By: Emily Granja, Junior Staffer

On October 23,2023, England’s High Court of Justice ruled in favor of the Federal Republic of Nigeria in Nigeria v. Process & Industrial Developments Ltd. (P&ID). Reviewing the case, the High Court vacated P&ID’s $11 billion arbitral award after finding significant evidence of fraud and bribery. While the High Court’s decision marked a victory for Nigeria, it also shook the international arbitration system. This case exposed some of international arbitration’s flaws and generated new concerns regarding the confidentiality inherent in the arbitration process.

The events culminating in Nigeria v. Process began in 2010, when P&ID struck a lucrative deal with Nigeria. P&ID is an engineering and project management company owned by two Irish businessmen who conducted extensive business in Nigeria but possessed no notable experience in the oil and gas industry. Nonetheless, Nigeria agreed to distribute a substantial amount of natural gas for P&ID to refine. Under the parties’ “20-year natural gas supply and processing agreement (GSPA),” P&ID’s refined gas would generate electricity for all of Nigeria.

In compliance with Nigerian law, the agreement contained an arbitration clause setting London as the arbitration venue unless the parties agreed otherwise. Nearly two years after signing the contract, the parties landed in arbitration proceedings in London. P&ID alleged that Nigeria failed to supply “the agreed-upon quantity of natural gas.” Accordingly, in 2015, the London tribunal found that Nigeria had breached its contract, and in 2017, and awarded P&ID an astonishing $11 billion. Nigeria repeatedly appealed the ruling to the English High Court of Justice, which maintained the award was “enforceable.” In 2020, Nigeria appealed the award again, finally succeeding, resulting in the momentous 2023 hearing.

Judge Knowles, writing for the High Court of Justice, vacated P&ID’s $11 billion award after Nigeria presented evidence exposing P&ID’s behavior. Documentation of “payments and communication” revealed that P&ID bribed a Nigerian official to secure the GSPA contract. The same Nigerian official was then coaxed throughout the arbitration hearings to conceal P&ID’s alleged wrongdoings. Furthermore, P&ID and its lawyers had procured numerous confidential documents “leaked” to it during the arbitration proceedings. The documents formed the basis of P&ID’s legal strategy, allowing it to prevail over Nigeria. Based on this record, Judge Knowles ruled that the award was obtained through “severe abuses of the arbitral process” and should not be enforced.

Nigeria v. Process dampened public trust in the arbitral system, but there are lessons to be learned from P&ID’s alleged abuses of that system. Nigeria v. Process revealed situations in which arbitrators should exercise some level of intervention to prevent the sort of corruption that unfolded in the case. Judge Knowles was “implicitly critical of the arbitrators for merely witnessing the inequality between the parties,” citing Nigeria’s lack of preparation, which allowed P&ID to execute its suspiciously powerful legal case unchallenged. Following the case, experts believe that parties involved in arbitration will permit tribunals to exercise more authority to investigate suspicions of corruption.

Additionally, Nigeria v. Process serves as a reminder that increased precaution and attention should be taken to combat the flaws associated with arbitration confidentiality. The private nature of the arbitration process prevents public oversight and scrutiny of proceedings, allowing for nefarious behavior to go unnoticed. Some experts recommend that parties aid in oversight and accountability by incorporating transparency provisions and protocols in arbitration agreements. Others emphasize that tribunals should strive to retain neutral adjudicators and secure access to confidential information. Whatever reforms are enacted following Judge Knowles’s ruling, Nigeria v. Process has presented the arbitral system an opportunity to address public concern by restoring and enforcing arbitration safeguards.

With the vulnerabilities of arbitration better known, tribunals can better recognize signs of corruption, and parties can incorporate various provisions to limit the likelihood of corruption and exploitation of a proceeding.

Emily Granja

Although Nigeria v. Process is expected to lead to further corruption mitigation, some critics remain worried about “an increasing willingness of parties to challenge the enforcement of arbitration awards on the basis of purported corruption.” Some fear such mitigation efforts may result in a new form of corruption—the validation of false claims. Some critics believe that an influx of parties will make false corruption claims to avoid the enforcement of large arbitral awards. Observers fear that these false claims could potentially saddle tribunals with corruption investigations. However, inundating proceedings with false claims is not unique to arbitration, and courts reviewing an arbitral award conduct an extensive review before vacating a ruling. Thus, some argue that the positive impact of the suggestions made in the wake of Nigeria v. Process may trivialize the critics’ concerns about the international arbitral system.

Nigeria v. Process & Industrial Developments Ltd. serves as a cautionary tale in the world of arbitration, and the arbitral system is better because of it. With the vulnerabilities of arbitration better known, tribunals can better recognize signs of corruption, and parties can incorporate various provisions that limit the likelihood of corruption and exploitation of a proceeding. Now more than ever, arbitral abuses are less likely to go unnoticed, and the arbitral system will continue to improve due diligence measures aimed at protecting the integrity of a proceeding. Nigeria v. Process reminds tribunals, arbitrators, and parties of the need to make arbitration more transparent so that it remains a leading dispute resolution mechanism.