An arbitration (mediation) corruption case involving a failed gas supply infrastructure project, which is big news in the UK, has received little media attention here in New Zealand despite an incidental link to employment law in this country.
The Federal Republic of Nigeria v Process & Industrial Developments Ltd [2023] EWHC 2638 (Comm) (23 October 2023) (bailii.org)
This judgement by Justice Robin Knowles CBE of the High Court (England and Wales) found that the Nigerian taxpayer no longer has to pay a private company a settlement figure of US $11 billion including interest calculated from 2010.
The company, Process and Industrial Developments Ltd, applied for leave to appeal. This was declined on 23 December 2023.
The 23 October 2023 judgement is 595 paragraphs so we’ll set out some highlights.
Introduction
(1) On 11 January 2010, in Nigeria, a document was signed between two parties, one a state and one a company.
(2) Twenty pages long, not counting a schedule of works that was proposed to be attached, the document bore the title "Gas Supply and Processing Agreement for Accelerated Gas Development" ("the GSPA").
(3) One party to the GSPA was the Federal Government of Nigeria ("Nigeria"). Nigeria did almost nothing to perform the GSPA after signing, but, according to Nigeria, neither did the other party.
(4) On the face of things, a dispute followed and then an arbitration to resolve that dispute. The result, according to the decision of an arbitration tribunal in 2017, was that Nigeria owed the other party US$6.6 billion, a sum so vast that it is material to Nigeria's entire federal budget. With interest at the rate awarded by the Tribunal, the amount now exceeds US$11 billion.
(5) The other party to the GSPA was a company registered in the British Virgin Islands. Its name was Process & Industrial Developments Limited ("P&ID"). It was one of many companies co-founded by two Irish businessmen, Mr Michael Quinn and Mr Brendan Cahill.
The project failed because of environmental concerns, creating a commercial dispute.
(11) Before this Court, the Commercial Court in London, Nigeria challenges the Award on Liability and the Final Award ("the Awards"), and an award on jurisdiction. It makes allegations of bribery, corruption and perjury. The allegations extend to the GSPA…
(23) I am asked to make many findings of dishonesty.
See which way this is going, readers? Serious wrongdoing can be covered up in arbitration/mediation under the cloak of legal privilege. Secret settlement agreements are the legal mechanism for gagging whistleblowers, for example.
(554) The first "red flag" coupled two parts. The first part was the contention that the GSPA was "a contract which was, on its face, deeply suspicious". The second was the fact that the GSPA was entered into with a British Virgin Islands company "with no apparent assets, no obvious industry experience, and no other credentials to suggest that it would be suitable to operate such a sophisticated arrangement", and where government business was generally conducted through a local Nigerian company.
…
(557) The second suggested "red flag" was the widespread presence of corruption in Nigeria…
(558) The third "red flag" was the failure to meet procurement procedures, or authorisation procedures…
There are a total of six red flags. Now we’ll get to Justice Knowles’ point, as per the title of this article:
(583) The risk is that arbitration as a process becomes less reliable, less able to find difficult but important new legal ground, and more vulnerable to fraud. The present case shows that having (as here) a tribunal of the greatest experience and expertise is not enough. Without reflection, then a case such as the present could happen again, and not reach the court.
…
(592) This case has also, sadly, brought together a combination of examples of what some individuals will do for money. Driven by greed and prepared to use corruption; giving no thought to what their enrichment would mean in terms of harm for others. Others that in the present case include the people of Nigeria, already let down in so many ways over the history of this matter by a number of individuals in politics and administration whose duty it was to serve them and protect them.
This is one of the rare occasions where lawyers’ conduct has been so egregious that a court has turned on them:
(593) I will be referring a copy of this judgment to the Bar Standards Board in the case of Mr Trevor Burke KC and to both the Solicitors Regulation Authority and the Bar Standards Board in the case of Mr Seamus Andrew. I trust that these two regulators of the legal profession in England & Wales will consider the professional consequences of the conduct of Mr Burke KC and Mr Andrew in relation to Nigeria's Internal Legal Documents. As a separate matter, although there was argument before me about the acceptability of the remuneration arrangements for Mr Burke KC, that would be a satellite point for the issues I have the responsibility to decide and is best left for the regulator for whom it will be a central point.
Brace yourselves, Messrs. Burke and Andrew.
And the New Zealand connection?
(176) It is common ground that bribery was extensive in Nigeria, and that some business could not in practice be transacted without it, but these points do not justify bribery. They reinforce the seriousness of a practice that "threatens the foundations" of a society (Attorney General for Hong Kong v Reid [1994] AC 324 at 330H (per Lord Templeman, giving the opinion of the Privy Council on an appeal from New Zealand)). And, where the question is one of dishonesty, the points do not reduce the standards of ordinary decent people.
Mr Reid is an employment advocate in Tauranga.
As an aside, a precedent for invalidating part of a settlement agreement in New Zealand's employment jurisdiction is here: 2017-NZEmpC-69-8i-Corp-v-Marino.pdf (employmentcourt.govt.nz)
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