Nigeria risks 20% of foreign reserves over London court judgement

Nigeria risks 20% of foreign reserves over London court judgement

Nigeria may lose about 20% of its foreign reserves following last Friday judgement of a London court awarding $9bn assets forfeiture against Nigeria in favour of Process and Industrial Development Limited (P&ID) for breach of contract.

Recall that Nigeria’s external reserves dropped by $482.18m from N45.14bn as of July 8 to $44.65bn as of August 8. The reserves which had maintained a steady rise in recent months has started suffering decline, and this latest judgement, if implemented, may compound the nation’s woes.

While the firm has declared the immediate execution of the court order, the FG disclosed it was making vigorous efforts to defend its interest in this matter and would not relent in exploring every viable options in doing so.

Reacting to the judgement, Solicitor-General of the Federation and Permanent Secretary, Federal Ministry of Justice, Dayo Apata said the Federal Government would pursue an appeal against the judgment of the English Court dated 16 August 2019 and at the same time seek for a Stay of Execution of the said judgement.

The dispute arisen over a 20 year Gas Supply and Processing Agreement (GSPA) entered in 2010 between FGN and P & ID in respect of an accelerated gas development project in Nigeria’s OMLs 67 and 123.

According to the Federal Government, P&ID never began the construction of the project facility although it alleges it incurred about $40 Million in preliminary expenses.

P & ID’s claim in the arbitration proceedings was mainly for loss of profit for the entire twenty-year term of the GSPA, initially claiming the sum of US$1.9 Billion and later increasing its claim to US$5.9 Billion.

The Arbitral Tribunal on 31st January 2017 rendered its Final Award against the Ministry of Petroleum Resources in the sum of US$6.597 Billion together with pre-award interest at the rate of 7% per annum effective from 20th March 2013 and post-award interest at the same rate till date of payment.

In granting the huge arbitration award against Nigeria the tribunal decided the following:

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 that the project would operate at 93% uptime during the twenty-year of the GSPA despite the well-known risks of operating such a project in the Niger-Delta.

that the average price of Natural Gas Liquids (the main revenue earner for P&ID assuming the GSPA had been implemented), should be based on an average oil price in excess of $100 per barrel over the twenty-year life of the project;

Upon the Award, P & ID commenced recognition and enforcement proceedings of the arbitration award against FGN in March 2018 in both the United Kingdom (“UK”) and the United States of America (the “United States”).

Apata said FGN was duly represented in the proceedings in the United States by the Law Firm of Curtis, Mallet-Prevost, Colt & Mosle LLP which also represented it in the UK proceedings of which judgement was given on 16th August 2019 in favour of the P&ID to commence enforcement proceeding against the FGN assets in the UK.

He said the Law Firm has taken a step to defend the proceedings in the United Stated by urging the District Court to dismiss the P&ID application for enforcement of the award on the ground that Nigeria as a sovereign state has an absolute right to obtain an authoritative determination of its sovereign immunity.

 The FGN, therefore, demanded that the jurisdictional issue must be conclusively resolved before Nigeria may be required to litigate the merits of P&ID’s petition.