Bloomberg has confirmed The Nigerian Xpress report published on Monday, hinting that the $9.6 billion judgement obtained in a London court by Process and Industrial Developments Limited (P&ID), a British engineering firm founded in 2006 by two Irishmen, Michael Quinn and Cahill may be a scam.
The Nigerian Xpress report entitled, ’King of rackets: P&ID and how Nigeria is ripped off through judgment debt scams’ detailed how the P&ID saga fit into similar ventures in which top civil servants, elected or appointed political leaders and their dodgy contractor-collaborators commit Nigeria to shady contracts, which are not executed but the country ends up with liabilities from court judgements.
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The Bloomberg report revealed that the brain behind the P&ID contract, Michael Quinn, now deceased, had a history of involvement in questionable contracts and had previously obtained a similar judgement debt victory against the Nigerian government, which was not paid.
The Bloomberg Businessweek report, ’Is One of the World’s Biggest Lawsuits Built on a Sham?’ is below:
THE NIGERIAN XPRESS REPORT PUBLISHED ON MONDAY, SEPTEMBER 2, 2019 IS REPRODUCED BELOW:
King of rackets: P&ID and how Nigeria is ripped off through judgment debt scams
The P&ID contract in which Nigeria has incurred a liability of $9.6 billion fits into similar venture in which top civil servants, elected or appointed political leaders and their collaborators in the private sector commit Nigeria to, for the of creaming off the country’s treasury, Akani Alaka writes.
When as Minister of Finance and Coordination Minister for the Economy, Dr. Ngozi Okonjo-Iweala presented the 2012 budget to the public at an event organised by the Budget Office of the Federation, one of the concerns that came up was the allocation for judgment payment in the appropriation document. Some of the guests at the event had queried the allocation of N12 billion included in the budget for payment of judgment debts.
The concern, as was borne out of the observation then, was that some individuals, in connivance with officials in ministries, departments and agencies, MDAs of the Federal Government had built an industry around recovery of judgment debts against the government. The ‘scam’, which also involved a group of lawyers, entailed members of the clique and officials of government, searching through court documents and files for requests for payment of judgment debts.
This was with the aide of collaborators in the Federal Ministry of Justice. Once they got hold of any such document, members of the clique then searched out for the ‘owner’ of the debt with the offer that they could help him to recover what he is being owed b y the government. Of course, this was at a fee, usually 50 per cent of the judgment sum.
Members of the clique also usually went round Abuja, scouting for high profile individuals with judgments against the government, involving payment and offering them their services. The circle of the ‘scam’ was completed by officials of the Federal Ministry of Finance, who always ensured that there were allocations in the budget to pay the judgment debts.
The making of debt judgment scam
When she was confronted with the question, Okonjo-Iweala confirmed that government was also worried about the increasing request for payment of judgment debts by MDAs. She noted that aside from the N12 billion included in that year’s budget, government was working with the Ministry of Justice to see how the outstanding of about N80 billion could be settled. “As we speak, there is an outstanding of about N80 billion of the judgment debt that has not been paid, outside the N12 billion included in this year’s budget, which is not even enough to settle the issue. At the moment, we are working with the Attorney General, who says there are many suits, pending against government that are not settled, starting from past administrations,” the minister had said.
She also recognised that the so-called judgment debts had become a scam in which some had positioned themselves for the rip-off of the country.
“Judgment debts seem to be mounting and mounting. The way to tackle it is that government is not going to be making provision for judgment debts in the annual budget again so that people do not think that there is a pot of money somewhere that they can tap,” she had recommended.
“Henceforth, if there is an issue in any sector, then that sector would have to pay for the judgment debt out of their budgets, because any time government starts provisioning for anything in Nigeria, all of a sudden an industry would begin to build up around it. If government makes people to be responsible for judgment debts in their own sectors, they would have to deal with it. We are saying it now to everybody, after N12 billion, there is nothing more for judgment debts,” the minister added.
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“We have to make it clear now that there is no pot of money, waiting to be tapped. If we have only N12 billion for judgment debts in this year’s budget, how are we going to pay the outstanding N80 billion in judgment debt? We are all very clever in this country, and government must not do anything that helps towards undue cleverness in this regard.”
However, despite her avowal, the sum of N7 billion was included in the 2013 budget for payment of judgment debt.
The former minister had in her book, “Fighting Corruption is Dangerous: The Story Behind the Headlines,” released in 2018, noted that one of the opposition she faced while in government was because she refused to pay some of the doubtful judgment debts.
In the book, the minister recalled a meeting former President Goodluck Jonathan asked her to attend with a group of businessmen from Abu Dhabi, who assured Nigeria of $2 billion in loans in form of an investment in ship building.
From Gas Project To Arbitration
Okonjo-Iweala revealed that she blocked the deal brought by investors that were introduced to the president by a special adviser because it looked like an attempt to replicate a 2013 incident that had led to Mozambique being saddled with hundreds of millions of dollars of debt in return for a redundant tuna fishing fleet.
Yet, the assertion by the former minister in the book reflected how top aides of government officials and top civil servants saddled the country with dubious debts by entering into contracts with dodgy businessmen.
This was especially the case with ongoing controversies over the agreement signed in January 2010 with Process and Industrial Developments Ltd. (P&ID) a British engineering firm founded in 2006 by two Irishmen, Michael Quinn and Cahill.
By the agreement signed with the firm, allegedly on behalf of Nigeria by the late Rilwanu Lukman, the then minister of petroleum resources, P&ID was to build and operate an accelerated gas development project at Adiabo in Odukpani Local Government Area (LGA) of Cross River State. Under the agreement, the Federal Government was mandated to supply natural gas from Addax Petroleum-operated Oil Mining Leases (OMLs) 123 and 67 for P&ID to be refined into fuel suitable for power generation by the British firm.
The volume of gas to be supplied by Nigeria to the company was stipulated at about 150 million cubic feet of gas per day. However, the volume of gas was expected to be ramped up to about 400 million cubic feet per day during the 20-year period of the agreement.
P&ID claimed that the project never took off, though it entered into negotiations with the Cross River State Government for allocation of land for the project soon after the agreement. The company claimed the Federal Government frustrated the project with its failure to construct the pipeline system that would convey gas to the proposed plant.
With the failure of the FG, the company said the construction of the gas project was frustrated and hence, it was deprived of potential benefits expected from 20 years’ worth of gas supplies.
The British firm had on July 2012, served the Federal Government a request for arbitration. As contained in the agreement, the arbitrators were the parties to be nominated by the company, the other by the Ministry of Petroleum Resources while the two of them would agree on the third arbiter. Nigeria was represented on the arbitration, which held in London by the former Attorney-General of the Federation and Minister of Justice, Chief Bayo Ojo (SAN), during the arbitration.
At the end of the process, the tribunal agreed that Nigeria was liable for repudiation of the agreement with P&ID.
Following the verdict by the tribunal, P&ID and Nigeria had entered into negotiations, which resulted in the British company’s acceptance of $850 million for settlement of the dispute.
It was learnt that though President Goodluck Jonathan, who then had barely three weeks to the end of his tenure considered the settlement sum too high, he was prevailed upon to accept the agreement by Ojo. Nevertheless, Jonathan preferred to leave the problem for the then about-to-be-sworn-in President Muhammadu Buhari’s government to handle.
From $850 million liability to a $9.6 billion liability
However, most Nigerians became aware of the huge liability on the neck of their country from the failed contract, following an enforcement application to US and UK courts by P&ID some months ago. As was reported, in January 2017, a London tribunal, organised under the rules of the Nigeria Arbitration and Conciliation Act, had ordered the Nigerian government to pay P&ID $6 billion in damages, plus $2.3 million in uncollected interest.
It was also revealed figure had since been attracting interest at the rate of $1.2 million per day, and had by mid – 2019 ballooned to over $9 billion because the Buhari government had refused to pay. “If history is any guide – just look at how creditors seized Argentina’s naval frigate while docked in Ghana. Efforts by Nigeria to evade this judgment will inevitably fall flat. The ball is in Nigeria’s court, if the government is prepared to find a good-faith solution,” Mr. Brendan Cahill, Founder, P&ID had said in a tone laced with threats in a statement while expressing optimism that the UK and US courts would grant enforcement rights that would allow his company to collect the funds from the Nigerian government in a statement issued in May 2019.
But Attorney General of the Federation and Minister of Justice, Abubakar Malami (SAN), had in a statement issued on his behalf by Salihu Othman Isah, Special Adviser on Media and Publicity, in reaction to the claim, accused the British firm of grossly misrepresenting the facts, regarding the suit. Malami claimed that the litigation between P&ID, FG and others was also pending before the United States District Court of the District of Columbia (District Court), the United States Courts of Appeals for the District of Columbia (Court of Appeal) and the Business and Property Courts of the United Kingdom (Commercial Court).
He also claimed that the US Courts of Appeals for the District of Columbia had on 15, February, 2019 issued a decision in favour of Nigeria. As he said in the statement, the US Court had in the decision, dismissed P&ID’s motion requesting the court to dismiss Nigeria’s appeal for lack of jurisdiction or to summarily affirm the scheduling order of the District Court.
The Nigerian Attorney General also said the monetary claim by P&ID in the suit could not be justified. “P&ID never began the construction of the project facility, although it alleges it incurred about $40 million in preliminary expenses. P&ID’s claim in the arbitration proceedings was mainly for loss of profit for the entire 20-year term of the GSPA, initially claiming the sum of $1.9 billion and later increasing its claim to $5.9 billion,” Malami said.
However, despite Malami’s statement, P&ID had its wish fulfilled on 16th of August, when the British court gave it the right to seize $9 billion in Nigerian assets in any part of the world. The British judge also said that P&ID can take 20 per cent of Nigeria’s foreign reserves.
“We are pleased that the Court has rejected Nigeria’s objections both to the arbitration process and to the amount of the award, and that it will grant permission to P&ID to begin enforcement of the award in the United Kingdom,” Andrew Stafford, counsel to P&ID, said in reaction to the judgment. “P&ID is committed to vigorously enforcing its rights, and we intend to begin the process of seizing Nigerian assets in order to satisfy this award as soon as possible,” the P&ID counsel added.
The British firm’s determination to enforce the judgment caused panic among Nigerians and in government circles. “This matter that has brought us here today is a very, very weighty one; an award of $9.6 billion is equivalent to N3.5 trillion. N3.5 trillion in our annual budget will be covering for us the personnel cost, which is about N3.2 trillion. So, this award that is unreasonable, that is excessive and exorbitant, is also unfair and it is an assault on every Nigerian. It is beyond trying to compensate for a commercial interest. It is an assault on each and every Nigerian,” the Minister of Finance , Budget and National Planning, Zainab Ahmed, said at a press conference convened on the issue by the Minister of Information and Culture, Alhaji Lai Mohammed last Tuesday.
“It is about all of us because 9.6 billion dollars translates to about N3.5 trillion and that is 20 percent of foreign reserves. Imagine what is going to happen when 9.6 billion dollars of our assets are attached. It is going to affect every Nigerian, and that is why we are appealing for patriotism and objectivity of the media in handling this delicate matter, ” the minister of information said while describing the award as unprecedented, unjustifiable and an attempt to inflict economy injury on Nigeria and its people.
Along with this fear had come accusations that like in the other judgment suits, which usually go against the Federal Government, the defence of Nigerian interests was shoddy by those saddled with the responsibility during the arbitration process and after the initial monetary award to P&ID in 2017.
But at his press conference of last Tuesday, which was also attended by the minister of justice, the minister of information said all the relevant organs of government did their best to defend the government. According to him, Nigeria successfully got a Federal High Court sitting in Lagos to set aside the Arbitration Tribunal’s decision in 2016. He, however, claimed that the tribunal ignored the decision and went ahead to render its final award against the Ministry of Petroleum Resources in the sum of $6.597 billion together with a pre-award interest at the rate of seven percent per annum and effective from March 20, 2013, a post-award interest at the same rate from the date of the award . He added that it was the interest that increased the size of the award to $9.6 billion.
The minister said, “After the arbitration award in 2017, Nigeria made several attempts to negotiate the award and resolve the whole issue amicably with the P&ID but to no avail, which eventually led to the enforcement proceedings instituted, simultaneously, by the company in the UK and the US.
“The Federal Government then engaged the services of the US law firm of Curtis, Mallet-Prevost, Colt & Mosle LLP, which took steps to defend the proceedings in the US District Court of Columbia to dismiss P&ID’s application for the enforcement of the award on the grounds that Nigeria, as a sovereign state, had an absolute right to obtain an authoritative determination of its sovereign immunity.
“While Nigeria has recorded some successes in that case in the US, the proceedings are currently ongoing in the US and the Federal Government will ensure that its interest and that of the people of Nigeria are vigorously defended,” said the minister.
He added that report of experts engaged by the Federal Government revealed that the damages given to the P&ID were clearly unreasonable and manifestly excessive and exorbitant; went far beyond any legitimate protection of the commercial interest of the P&ID; were completely wrong and obviously unjustifiable; and that the damages over compensated P&ID on a frankly gargantuan scale and imposed a punitive award on Nigeria.
“It was on this ground and others that the Federal Government took all available steps to resist enforcement before the courts of the United Kingdom. Unfortunately, the UK Court has recognised the award and given the company the authorisation to seize Nigeria’s assets,” the minister concluded.
P&ID: How Malami bungled Nigeria’s case
But P&ID while reacting to claims that the Buhari administration should not be held responsible for the judgment debt fiasco by Malami on an international television station last Friday, put the blames on the doorstep of the AGF.
The company, in a statement, recalled that the Buhari government did not make any attempt to continue with the out-of-court settlement it had with its predecessor over the breach of contract when it assumed office in 2015 to July 17, 2015 when the Arbitration Tribunal made a ruling in its favour.
It added that even then, the then new Buhari administration did not make any attempt at settling or negotiating with it and did not make any effort to challenge the decision of the Arbitration Tribunal.
The company added that the nonchalance continued even after Malami was sworn in, as a minister on November 11, 2015.
The company further noted that on May 27, 2016, the Arbitration Tribunal wrote to the Nigerian government to reject a judgment by the Federal High Court, which set aside ruling of the tribunal and shifted the venue for the arbitration to Nigeria.
Malami, according to the British firm, later wrote personally to the arbitrators to indicate that his office had taken over the handling of the above arbitration on behalf of the Ministry of Petroleum Resources. The company claimed that the Nigerian Attorney General asked for and obtained an extension of time to file a defence and appoint his own legal team during proceedings held to determine the amount payable as damages, which was to take place in London from August 30 to 31, 2016.
But the company noted that Malami’s legal team conducted Nigeria’s defence at the hearing, calling expert witnesses as to the amount to be awarded as damages and that the Nigerian Attorney General consequently requested for a standstill of the suit for 60 days. “The Award on Quantum was delivered to the parties on February 17, 2017. Despite the 60-day standstill, having been agreed by P&ID, Attorney General Malami made no attempt to negotiate with P&ID during the 60 days, following the handing down of the Quantum Award,” the company said.
It added that Malami instructed his lawyers to write to P&ID’s lawyers to explain that his failure to take advantage of the 60 days adjournment to reach amicable settlement on the issue was because of the delay by the bureaucracy to “determine a reasonable strategy after receipt of the Arbitral award.” P&ID added that the AGF’s lawyers had also indicated in the letter that they had obtained the “authority of the vice president to meet with them to negotiate the Terms of the Arbitral award.”
“In the lead up to the judgment by the English Commercial Court, Attorney General Malami allowed the time for acknowledging service in both the United States and London to lapse without filing any response. In both jurisdictions, Nigeria’s lawyers, Curtis Mallet had to apply for ex post facto extensions of time and make the necessary apologies and explanations to the court.
“In London, a senior Curtis Mallet partner explained that the Claim Form was “immediately filed and not passed up the chain of command” at the Ministry of Justice. The partner pleaded that “the delay was neither deliberate nor intended to be disrespectful to the Court.”
“In the US, Curtis Mallet explained that the deadline was missed because they were in the process of being formally retained by the Nigerian government and had been instructed to enquire about the potential for a settlement,” the company further noted.
“The Attorney General’s pronouncements in the Nigerian press are a clear attempt to cover up his own incompetence and that of the Buhari administration. This is a matter, which could have been settled shortly after he took office in November 2015 for $850 million. Instead, he personally took the decision to gamble on the arbitration and turned an $850 million liability into a $9.6 billion liability.
“And at no time since has Attorney General Malami assumed responsibility has he raised any allegation of fraud or scam, either in the arbitration or in the subsequent enforcement proceedings. The reason for this is that there was no fraud. All of this raises serious concerns for foreign investors in Nigeria, whether you are investing in a commercial enterprise or buying Eurobonds. Not only will Nigeria deliberately refuse to pay an international arbitration award backed by an English Court, but they are prepared to launch sham investigations and character assassinations when all else fails.
“This is a serious assault on the Rule of Law by a demonstrably dishonest administration.
“Meanwhile, P&ID is now focused on vigorously enforcing its legal rights in the UK, including seizing Nigerian assets to satisfy the award. This will begin as soon as possible,” the company concluded.
Barely disguised fraud
Nevertheless, not a few Nigerians agree with the government that the contract with P&ID leaves much to be desired. The P&ID contract, according to analysts, fit into similar venture in which top civil servants, elected or appointed political leaders and their collaborators in the private sector commit Nigeria to through the backdoor to cream off the country’s treasury. For one, the Central Bank of Nigeria has said that there was no evidence that the company invested any amount into the gas project. Also, the Cross River State government where the project was to be located said the company never contacted it or made a request for land to locate the plant.
Chief Michael Aondoakaa, who was the AGF between July, 2007 and February, 2010 when the contract was signed, also said throughout his tenure, no such contract was brought to Federal Executive Council (FEC) for deliberation. He also added that the contract papers were not brought before him for vetting, as the AGF.
Andoakaa, who may be one of those to be grilled if the contract is to be investigated, told journalists that with such a huge contract sum involved, the best practice was after approval by tenders board, the contract with P&ID should have been forwarded to FEC for deliberation and final approval.
He added that it was only after the conclusion of the process that the Ministry of Petroleum Resources would go ahead with the award of the contract. “But I can tell you without fear of contradictions that I saw nothing like that before FEC. I did not see such contract, and since the news broke out, I’m wondering how this could have been possible,” said the former AGF, who affirmed that he is in support of the probe of the contract by the Federal Government.
As revealed by the Minister of Information last week, President Buhari had directed the Economic and Financial Crimes Commission, the National Intelligence Agency and the Inspector-General of Police to investigate the company, the circumstances, surrounding the agreement and the subsequent events.
“We want to place on record that the Federal Government views with serious concerns the underhanded manner in which the contract was negotiated and signed. Indications are that the whole process was carried out by some vested interests in the past administration, which apparently colluded with their local and international conspirators, to inflict grave economic injury on Nigeria and its people.”
While supporting the move by Federal Government to arrest and prosecute former government officials connected with the alleged ill-fated project, Executive Secretary, Anti-Corruption and Research Based Data Initiative (ARDI), Dr. Dennise Aghanya, also urged the government to immediately commence an out-of-court negotiation with the judgment creditor by negotiating for an alternative contract to compensate them.