The Federal Republic of Nigeria has been successful in its application for an extension of time to challenge a multi-billion arbitration award against it, along with relief from sanctions.
The High Court in London held that Nigeria had established a “strong prima facie case” that the contract between it and Process & Industrial Developments (P&ID) had been procured by fraud. Nigeria had argued that it should be granted additional time to challenge a $6.6 billion award in favour of P&ID under sections 67 and 68 of the 1996 Arbitration Act (the Act), despite the 28-day time limit to challenge an award under the Act having long since expired.
In his judgment, Judge Cranston said that as well as having successfully established a strong prima facie case of fraud, there was also a case that one of the main witnesses for P&ID gave perjured evidence to the tribunal in the arbitration proceedings and that payments were made to officials in order to gain their silence. These circumstances justified allowing Nigeria to pursue its challenge outside the statutory time limit.
International arbitration expert Rob Wilkinsof Pinsent Masons, the law firm behind Out-Law, said: “This decision allows Nigeria to present its full evidence on the fraud allegations and to challenge the earlier findings at a further hearing”.
“Whilst the case turns on what are quite an unusual set of facts, the case re-affirms the position under English law that where there is evidence of illegality, public policy considerations can prevail over the important arbitration principles of finality of award and the limited time period to make a challenge,” he said.
The case is now expected to go to trial with a challenge from Nigeria to set aside the award, with the hearing likely to focus on the substance of Nigeria’s allegations of fraud. If successful, Nigeria would have the award set aside meaning that it would have no effect. However, if Nigeria is unsuccessful in its challenge, P&ID is likely to continue its enforcement of the award.
A three-person arbitral tribunal made the award in favour of P&ID in 2017, in respect of a breach of a major gas supply and processing agreement. Last year, the High Court granted P&ID permission to enforce the award, which is worth almost five times Nigeria’s national education budget and eight times its health budget, according to the Financial Times.
However, Nigeria has since alleged that the supply and processing agreement was procured on the basis of fraud and corruption, citing new evidence it claims has come to light.
In reaching his decision, the judge exercised the court’s discretion under the Act to extend the 28 day time limit for a challenge or appeal under sections 67, 68 or 69. In doing so, he considered the seven-factor test set out in the 2001 case of AOOT Kalmneft v Glencore (Kalmneft), noting that the weight of each factor would turn on the facts of a case.
Judge Cranston noted that the extraordinary delay weighed strongly against granting an extension of time. However, he found that on the particular facts of this case, an extension ought to be granted as the prima facie case of fraud meant that Nigeria would suffer an injustice if it were deprived of the opportunity to make a challenge. In doing so, he referred to previous case law setting out the principle that “there is no rule of law which automatically prioritises the finality of arbitral awards over the public policy of refusing to endorse illegal conduct”.
The ‘Kalmneft factors’ are the length of the delay; whether the party seeking the extension was acting reasonably in permitting the time limit to expire and the delay to occur; whether the other party or the arbitrator caused or contributed to the delay; whether the other party would suffer irremediable prejudice in addition to the mere loss of time if the application was permitted to proceed; whether the arbitration has proceeded during the period of delay and, if so, what impact the application would have on that progress or costs incurred; the strength of the application; and the unfairness of denying the application.
Additional reporting by Mahir Hussein of Pinsent Masons
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