In a landmark judgment released last week, Mr. Justice Robin Knowles of the English High Court has set aside a USD 11 billion arbitral award against Nigeria because, the Judge held, it was obtained “only after and by practising the most severe abuses of the arbitral process”. The decision is a salient reminder of the need to be alive to the risk of abuse of the arbitral system, particularly in cases involving state parties. The case also raises important questions about whether greater transparency in the arbitral process might help guard against such risks.

The facts of the case are relatively straightforward: in 2010, Process & Industrial Developments Ltd (P&ID) entered into a 20-year gas supply and processing agreement (the “GSPA”) with the Nigerian Ministry of Petroleum Resources. After the contract was signed, the Court found, “almost nothing” was done by either party to make good on the promises made in it: the gas processing plant was never constructed, nor was any gas ever delivered. (Counsel for Nigeria went so far as to argue before the Court that the contract had been entered into by P&ID only for the purpose of launching a future arbitration against Nigeria, although this allegation was not accepted by the Court.) Three years into the contract, P&ID commenced arbitration proceedings against Nigeria, claiming that Nigeria had committed a repudiatory breach of contract and so was liable for US $6 billion in lost profits. A tribunal of the “greatest experience and standing”, as the Court described it, found in favour of P&ID in a series of relatively short decisions (the partial award on liability contained just 80 paragraphs). In its similarly succinct final award, issued in January 2017, the tribunal fixed damages at just over USD 6.5 billion (a sum which the Court described as “so vast that it is material to Nigeria’s entire federal budget”), with interest at 7% running from March 2013. This meant that, by 2023, the award was worth in excess of USD 11 billion.

Nigeria challenged the awards before the English High Court, alleging serious procedural irregularities and a lack of jurisdiction (while its first attempt to challenge the award on liability was dismissed in 2016 as time-barred and having “no merit”, Nigeria was granted a time extension to bring a new challenge against the awards in 2020). In an eight-week trial beginning in January 2023, Nigeria “made almost every allegation it could”, in the words of the Court, in support of its argument that the awards had been fraudulently obtained. Although not agreeing with every allegation made by Nigeria, the Judge found “convincing evidence” to conclude that the awards had indeed been procured by fraud, including that (i) one of P&ID’s key witnesses had knowingly made false statements to the tribunal, (ii) P&ID had bribed one of its witnesses, a Nigerian official, to maintain her silence about her earlier receipt of bribes from P&ID at the time the GSPA was entered into, and (iii) counsel for P&ID had improperly obtained and retained Nigeria’s privileged documents during the course of the arbitration. The Judge concluded that the award should therefore be set aside under section 68 of the Arbitration Act 1996 (which allows parties to challenge arbitral awards on the ground of “serious irregularity”, including cases where “the award [was] obtained by fraud or the award or the way in which it was procured [was] contrary to public policy”).

In other cases, parties challenging awards under section 68 have sometimes struggled to meet the high standard required to establish a serious irregularity affecting the outcome of the award. The extraordinary circumstances of the Nigeria case, however, readily met this threshold. In particular, Nigeria’s challenge benefitted from significant new evidence that it had obtained through disclosure in New York, England, Cyprus, the Cayman Islands and the British Virgin Islands, which, the Judge recognised would have “completely altered the Tribunal’s approach” had it been known at the time of the arbitration. Following the release of the awards, Nigeria’s president had also initiated an investigation into P&ID and the circumstances surrounding the signing of the GSPA, which led to criminal charges under Nigerian law for P&ID and several key government officials involved in the execution of the GSPA. Nigeria was also informed of the leak of its privileged documents in 2021 (long after the conclusion of the arbitration), when the then-solicitors for P&ID informed Nigeria that the firm had identified documents over which Nigeria might seek to assert privilege. While the Judge never conclusively determined how P&ID came to possess these documents (the Judge rejected a suggestion that they had been shared as part of the parties’ settlement discussions), he was clear that choosing to retain and benefit from the documents, rather than alerting Nigeria to the mistake and returning the documents immediately, “was indefensible”.

The High Court’s decision is not only significant for the people of Nigeria, but also touches, as the Court recognised, on “the reputation of arbitration as a dispute resolution process”. In his decision, the Judge highlighted concerns over transparency in the arbitral process, stating that “I hope the facts and circumstances of this case may provoke debate and reflection among the arbitration community, and also among state users of arbitration, and among other courts with responsibility to supervise or oversee arbitration […] 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 decision highlights, in particular, the need for tribunals to closely scrutinise the evidence in cases involving state parties (especially those where corruption is prevalent) and perhaps to take a more active approach if it becomes clear, as it should have been in the Nigeria arbitration, that one party’s interests are not being adequately represented.

In the present case, the Court found, a lack of scrutiny had allowed two lawyers representing P&ID to pursue their personal enrichment at the expense of the “people of Nigeria, already let down in so many ways over the history of this matter by […] individuals [...] whose duty it was to serve them and protect them”. Both lawyers were set to derive a “life-changing” personal financial benefit from the arbitration, with one having a claim to fees of up to USD 825 million and the other up to USD 3 billion. While the Judge concluded that the “money they hoped to make” had influenced the lawyers’ conduct in the arbitration, both men denied this, with one stating in evidence that “the money is a complete irrelevance”. Nevertheless, the Judge, describing the situation as “deeply unhappy”, noted that he would be referring a copy of his judgment to the Bar Standards Board and the Solicitors Regulation Authority for further investigation. Both lawyers have publicly rejected the Judge’s findings against them.

Looked at in another light, however, the decision highlights the essential role played by the courts in shining a light on the (still rare, one hopes) abuses of the arbitral process and applying judicial corrections where appropriate. The decision also underscores the importance of quality legal representation. Indeed, far from despairing of the legal profession more generally, the Judge concluded his decision by praising the quality of the lawyers acting on both sides of the court proceedings, noting that they had met the “highest professional standards” in a “difficult case”.

A copy of the High Court’s decision can be accessed here.

This article was prepared with the assistance of Verity Thomson, legal intern at Baker Botts in London.

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