The birth of one of the most notorious companies to have ever impacted Nigeria came about in 2006 when two Irish businessmen Michael Quinn and Brendan Cahill established a company called Process and Industrial Developments Limited (P&ID). Shortly afterwards, and despite having, “no assets, only a handful of employees, and was without a website or other presence”, the company won a 20-year contract to build and operate a gas processing facility in the Niger Delta. That contract, which the Nigerian government alleges was awarded to P&ID without following due process, was never executed by any of the involved parties.
In 2012 the company sued the Nigerian government for breach of contract. In 2017, after five years of private arbitration proceedings in London, P&ID was awarded $6.6 billion in compensation with 7% interest per annum (or roughly $1.3 million per day). That award has since soared to approximately $10 billion in total.
In 2019, two years later, the company won an order to compel Nigerian authorities to pay up. Luckily for the Nigerian people, that order has been frozen pending Nigeria’s appeal. The country is now asking UK commercial courts to set aside the award and trial commences in early 2023. If P&ID wins the appeal, then it will have succeeded in ripping off Nigeria for north of $10 billion, a truly staggering amount. This hit to government coffers would be outrageously high for any country, but the impact on Africa’s most populous nation would undoubtedly be felt across society.
By any measure, P&ID’s claim is a sham. The company is registered in the British Virgin Islands, a jurisdiction seen by many as a safe haven for offshore shell companies trying to evade tax. P&ID has no real record of delivering contracts in the oil and gas sector but won a 20-year contract worth billions of dollars to build and operate a gas processing facility in the oil-rich Niger Delta. When the contracted work unsurprisingly failed to materialise, P&ID sued the Nigerian government in the UK, using secretive arbitration proceedings in London to extort billions of dollars from Nigeria over a promised gas project it is alleged was planned to fail.
The UK courts have established a “strong prima facie case” that the contract was procured by bribes paid to insiders as part of a larger scheme to defraud Nigeria. P&ID’s main witness is alleged to have lied during arbitration including over whether the company was in a position to perform the contract and the arbitration itself was also tainted by corruption.
Quinn himself was connected to two failed military contracts in Nigeria and was charged with espionage in 2006. Ahead of his death in 2015 he was also involved in a steel contract in the EU that had been under investigation for alleged fraud. It would therefore be hard to argue against Nigerian President Muhammadu Buhari for dismissing the case as a sham to cheat the country out of billions of dollars.
P&ID wants to be paid $10 billion for breach of contract when no work was ever executed. The amount of money at stake, which would be eyewatering for any country to pay, has huge and grave implications for Nigeria. The total award amounts to, “more than ten times the country’s national health budget; eight times its education budget; or well over a quarter of its gross foreign reserves.” 40% of Nigerians live below the poverty line, subsisting on less than $1 per day. Even under normal conditions, expecting a developing state to pick up a $10 billion tab would be outrageous. In the age of Covid, the award is deadly and tantamount to forcing the Nigerian government to choose between a loan-shark and the health of the people it is sworn to protect.
Some would say that Nigeria’s appeal is coming very late, years after the arbitration case was concluded, and therefore should not be heard. Those who know Africa and the challenges facing most developing economies would disagree. This is not a simple situation – it is a matter of national security. The monumental corruption underlying the contract is enough to cripple the government and further impoverish the people who are already suffocating under systemic corruption and embezzlement of public funds.
Having been granted an “unprecedented” extension, the Nigerian government can now proceed to appeal having uncovered serious irregularities and fraud in the arbitration process. Should the final award be allowed to stand, then a small offshore shell company with no credibility like P&ID would have succeeded in using English courts as an unwitting vehicle to dupe the Nigerian government out of billions of dollars, crippling the country’s economy in the process and further impoverishing its people. The international community cannot stand by and allow this to happen. If they do, companies similar to P&ID are more than likely to try their luck in other countries and the vicious cycle of corruption and opaque arbitration awards will continue.