By Momoh Kadiri
The Final Award that resulted in the judgment was made in arbitration proceedings relating to a dispute between P&ID and the FRN arising out of a Gas Supply and Processing Agreement (the “GSPA”). This agreement, dated 11 January 2010, was entered into between P&ID and the FRN, acting by its Ministry of Petroleum Resources (“the Ministry”). By an arbitral Final Award dated 31 January 2017, made by a tribunal consisting of Sir Anthony Evans, Chief Bayo Ojo SAN, and Lord Hoffmann (“the Tribunal”), P&ID was awarded US$6,597,000,000. The majority was comprised of Sir Anthony Evans and Lord Hoffmann, with Chief Bayo Ojo SAN dissenting.
By 2012, a dispute had arisen in relation to the GSPA. P&ID contended that the FRN had failed to make available natural gas (“Wet Gas”) in accordance with the GSPA. On 22 August 2012, P&ID served its Notice of Arbitration. The arbitration commenced thereafter with the appointment of the arbitral Tribunal. Whereas the parties’ legal representatives expended some considerable time in correspondence arguing over the seat of arbitration, it is however plain that the arbitral Tribunal had already on two separate occasions made unanimous Part Final Awards: on 3 July 2014 – dealing with its own jurisdiction and some other procedural matters; and on 17 July 2015 – dealing with liability (the Liability Award) wherein it was unequivocally and unanimously stated by the arbitral Tribunal that the seat of the arbitration was London. Both the Part Final Award as well as the Liability Award stated, at the end: “Place of arbitration: London, United Kingdom”.
FRN’s application to Nigerian and English Courts
On February 24, 2016, the Ministry of Petroleum Resources of the FRN commenced proceedings in the Federal High Court (Lagos Division) in Nigeria, seeking the Court’s ‘supervisory jurisdiction’ in relation to the Liability Award, stating that the seat of the arbitration was Nigeria. It is noted this followed after the FRN had unsuccessfully applied to the Commercial Court in London for leave for extension of time and to appeal the Part Final Award under section 68 of the Arbitration Act 1996. The request for extension of time and permission to appeal was dismissed by the Court on February 10, 2016, by Phillips J. on the basis that no justifiable reasons had been given to excuse the application being made out of time.
Recourse to the Competent Courts
What is a losing party to do if its grievance is not something that can be put right by correction or interpretation of the award and there is no provision for internal review of the award? There are grounds on which an arbitral award may be challenged before a national court at the place of arbitration (the seat of arbitration). The UNCITRAL Model Law, Article 6, provides for each state to designate the court, courts, or other authority competent to perform the functions laid down by the Model Law, which includes setting aside of awards under Article 34. Thus, the courts with supervisory or curial powers or authority are a function of the juridical seat or place of arbitration. The proper place of challenge
Whereas the primacy of the FRN’s objections were ably and ‘attractively’ argued by its counsel, Harry Matovu QC, on a multiplicity of grounds, it seems safe to state in conclusion that the most significant issue and objection that proved decisive in the case concerned the issue as to what was the seat of the arbitration -England or Nigeria? The court disagreed with FRN’s objections, finding that the seat of arbitration was England as opposed to FRN’s contention that it was Nigeria.
Although the question as to the seat or place of arbitration (especially when the latter is used in a juridical or curial sense) may somewhat be taken as readily ascertainable or as a given when stipulated the within parties’ arbitration agreement, this case highlights not only the importance of ensuring that the dispute resolution and/or arbitration agreement is carefully and robustly negotiated and drafted, it equally underscores the imperativeness of ensuring that the seat of arbitration is carefully selected and expressed with no room for ambiguity in the parties’ underlying contractual agreement.
Also, what is further instructive to note is that any objection or challenge, including an appeal as to the proper interpretation or decision on the question of the seat of arbitration, needs to be raised timeously by the relevant disputing party before the appropriate supervisory or curial courts at the seat of the arbitration. A late or mistaken application to the wrong court is not only liable to dismissal but the cost implication for the party concerned can be astronomically significant. The FRN, as expected, was unable to resist P&ID’s application on this occasion because the combined effect of CPR r. 62.18 in conjunction with section 66 of the Arbitration Act 1996 means that the procedure to enforce an arbitration award in the same manner as the judgment of the court is usually a summary procedure that is made usually without notice.
That judgment was given in favour of P&ID is certainly not the end of the matter.
It is stated that the current outstanding sum now due to P&ID is estimated at USD$9.6 billion, which is about a quarter of Nigeria’s foreign reserves, as well as a third of Nigeria’s 2019 total budget. Also, daily interest on the award is about USD$1.2 million, which explains the scale of the final award.
Clearly, this raises significant concern for the FRN and it is expected, it will continue to seek to resist execution of the judgment, particularly as a sovereign state. An additional concern for the FRN is this issue was an inherited burden from the previous regime.
However, the hope is that this case will provide an incentive for the government to address the underlying issues that have come to the fore as well as take steps to prevent similar occurrences in the future.
Whereas this award is the largest recorded in the public domain against Nigeria, experienced practitioners know very well that unless a party is able to execute an award or judgment, how much it is really worth is something that may be more fanciful than real. The record USD$50 billion that was awarded against the Russian Federation in 2014 by the Permanent Court of Arbitration in Yukos v Russia (Yukos Universal Limited (Isle of Man) v. The Russian Federation (PCA Case No. AA 227)), after ten years of long, drawn-out proceedings, has yet to be enforced. It will therefore be interesting to see, from both sides, how the next steps unfold.