enforcement of the awards against Nigeria could whittle down the country’s rating and chances of securing lending abroad.
The Director General, Debt Management Office (DMO), Patience Oniha, gave the country’s public debt profile as N21.7 trillion as at March 2018.
