NNPC gets $100m bank guarantee reprieve from UK Supreme Court

By Michael Eboh
Nigerian National Petroleum Corporation, NNPC,
Tuesday, said it has been granted a reprieve in a
unanimous judgment by the Supreme Court of the United
Kingdom over a $100 million Bank guarantee in a case
involving the Corporation and a service company, IPCO
(Nigeria) Limited.
New GMD, NNPC, Dr. Maikanti Baru
The NNPC, in a statement by its Group General Manager,
Group Public Affairs Division, Mr. Ndu Ughamadu, said
the reprieve was the latest in the protracted dispute
arising from the contract between NNPC and IPCO for
the construction of the Bonny Export Terminal (BET)
Project in Port Harcourt, Nigeria.
The NNPC said the development is a significant decision
in the history of the case as the English Supreme Court
has not only discharged NNPC from the responsibility to
sustain the additional security of US$100million in
favour of IPCO but it also further reiterated the finding of
the English Commercial Court and the Court of Appeal
that NNPC has a good prima facie case that IPCO
procured the Arbitral Award by fraud.
It further stated that the decision of the Supreme Court
has clarified conclusively the limits of an enforcing
Court’s power to order security as a condition on the
right to have a decision of a properly arguable challenge
under the New York Convention 1958 and the English
Arbitration Act 1996.
Group Managing Director of the NNPC, Mr. Maikanti
Baru, said he was delighted on the new development,
commending the efforts of the legal team that secured
judgment in favour of the Corporation.
Baru said no stone would be left unturned to extricate
NNPC from encumbrances that may impede its access
to hard earned funds which are much needed to execute
developmental projects by the various tiers of
government in the country.
Ughamadu said the NNPC was represented by the UK
law firm of Messrs. Stephenson Harwood LLP, and
Nigerian law firms of Messrs. Babalakin & Co. and
Messrs. Abdullahi Ibrahim & Co.
He disclosed that the IPCO had referred its claims to
arbitration in Nigeria and obtained an Arbitral Award of
$154 million in 2004, with annual interest running at
14%, leaving NNPC with no option than to promptly
challenge the award at the Federal High Court in Lagos.
According to him, since 2004, IPCO had repeatedly
sought to enforce the award in England prior to the
conclusion of NNPC’s challenge of the Arbitral Award in
Nigeria.
He said, “It would be recalled that in 2008, during one of
IPCO’s attempts to secure an order for the enforcement
of the Award in the UK, NNPC discovered evidence that
IPCO had forged documents relating to the claims and
the related arbitration in Nigeria, and as a result, the
parties agreed in 2009 to adjourn the enforcement
proceedings in England, in order to await the
determination of the fraud allegations in Nigeria.
“In 2012, IPCO again applied to the English Commercial
Court to enforce the award despite the agreement on
the adjournment of the enforcement action. IPCO’s
application was however, dismissed on March 14, 2014,
holding inter alia that NNPC had made out a good prima
facie case of fraud giving NNPC a realistic prospect of
proving that the whole award should be set aside. IPCO
however appealed to the UK Court of Appeal.
“In 2015, the UK Court of Appeal decided that the delays
in the Nigerian proceedings required the English Court to
lift the adjournment and to decide whether to allow
enforcement following a trial of the fraud allegations in
the English Court.
“Both the Commercial Court and, the Court of Appeal
concluded that the fraud allegations against IPCO were
made bona fide, that NNPC has a good prima facie case
that IPCO practised a fraud on the Arbitral Tribunal, and
that NNPC has a realistic prospect on that basis of
proving that the whole award should be set aside.
“However, the UK Court of Appeal ordered NNPC to
provide an additional security of US$100 million (NNPC
having previously provided security of US$80million) as a
condition of being entitled to advance a defence that
enforcement should be refused because the award had
been procured by IPCO’s fraud.
“Subsequently, NNPC appealed to the UK Supreme Court
to decide whether the English court, as an enforcing
court, is empowered to require security for money
payable under the award (or any part thereof) from a
party resisting enforcement of such award as a condition
for being entitled to advance a good and arguable
defence that enforcement would be contrary to English
public policy because the award was procured by fraud.”
Ughamadu further stated that on March 1, 2017, the UK
Supreme Court unanimously set aside the Court of
Appeal’s Order, allowing NNPC to advance its defence in
the English Commercial Court free of any such
conditions.