Commercial Court grants “unprecedented” extension of time based on “strong prima facie case” that US$10 billion arbitration award against Nigeria was tainted by fraud

04/09/20

Sir Ross Cranston has handed down his judgment in Federal Republic of Nigeria v Process & Industrial Developments Limited. The case concerns a large and complex gas processing contract that was awarded to P&ID by the Nigerian government in early 2010, despite the fact that P&ID was a BVI shell company with no track-record in the industry. Neither party took any steps to perform the contract and P&ID brought a claim against Nigeria for repudiatory breach in a London arbitration. By three awards given between 2014 and 2017 the tribunal, which included Lord Hoffmann and Sir Anthony Evans, awarded P&ID damages of US$6.6 billion plus 7% interest. The purported value of the awards today stands just short of US$10 billion. It has been described in the press as “one of the world’s biggest lawsuits” here. 

In December 2019 Nigeria applied to set aside the awards on the basis that they, and the underlying contract, were the result of a massive fraud by P&ID involving a campaign of bribes paid to Nigerian officials, perjured evidence given to the tribunal about P&ID’s ability and readiness to perform the contract, and the corruption of Nigeria’s advocate in the arbitration. A party challenging an award on grounds of fraud must usually do so within a short 28-day time limit under the Arbitration Act 1996. Nigeria therefore required a substantial extension of time.

Sir Ross Cranston granted Nigeria’s request for an extension and allowed the fraud challenge to proceed. He noted that it was “unprecedented” for an English court to grant an extension of time for challenging an arbitration award of between three and five and a half years. However, Nigeria had established a “strong prima facie case of fraud” and had acted reasonably in discovering the fraud when it did. It had not, as P&ID contended, made a deliberate decision not to pursue a fraud investigation. This tipped the balance in favour of granting the extension ([263-76]).

Sir Ross Cranston also said that, had it been necessary to decide the point, he would have found that the Supreme Court’s recent ruling in Takhar v Gracefield Developments Ltd [2019] UKSC 13 applies to arbitration, such that it is not necessary for a party who is seeking to set aside an arbitral award to show that it could not “with reasonable diligence” have discovered the fraud against it sooner ([178-183]).

The judgment is here.