A US court blocks Nigeria’s access to documents on P&ID $10 bln claims
A United States court has ruled against Nigeria’s wish to claim over $10 billion in its ongoing dispute with the Process & Industrial Developments Ltd (P&ID), a British Virgin Islands-registered company.
U.S. District Judge Paul Engelmayer in New York granted the hedge fund’s motion, overturning a ruling from May and quashing subpoenas issued by Nigeria.
Nigeria sought the information to aid a corruption probe into P&ID, a company in which VR Capital acquired a 25 percent interest in 2018.
The case was filed by VR Capital Group Ltd. to block Nigeria from accessing its internal documents to stop P&ID, a company VR partly owns from collecting a $10 billion arbitration award.
Nigeria’s anti-graft agency Economic and Financial Crimes Commission (EFCC) is investigating a gas-supply contract a former minister concluded with P&ID in 2010 and subsequent arbitration proceedings that resulted in the hefty penalty against the country three years ago.
Nigeria is accusing the company of developing sham arrangements designed to fail and bribing of government officials at the time.
P&ID was to build and operate an Accelerated Gas Development project in Cross River State while the Nigerian government provides natural gas from oil mining leases (OMLs) 123 and 67 operated by Addax Petroleum and supplied to P&ID to refine into fuel suitable for power generation in the country.
As part of its defence on the alleged breach, the firm claimed that the failure to construct the pipeline system to supply the gas “frustrated the construction of the gas project, thereby depriving it of the potential benefits from over 20 years’ worth of gas supplies.”
While P$ID continues to deny any wrongdoing in the deal, the Nigerian government continues its legal attempts to overturn both the 2017 arbitration award and a decision by a U.K. judge last year upholding it, claiming P&ID’s alleged fraud only recently came to light.
Nigeria got a victory in September when a London judge ruled the government had established a “strong prima facie case of fraud” against P&ID and should be permitted to test its allegations at a trial to determine the legitimacy of the arbitration award.
Following the decision, Nigeria’s lawyers wrote to Engelmayer asking him to dismiss VR Capital’s motion. Information collected from the banks had contributed evidence to the anti-corruption agency’s probe, which in turn had been “critical” to the country’s success in the UK court, the government said.
In June 2020, Southern District of New York’s Judge Lorna Schofield granted Nigeria permission to gather information from U.S. banks concerning transactions involving companies and people affiliated with P&ID, as well as former government officials.
The Nigerian government also wanted VR Capital to hand over documents concerning its purchase of P&ID shares as well as the decade-old contract and ensuing arbitration. VR Capital applied to the federal court in New York to set aside the subpoenas principally on the grounds that Nigeria should have sought authorization through its mutual legal assistance treaty with the U.S.
While the hedge fund is based in London, the four entities and two directors targeted by Nigeria are in New York.
During the ruling, Engelmayer claimed that Nigeria misled Schofield by denying any intention to use the documents in the UK proceedings after VR Capital claimed Nigeria would use the information provided by the hedge fund for the same goal.
However, Nigeria told Engelmayer that the main use of VR Capital documents would be in its domestic corruption probes.
Engelmayer accepted Nigeria’s argument that it would be permissible for the government to present some material to support efforts to challenge the arbitration award in England.
But a review of the request by the U.S. Justice Department under the treaty would help decide if the information sought was “genuinely intended for use in a criminal prosecution or investigation” or “the improper purpose of fortifying Nigeria’s attempt in the English courts to void the multi-billion-dollar arbitral award against it,” Engelmayer said. It is unclear if Nigeria plans to submit a new application under the bilateral agreement.
A spokesperson for Nigeria’s attorney-general Abubakar Malami according to a Bloomberg report accused VR Capital and P&ID of using “delay tactics” in “prolonging the discovery process and preventing us from obtaining critical evidence.”
“These evasive efforts are manifestly inconsistent with P&ID’s position that it has nothing to hide.”
However, a lawyer representing P&ID and VR Capital Zachary Rosenbaum argued that “Misleading the U.S. court” is part of Nigeria’s “last-ditch efforts to avoid payment of the arbitration award.”