The contract at the heart of the $11bn claim against Nigeria has been found to be fraudulent

After years of legal disputes, a London judge has ruled that the contract at its centre in a long-running saga between Nigeria and a small energy company was fraudulent. This comes after years of legal wrangling which put Africa’s biggest economy at risk of being forced to pay $11bn as compensation.

This ruling follows a 2017 tribunal order that Nigeria pay $6.6bn in compensation to Process and Industrial Developments, an energy company. The award was made after the Nigerian petroleum ministry and the group failed to reach a contract. The award increased to $11bn when interest was added.

The judge who oversees the appeal in the London high court said on Monday that the awards were “obtained by fraud” as well as “the manner in which they obtained them was contrary to public policies”.

P&ID was awarded a contract to operate a Natural Gas Processing Plant in 2010, but the Nigerian Government failed to build the pipeline to supply it. In 2012, the company filed arbitration proceedings alleging breach of contract.

Five years later, in London, a panel consisting of three arbitrators decided by a 2-1 vote to award $6.6bn in judgment for the losses incurred by P&ID on the project. This was the largest amount of money ever awarded against a nation.

Nigeria argued that the contract, and the arbitration proceeding following it, were fraud schemes intended to defraud the nation.

P&ID may appeal the ruling of Monday.

The court is yet to determine the outcome of Nigeria’s successful appeal. Sir Robin Knowles said that he would like to hear from both sides before making a decision on whether or not to reject the award in its entirety or send the dispute back to arbitration.

Nigeria’s chances of overturning the award initially were considered slim, and its lawyers missed deadlines for filing an appeal. But a London High Court Judge, Sir Ross Cranston in 2020, granted Nigeria more time to prove the allegations of corruption.

Michael Quinn, one of P&ID’s founding members, was found to have “perjured testimony” before the tribunal to “give the appearance that P&ID is a legitimate company and that it was willing and able to fulfill the contract”.

The award against Nigeria was so large that it brought to light the importance of London’s arbitral courts in resolving disputes worth billions of dollars. The Monday judgment raised concerns about the widespread use of arbitration to settle important lawsuits.

The facts and circumstances in this case are not only remarkable, but also very real. They provide an opportunity for us to examine whether the arbitral process, which has a great value and importance around the world, requires further attention when the stakes are so high and a state involved,” said Knowles.

A Nigerian spokesperson described the ruling in the court as an “historic victory” by the country.

The brazen fraud committed by P&ID, despite the constant attempts of P&ID to frustrate justice, has been exposed for all to see. This should be a warning to anyone who would try to defraud Nigerians for their own gain.

They added that “Nigeria believes that this ruling will mark a boundary, forcing anyone who thinks African nations are easy targets for exploitation to reconsider their position.”

An attorney for P&ID stated that the company “was considering the steps it could take” in response to the ruling.

Nick Marsh, P&ID’s lawyer at Quinn Emanuel, said: “Whilst P&ID respects the English Court’s judgment, it is disappointed with the result.”

Helen Taylor, senior research at the anti-corruption organization Spotlight on Corruption said: “It’s difficult to overstate how important today’s decision is for the Nigerians, as the economic prospects of a whole country were held hostage by an arbitral award that was tainted for a project based on bribes, lies, and shams.”

She added that the prospect of Nigeria being relieved from its $11bn in debt would be a great relief.