Speaker Femi Gbajabiamila
Nigerians recently received with shock the news that a foreign court had granted an enforcement order for over $9Bn (Nine Billion US Dollars) as compensatory damages in the matter of Process and Industrial Development Ltd v Federal Government of Nigeria (FGN), as a consequence of the determination by an arbitration panel that the Government of Nigeria failed to live up to its contractual obligations. This case raises certain fundamental public policy issues which must be addressed, lest the best interests of our nation are wittingly or unwittingly mortgaged. We must also be mindful of the fact that the award represents about 25% of our annual national budget, and the enforcement of this order will have very real consequences on our national development ambitions.
My position on this subject should not be taken as an endorsement of Nigeria’s sometimes unpardonable ways of not respecting the sanctity of contracts, but as a consideration of this case as a standalone matter, distinguished both by the nature of the contract, the subtext of its wider implication and the possible unintended consequences of enforcing this final award.
Let us consider first whether or not the Commercial Court of the High Court of Justice of England and Wales has jurisdiction over the enforcement of the arbitral award, and following from that, whether there is a difference between the Seat of Arbitration and the Venue of Arbitration. The Agreement between the Federal Government of Nigeria and the claimant clearly stated that the agreement shall be construed in accordance with the Laws of the Federal Republic of Nigeria.
This unambiguously implies that any interpretation of the contract, issues or dispute arising out of the contract shall be resolved in accordance with the Laws of Nigeria. In other words, as far as any issue arises from the entire contract, whether as to the manner or style of performance of the contract, non-performance, recourse to arbitration and enforcement of any award, the laws of the FRN will apply. Parties went further to agree that the Nigeria Arbitration and Conciliation Act CAP A18 Law of the Federation of Nigeria 2004 and its ancillary Rule shall be applied in the resolution of any dispute.
In the extant case, the contract provides that the venue will be London but the law governing the conduct of the arbitration (seat of arbitration) is the law of Nigeria. This to my mind is a concerted effort by the parties to clearly determine their terms to the letter. To hold anything to the contrary will amount to a butchering of the Gas Supply and Processing Agreement (GSPA). It is my opinion that the High Court of England has neither the supervisory nor enforcement jurisdiction over the arbitral proceedings as the letters of the GSPA is very clear on that issue.
The court with the jurisdiction is the Federal High Court of Nigeria. This position is supported by the ruling of the English courts in Tonicstar v. American Home Assurance Company (2004) EWHC 1234 wherein the Court held that where a contract was made in London, signed in London, to be executed in London, made in accordance with the laws of England, it is to be inferred that the parties intended these provisions to be determined by the English court, but even when there is no implied choice of law, there is a presumption under the Rome Convention that the applicable law is that of the place of business of the party whose performance is characteristic of the contract. As to the question of whether under the international law, the High Court England and Wales has jurisdiction to attach the property of another sovereign nation, I submit that where a sovereign state submits to arbitration, the award emanating from the arbitration proceedings cannot be denied on the ground of immunity.
However, a waiver of immunity on adjudication is different from the immunity from attachment or execution. Assuming without conceding that the FRN impliedly waived its immunity from adjudication, it did not waive its immunity from attachment or execution. Section 13(2)(b) of the State Immunity Act of England 1978 provides that a sovereign state’s property can only be attached with the state’s consent or where the property is shown to be expressly used for commercial purpose. Every contractual dealing contains an implied covenant of good faith and fair dealing presuming that the parties will act fairly to each other.
As at the time of filing their claim, there was no evidence the claimant had fulfilled their part of the contract. It is the claimant’s position that the construction of a pipeline by the federal government comes in advance of their own obligation to build the gas plant, and it is as a consequence of the federal government’s failure to build that pipeline that the claimant now seeks to walk away with an award of Nine Billion US Dollars. This is a flawed position that should have been defeated at the earliest stages of the litigation in this matter. Filing a claim against a contractual partner where you yourself are arguably in breach of the same contract is an unacceptable denunciation of the good faith and fair dealing principles that are at the heart of contract law.
That both the Arbitration Panel and the British court allowed this position to stand is further reason why we must treat the outcomes of both processes with deserving scepticism. We must all at this time avert our minds to the best options for resolution of this matter in a manner that protects the genuine commercial interests of the claimants without causing any more injury to the Nigerian state and the Nigerian people. Already, there are multiple appeals against both the arbitration award and the enforcement order by the British courts. As it is to the National Assembly, that the constitution of Nigeria grants the power of the purse, it is my opinion that the Assembly ought to be party to all ongoing litigation whether by means of joinder or by initiating fresh action.
Whilst we await the final determination of these matters in the court of law, simultaneous diplomatic back-channel discussions must be ongoing. We must approach these talks with all options on the table, recognising the urgency of the situation and dire consequences of failure. Beyond the present matter, there is a need for the National Assembly to begin a comprehensive review of all protocols, treaties, and agreements signed by the country over the years whether or not ratified as it may be time to opt-out of those that may no longer serve our country’s interest. Time sometimes may change the dynamics and make such agreements less favourable to us as a country. Treaties are not in perpetuity and a country cannot be held in bondage by virtue of having signed one.
The United States of America has a long history of conducting such reviews and acting in the best interests of the nation. Most recently, by withdrawing from the Joint Comprehensive Plan of Action known commonly as the Iran nuclear deal and withdrawing also from the North American Free Trade Agreement (NAFTA), with the latter now being renegotiated in view of present realities. This is the same approach we must adopt in the best interests of the Nigerian people.
Femi Gbajabiamila is the Speaker House of Representatives.