Fraud, Bribery and Corruption Lead to $11bn Arbitration Award Set Aside
The UK High Court handed down its judgement in October 2023 in the Federal Republic of Nigeria v. Process & Industrial Developments Ltd [2023] EWHC 2638 (Comm), setting aside the $11bn arbitration award because it was obtained by fraud and contrary to public policy.
Background Facts
In 2010, the Federal Republic of Nigeria (“Nigeria”) and Process & Industrial Developments Ltd (“P&ID”) signed an agreement. Under the agreement, Nigeria was to supply gas to the facilities construed by P&ID. P&ID, on the other hand, would use these facilities to process gas so that it could be used by Nigeria for power generation. Neither party performed the contract. As a result, P&ID brought an arbitration claim against Nigeria resulting in it being awarded damages of $11bn, including interest. $11bn was equivalent to a significant proportion of Nigeria's state budget at the time being.
Nigeria challenged the award under s.68 of the Arbitration Act on the grounds of serious irregularities, specifically, bribery, and corruption and alleged that two of its lead counsel in the arbitration proceedings had been corrupted by P&ID.
Judge Knowles found in favour of Nigeria and set aside the award. The court was satisfied that firstly, P&ID provided false witness statements which they knew to be false. Secondly, P&ID aid numerous bribes to Mrs Grace Taiga — who was the Legal Director at the Ministry of Petroleum Resources and had previously worked at the Nigerian Ministry of Defence — to secure the initial Contract and, later, to buy her ongoing silence. Thirdly, P&ID had access to Nigeria’s internal legal documents during the arbitral process that was covered by legal professional privilege detailing Nigeria's strategy. Judge Knowles made highly critical remarks about the conduct of lawyers involved in this retention of documents and was prepared to make a complaint to the regulation bodies.
Disclosure in International Arbitration
There is significant document disclosure in this case. Important information relating to bribery and corruption was obtained as part of the discovery order made by the English Courts. There is something to consider here: the powers of an arbitral Tribunal to compel the production of documents are somewhat limited. This could be addressed by increasing the powers of arbitrators to sanction parties which do not comply with orders for production and to encourage closer cooperation with national courts to obtain appropriate orders.
Balance of Power
In delivering his 140-page judgement, Judge Knowles also highlighted that the arbitration was “not a fair fight”. The reason is that there is an imbalance of resources between the parties. Despite inexcusable delays and a lack of engagement on Nigeria's part, the imbalance in the present case was caused by bribery and corruption. However, a large difference in experiences and resources between two parties can also lead to such an imbalance. Therefore, uploading professional ethics in drafting a contract is the cornerstone in protecting both parties in the agreement.
