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IPCO v NNPC saga and liability of Nigerian legal system

Kachikwu

Kachikwu

THE judgments in IPCO v NNPC arose following an arbitration hearing at which the arbitral tribunal issued a final award dated 28 October 2004 in favour of IPCO. Briefly, IPCO is a Nigerian registered company that was contracted by the NNPC to design and construct the Bonny Export Terminal. The contract between the parties contained an arbitration clause subject to the Nigerian Arbitration and Conciliation Act in Nigeria.

In 2003 IPCO commenced arbitration against NNPC for a money claim arising from disputes under the contract. The arbitral tribunal was made up of three reputable Nigerian arbitrators who issued an award in the sum of about USD152 Million with interest at the rate of 14% from the date of the award. NNPC contested the award by filing various applications before the Nigerian courts while IPCO sought enforcement of the same awards before the English courts.

A very brief explanation of the law of arbitration:
Parties to a contract can agree between themselves that if a dispute arises from their contract instead of litigating before any particular court, they will request private individuals (known as arbitrators) to decide the disputes. The arbitrator’s final award on the disputes is generally regarded as equivalent to the decision of a court on those issues and will be enforced as such except where on very limited clearly defined grounds, the award may be set aside or referred back to the arbitrators. For those countries who are member states of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, awards that fall within Article I of the convention may be enforced in any of the 156 member states. The UK and Nigeria are both parties to the New York Convention so that the Nigerian award in favour of IPCO (clearly a domestic award) could on the basis of the New York Convention be enforced against NNPC in the UK where NNPC has assets.

The English Proceedings:
In 2004, NNPC challenged the application of IPCO to enforce this award in the UK. IPCO sought enforcement on the basis of the New York Convention and English law. An order to enforce the award was made in 2004. This order was varied in 2005 by a fresh order adjourning the enforcement of the award on condition of NNPC paying USD 13 Million (which was not disputed) and providing security of USD 50 Million. NNPC complied with both orders. In 2007 IPCO again applied to enforce the full award in England. In 2008 another decision was made for NNPC to make some more payments and increase the security by USD30Million to which NNPC complied. Both sides appealed to the English Court of Appeal in the same 2008 which were dismissed. At this time allegations of fraud arose and in December 2008 NNPC applied to stay enforcement of the award on grounds that the award had been obtained by fraud. The enforcement was stayed.

Various applications were then taken before the English courts including a consent order in 2009. In 2010, the English courts again partially enforced the IPCO award by requesting NNPC to provide security for the award in deference to the Nigerian courts making a decision on the application to set aside the award. In 2013 IPCO applied again to enforce the award now over USD100 Million. This application was refused in 2014 on the basis that NNPC may have a viable case of fraud against IPCO which was a question to be determined by the Nigerian courts.

IPCO appealed to the Court of Appeal. On 10 November 2015 the Court of Appeal handed down its decision (and a supplementary decision) in which it referred the dispute back to the Commercial court to determine the fraud allegation on the basis of English (and not Nigerian) public policy on condition of NNPC maintaining security of USD85 Million (in the supplementary judgement) within jurisdiction, thus adjourning the enforcement of the award by IPCO pending the decision of the commercial court. The neutral citation of the latest English decisions which are available online are: IPCO v NNPC [2015] EWCA Civ 1144 (for the main judgement) and [2015] EWCA Civ 1145 (for the supplementary judgement).
The Nigerian Proceedings:

In 2004 NNPC applied to the Federal High Court, Lagos to set aside the award on the grounds that the arbitral tribunal lacked jurisdiction and misconducted itself. The decision on this challenge is still pending or more correctly is yet to be delivered following the fiasco with the now disputed report of the judge (who has now retired) declaring that the issues in the case were too complicated for her; the reassignment of the case which took ten years (in May 2015) to resolve on appeal what the reassignment required of the new judge and the effect of the retirement of a judge on matters before the judge.

Following this decision of the Nigerian Court of Appeal, the case has now been assigned to a new judge. So since 2004 and after several applications, in 2015, a decision has not been made by the Nigerian courts. Between 2008 and 2015 there has been two discontinued criminal prosecutions and currently the third criminal prosecution for fraud and forgery privately pursued by NNPC against IPCO is on-going in Nigeria.
Delay:

Malami

Malami

The English Court of Appeal was heavily swayed and relied on the expert witness of a former Chief Justice of Nigeria, Justice Belgore, who was the expert witness for IPCO to the effect that it was, “conceivable that there will be no fixed determination of the issue of whether the arbitral award will be set aside for twenty or thirty years or longer”. If we recognise that the IPCO award was rendered in 2004 and eleven years after, the award has not been enforced or set aside, it becomes understandable how and why the courts frustrate the arbitral process and retain for themselves a very poor reputation which directly impacts on the growth of the arbitration market in Nigeria. The result is the very low numbers of foreign or international arbitral references with seat in Nigeria and the reluctance of foreigners to seek enforcement of their arbitral awards in Nigeria (if they can find assets against which to enforce in other jurisdictions). The direct impact of this apathy and weak judicial structure is loss of income to Nigerian lawyers and the Nigerian state; the involvement of very few Nigerian lawyers and law firms in international arbitration practice; the lack of “Nigerian voices” (of Nigerian academics and judges) in international arbitration discourse. This state of affairs must change, not just for the interest of foreign investors or arbitration but in the interest of every Nigerian citizen who have to seek legal redress before our courts.

For purposes of comparison, from 2004 to 2015 the English courts (High Court and Court of Appeal) have given five judgments on IPCO v NNPC. Over the same period, the Nigerian courts have not made one final decision on the same dispute except the one by the Federal High Court judge mentioned above. That clearly does not augur well for the reputation of the Nigerian judiciary which one English judge in IPCO v NNPC described as “catastrophic”. I must note also that the outstanding sum plus interest in this dispute is currently estimated at USD340 Million, funds belonging to the Nigerian people.

Effect:
Successive Nigerian governments woo foreign investors with all sorts of incentives (it remains debatable whether those incentives positively influence such investors to set up shop in Nigeria) and yet it is well known that security of investments is important to any business (which is what investors are) and part of that security is an efficient judicial system. Efficiency implies access to and speed of obtaining justice in addition to substantive justice.

It is no use telling investors “oh you can arbitrate your disputes in Nigeria” only for them to end up being frustrated by the Nigerian court system after going through arbitration. Arbitration will get you a decision in good time (for example the IPCO v NNPC arbitration commenced on 26 February 2003 and an award was issued on 28 October 2004) but it will not transform the paper on which the decision is written into money – it is the courts that need to do that. This is why an efficient arbitral system requires an equally efficient judicial system to thrive. The Nigerian judicial system clearly is broken and no longer fit for purpose. It needs a major overhaul to provide the support arbitration in Nigeria desperately needs.

The IPCO v NNPC saga further confirms that our decision to hold a conference at the Lagos Court of Arbitration Centre in Lagos from 5-7 July 2016 to examine the role of courts and judges in supporting arbitration in Africa was the right one.
At this conference which will be attended by judges and arbitration stakeholders from all over Africa, we will engage with issues such as delay in the courts and hope that the output from the conference will equip the judges with some of the tools they need to adopt for positive change in the way judicial business is conducted within the continent. Such change will further boost the confidence of investors and Africans in the judicial machineries of these countries.
Dr Onyema is of SOAS, University of London.



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