JP Morgan ordered to give disclosure of US-held compliance documents

11/05/21

On Tuesday 11 May 2021, Mr Justice Calver handed down judgment on a disclosure application brought by the Federal Republic of Nigeria (the “FRN”) against JP Morgan Chase Bank NA (“JPM”).

The FRN has brought proceedings against JPM alleging breach of the banker’s “Quincecare” duty of care, claiming damages of some $875 million (plus interest). The Quincecare duty is a duty on the bank not to comply with a payment instruction if, and for so long as, the circumstances were such that a reasonable and honest banker would consider that there was a real possibility that the instruction was an attempt to misappropriate the funds of the customer. JPM’s attempts to strike out the case based on its contractual Ts&Cs failed at first instance and in the Court of Appeal.  

The claim concerns payments made by JPM, out of an account held with it by the Republic, to accounts held with Nigerian banks by Malabu Oil and Gas Limited (“Malabu”). JPM paid over $800 million to Malabu out of that account in August 2011, and a further $74 million in August 2013. The FRN’s case is that Malabu was a front for a former Minister of Petroleum Resources in the Nigerian government, Chief Dauzia Loya “Dan” Etete, and that these payments to Malabu represented the proceeds of a fraudulent and corrupt scheme that began when, in 1998, Chief Etete awarded the rights to a valuable oil concession (“OPL 245”) to Malabu – and therefore, in effect, to himself.

The parties gave Extended Disclosure (under the Disclosure Pilot in CPR Practice Direction 51U) in March 2020. The FRN then applied for further disclosure of two categories of documents relating to the 2013 payments. First, the FRN sought documents relating to recommendations made internally within JPM’s US compliance function, before the 2013 payments were made, that Malabu should be placed on a “watch list” and that Etete and another company, Rocky Top (which the FRN alleges was used as a conduit for the monies paid out in 2011), should be placed on an “interdiction filter”. Second, the FRN sought documents relating to concerns that senior managers in JPM’s US compliance function appear to have formed about the transaction, again before the 2013 payments were made. JPM resisted the application: arguing that the Disclosure Pilot was intended to introduce a change in culture, and that the FRN’s requests for further disclosure were disproportionate and smacked of an old-style application for Peruvian Guano-type disclosure.

Calver J granted the FRN’s application and found, pursuant to Practice Direction 51U, paragraph 17, that JPM had failed adequately to comply with the existing order for Extended Disclosure. The Judge held that the documents sought by the FRN on its application were documents that JPM should have disclosed the first time around, as part of its original Extended Disclosure.

The judgment is here.

A link to the Court of Appeal’s judgment is here.