A judgment by London’s High Court has been hailed by President Tinubu as a victory for Africa over economic malpractice, but it also underlines the need for governmental transparency and due diligence in making contracts.
AFRICAN BUSINESS
In late October London’s High Court overturned an arbitration decision which had seen Nigeria liable for $11bn in compensation to a firm which the government insisted had acted fraudulently.
The original case had been brought to London’s arbitration courts by Process & Industrial Developments (P&ID), a company registered in the British Virgin Islands that in 2010 signed an agreement with Nigeria’s petroleum ministry to develop a processing plant in Calabar, Cross River State.
When Nigeria failed to build a pipeline that would have supplied the plant, the firm alleged breach of contract and began arbitration proceedings in London. That led to a $6.6bn judgment in the company’s favour, which later swelled to $11bn as it accrued interest.
But on 23 October High Court judge Justice Robin Knowles reversed the decision. He concluded that P&ID had paid bribes to a Nigerian oil ministry official in connection with the contract, and had failed to disclose these when it commenced arbitration.
“I have not accepted all of Nigeria’s allegations,” Knowles ruled. But the contracts “were obtained by fraud… and the way in which they were procured was contrary to public policy,” he said in his judgment.
The appeal victory has prompted huge relief in Nigeria, whose people can ill-afford to make an $11bn payout – equivalent to roughly a third of the country’s foreign exchange reserves. Many will see the victory as a huge blow struck for a continent whose tangled financial affairs are often dragged through foreign courts.
In a strong statement, Nigerian President Bola Tinubu was quick to seize on the wider implications of the judgment.
“This landmark judgment proves conclusively that nation states will no longer be held hostage by economic conspiracies between private firms and solitarily corrupt officials who conspire to extort and indebt the very nations they swear to defend and protect. Today’s victory is not for Nigeria alone,” the Presidential statement said. “It is a victory for our long-exploited continent and for the developing world at large, which has for too long been on the receiving end of unjust economic malpractice and overt exploitation.”
Spotlight on Corruption, a non-governmental organisation that “shines a light on the UK’s role in corruption at home and abroad,” argued that the “economic prospects of an entire country have been held hostage by a tainted arbitral award for a gas project that was built on bribes and lies.”
Justice Knowles suggested that London’s arbitration system would have lessons to learn from the affair.
Wider lessons
But there are wider lessons that can already be drawn. For too long, Nigeria’s petroleum industry has been a wild-west defined by opaque decision making, cowboy operators and outright corruption. Over decades, successive governments and private interests have conspired to defraud the Nigerian public of billions of dollars of much-needed revenues while plunging parts of the country into environmental crisis.
Tinubu is right to say that Nigeria and Africa have for too long been the victims of organised extortion. But if there is an enduring lesson that Nigeria can learn from this expensive debacle…
