UK High Court Sets Aside Arbitration Awards in Nigeria v P&ID Case Over Fraudulent Procurement

Introduction

In the case of The Federal Republic of Nigeria v Process & Industrial Development Ltd (P&ID), the High Court of Justice delivered a landmark ruling on a challenge to arbitration awards on the grounds of fraud and public policy. This analysis examines the key topics and legal principles applied in the judgment handed down by the Hon Mr Justice Robin Knowles CBE.

Key Facts

The Federal Republic of Nigeria challenged two arbitration awards made in favor of P&ID under section 68 of the Arbitration Act 1996, alleging fraud and arguing that the procurement of the awards was contrary to public policy. Mr Justice Knowles agreed with Nigeria, setting aside the Award on Liability and the Final Award due to the way they were obtained, which included the provision of false evidence, bribery, and retention of internal legal documents.

Legal Principles

Challenge Under Section 68(2)(g)

The court upheld the challenge pursuant to section 68(2)(g) of the Arbitration Act 1996, which deals with serious irregularities affecting procedures, requiring that the irregularity has caused, or will cause, substantial injustice to the applicant. The Court identified three irregularities: false evidence by Mr Michael Quinn regarding the Gas Supply and Processing Agreement (GSPA), continuing bribery of Mrs Grace Taiga to suppress information about the earlier bribery, and P&ID’s improper retention of Nigeria’s internal legal documents to gain insight into Nigeria’s strategy during arbitration.

Causation Requirement

The court scrutinized the causation requirement, as contained in section 68(2), demanding proof from Nigeria that any fraud was causative of the awards. P&ID proposed that the “Different Result Test”—whether, absent the irregularity, the Tribunal might well have reached a different conclusion—was not satisfied, particularly with respect to the continued payments to Mrs Taiga. However, the court disagreed, noting that without the fraud, the outcome of the arbitration would have been different and that the awards were obtained due to these irregularities.

Section 73 — Loss of Right to Object

P&ID asserted that Nigeria lost its right to object to the awards under section 73 of the Arbitration Act 1996 by not raising its objections sooner. The court considered whether Nigeria could have, with reasonable diligence, discovered the fraud at an earlier date. The court held that there were no logical or evidential grounds to predict that Nigeria could have discovered the fraud through earlier action, thus Nigeria had not lost its right to object.

Leave to Appeal

P&ID sought leave to appeal the decision under section 68(4) of the Arbitration Act. The court refused leave to appeal for several reasons, primarily on the grounds that P&ID had no real prospect of success on the proposed grounds of appeal and that there were no compelling reasons for an appeal. The value and importance of the case, and the potential repercussions for arbitrators and other participants in arbitral proceedings were noted, but not deemed sufficient to warrant an appeal.

Setting Aside vs. Remission to the Tribunal

The court also considered the appropriateness of setting aside the awards versus remitting the matters to the Tribunal for reconsideration per section 68(3) of the Arbitration Act. It was determined that justice would not be served by reconsideration by the same Tribunal and that the irregularity indeed went to the root of the awards, justifying the setting aside of the entire award rather than remission.

Outcomes

The court set aside the Award on Liability and the Final Award in their entirety. It refused leave to appeal after assessing P&ID’s proposed grounds, finding no real prospect of successfully appealing the decision. The judgment also addressed various consequential matters and other decisions arising from the trial.

Conclusion

The High Court’s decision in The Federal Republic of Nigeria v Process & Industrial Development Ltd introduces a significant precedent regarding the level of irregularity and fraud necessary to set aside arbitration awards under the Arbitration Act 1996. Mr Justice Knowles’ application of legal principles and the refusal to grant leave to appeal emphasizes the UK courts’ commitment to ensuring that arbitration awards are procured without manipulation or fraud and stand up to the principles of natural justice and public policy. This case serves as a cautionary tale for participants in arbitration proceedings, highlighting the seriousness of perjury, bribery, and improper use of documents in the arbitral process.