The landmark decision of Robin Knowles J in Nigeria v Process & Industrial Developments Limited [2023] EWHC 2638 (Comm) sets a precedent for English courts in exercising their supervisory jurisdiction to rigorously scrutinise arbitral awards procured by fraud and corruption to protect the integrity of international arbitration proceedings.
Summary of the Facts
In January 2010, the Federal Republic of Nigeria entered into a 20-year Gas Supply and Processing Agreement ("GSPA") with Process & Industrial Developments Ltd ("P&ID"), a company registered in the British Virgin Islands. The GSPA required Nigeria to supply natural gas to P&ID, which would process it and return it for power generation. Both parties failed to perform, which led P&ID to initiate arbitration in reliance on an arbitration clause in the GSPA. P&ID claimed that Nigeria's breach caused it to lose anticipated profits. In January 2017, P&ID was awarded US$6.6 billion plus interest by the arbitral tribunal. That figure had increased to approximately US$11 billion by the time of the English Commercial Court proceedings.
Nigeria challenged the arbitral awards in the English Commercial Court under section 68 of the Arbitration Act 1996, alleging that the awards had been obtained by fraud and were therefore contrary to public policy. The allegations included:
- Bribery and corruption in the procurement of the GSPA;
- Bribery of a Nigerian official during the arbitration to conceal the initial corruption;
- Perjury and the presentation of knowingly false evidence by P&ID during the arbitration and improper access to Nigeria's privileged legal documents to gain an unfair advantage.
The Decision of Robin Knowles J
Justice Robin Knowles ruled in favour of Nigeria, finding at [516] that P&ID obtained the awards "only after practising the most severe abuses of the arbitral process". Several scathing findings were made against P&ID. First, Justice Knowles found that P&ID secured the GSPA by bribing Mrs Grace Taiga, a senior Nigerian official involved in the contract's negotiation. Second, P&ID committed perjury by presenting evidence in the arbitration that it knew to be false, deliberately hiding bribery from the arbitral tribunal by false testimony from P&ID's CEO, Michael Quinn. This was a deliberate attempt to mislead the tribunal. Third, P&ID continued to pay bribes to Mrs Taiga during the arbitration process to ensure her silence about the original corruption, further distorting the arbitral process. Fourth, P&ID and its legal advisers obtained and used Nigeria's privileged legal documents, which detailed its legal strategy and internal deliberations. This gave P&ID an illegitimate and unfair advantage in the arbitration. Consequently, the arbitral awards (both on liability and quantum) were set aside.
Legal Reasoning
Justice Knowles set aside the arbitral awards on the basis of "serious irregularity" having caused substantial injustice under section 68(2)(g) of the Arbitration Act 1996 ("AA").
At [499], Justice Knowles pointed out that the reference to seriousness in s.68 AA 1996 focuses specifically on the consequences for justice. At [512], Justice Knowles went on to say that while the threshold is high, the Court will be realistic about what proof is possible in terms of showing the effect of a dishonest course of conduct. Justice Knowles found at [474] that the awards were obtained by fraud and procured in a manner which was contrary to public policy. At [511], Justice Knowles found that Nigeria suffered substantial injustice. Crucially, while parties should be free to agree how their disputes are resolved, this is subject to such safeguards as are necessary in the public interest. Thus, for reasons of public policy, s.68 AA 1996 requires close scrutiny of the parties' conduct in the arbitration and the process by which the award was obtained. On this ground, Justice Knowles found at [476] that it can be inferred that an award obtained by fraud or contrary to public policy (or procured in a way that was contrary to public policy) and which has caused or will cause substantial injustice is not what the parties agreed to when they agreed on arbitration. Justice Knowles's judgment underscores that public policy considerations can override the finality of arbitral awards.
The judgment provides clear guidance on the threshold for setting aside awards under s.68 AA 1996. Specifically, citing Lesotho Highlands Development Authority v. Impregilo [2006] 1 AC 221 at 235H (Lord Steyn), Justice Knowles confirmed at [477] that a high threshold is applicable to s.68 AA 1996. Furthermore, per Flaux J (as he then was), in Chantiers de l'Atlantique SA v Gaztransport & Technigas SAS [2011] EWHC 3383 "fraud (that is dishonest, reprehensible or unconscionable conduct) must be distinctly pleaded and proved, to the heightened burden of proof as discussed in Hornal v Neuberger Products Ltd [1954] 1 QB 247 and Re H (Minors) [1996] AC 563". Moreover, the judgment clarifies that it is not merely the existence of corruption in the underlying contract, but the use of fraud and abuse during the arbitral process itself, which justifies judicial intervention.
Commentary
The case demonstrates that state parties are not powerless against arbitral awards procured by fraud or bribery and can successfully challenge them in the courts of the seat of arbitration. The impact that this decision will have on the international arbitration landscape remains to be seen. States and private companies in emerging markets which either host or are involved in high-risk sectors might find it prudent to designate London as the seat of arbitration to avail of the supervisory jurisdiction of English courts. Nigeria v P&ID has reaffirmed English courts' vigilance over the integrity of arbitral processes and their willingness to deter misconduct in international arbitration. Firms in London with arbitration practices may be well-advised to look further afield to emerging markets for business opportunities, including for state clients in view of the shifting tides in international arbitration where corruption is concerned.
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