The $9 Billion Judgement Debt: An Albatross on Nigeria’s Lean Neck (Part 4)
Last week, we discussed how the recent decision of the Federal High Court sitting in Abuja, convicted and subsequently ordered the winding up of Process and Industrial Developments Ltd (P & ID Ltd) and its Nigerian affiliate, P & ID Nigeria Ltd, by Justice Inyang Ekwo. The reaction that followed the decision of the court, through its counsel, Andrew Staffort, Q.C, of Kobre & Kim, based in London, denounced and repudiated the Federal High Court judgement, as a sham and illegitimate. Today, we shall continue with the other concepts as advanced by pro-government advisors, to arrive at a just opinion. Before this, let us examine more recent developments on this unending saga.
The Stay of Execution by the UK Court: A Pyrrhic Victory by the Federal Government
I laughed with a guffaw, when I watched the Attorney-General of the Federation, Abubakar Malami, SAN, announce with éclat, pomp and sparkle, how Nigeria secured a stay of execution of the $9.6 billion debt, coram Justice Christopher Butcher of the UK Commercial Court in London.
What Malami and Lai Mohammed, Information Minister, did not tell Nigerians in their own narratives, if really true (as published by Premium Times and strenuously advanced by P & ID), is the argument that Justice Butcher, in granting the stay of execution actually “butchered” Nigeria in his ruling, in three infamous respects. Holding that " there may be immediate and potentially severe damage to Nigeria if there is no stay", the ruling however translates to P & ID being entitled to seize Nigeria's assets should either of the deadlines be missed by the Federal Government. Firstly, the ruling, if the narration by P & ID and Premium Times is the correct version (I pray it is not), merely granted Nigeria leave to: appeal the UK Court’s decision which made Nigeria’s assets subject to forfeiture in enforcement/satisfaction of the arbitration award in favour of P & ID. It was not an order allowing the Government to appeal the award itself. Only the enforcement. This presumes that for now, the award of $9.6 billion against Nigeria itself, remains intact, untouched and unviolated. Secondly, for Nigeria to even appeal against the execution of the award at all, she must pay $250 million to P & ID as costs within 14 days; and $200 million must be deposited in the Court towards the judgement within
60 days. Was this humongous and scandalous cost of $250 million really awarded against Nigeria, in favour of P& ID? I pray not.
If this narrative is correct, what this means in effect is that, for Nigeria to be allowed at all to stay execution of and appeal against the enforcement of the arbitral award (not the award itself), she must first cough out $450 million. At the current yoyo-dancing rate of #360 to $1, that means Nigeria must first cough out N450 billion, towards satisfying the P & ID arbitral award.
Without these payment conditions, it simply means the coast remains clear for P & ID to forfeit Nigeria’s properties, and monies in 160 New York Convention and 28 EU Countries. This is not yet the meat of the main judgement, itself.
Thirdly, and perhaps, more damning and damaging (a piece of pro bono legal advice I had freely offered last week, but which appears to have been ignored), all Counsel to both the Federal Government and P & ID agreed with the Commercial Court that all actions and criminal trials in Nigeria, shall not have any relevance or bearing on the UK arbitral award matter howsoever! Even Harry Mantovu, QC, who represented Nigeria, was aware of the great danger we are in, when he declared, "even if P& ID seized assets for a short time, it could be serious". This is because P & ID are entitled to target and seize Nigeria's assets, such as real estate, bank accounts, all kinds of moveable wealth, except properties unrelated to Nigeria's operations as a sovereign State. Such cannot be seized. Examples are State assets that help to carry out diplomatic functions, such as commercial properties that are also used to issue visas, or officially house Nigerians and other nationals who are visiting Nigeria, as guests on a foreign land.
So, what has Nigeria achieved? Nothing positive;
everything negative. This is why I had given Nigeria three possible options of settling this matter, but with preference for negotiation of the judgement debt of $9.6 billion. Every other is merely tangential, and amounts to postponing the evil day.
The current GDP (in millions of Dollars) of some States in Nigeria are as follows: Lagos (the highest) = $ 33.679; Rivers ($ 21.073); Delta ($16,749); Oyo ($16.121); Imo (14. 212); Edo ($11.888); ....... Ebonyi ($2.732); Gombe ($2.501) and Yobe ($2.011); from the richest to the poorest of the 36 States. The ugly spectre of the prevailing interim award, is thus, nearly two times the GDP of the entire 36 States of Nigeria combined! Yet, Nigeria is beating her flabby-breasted chest in adulation, and fawning sycophancy? This is sheer poor factual narration, which amounts to historical revisionism.
Aside this poor interim outing by Nigeria and expected future hurting steps, the main substantive case suffers serious legal minuses, damning obstacles, and mine-laden booby traps. This then brings us to an analysis of the various concepts of State immunity, a doctrine the Federal Government hopelessly
hopes to rely on. We had started a discourse on this doctrine, last week. Now, let us continue.
The Restrictive Doctrine (Continues)
Although the restrictive approach is now widely adopted, State immunity continues to be an unsettled area of International
Law, and the scope of recognised exceptions varies from State to State. Consequently, in order to analyse the level of risk in dealing with a particular State or State entity, it is important to understand which laws shall apply, in determining whether the State is entitled to claim immunity.
Why does State Immunity Matter?
Put simply, if a State is able to claim immunity from suit or enforcement, it will be difficult for a commercial party to enforce its contractual rights against that State. A successful plea of State immunity (as Nigeria intends to do), will mean that either the courts will refuse to hear the dispute, or they will be unable to give effect to any judgement or award made against the State.
Commercial parties always attempt to manage the risks associated with State immunity, by obtaining a contractual waiver of immunity. This is an early step, by which the State wholly waives and agrees not to claim the immunity it would otherwise be entitled to. However, increasingly, States and State entities are now refusing to abandon their rights to immunity. In many cases, they now insist on positively asserting their right to claim immunity, in relevant contractual documents. In such, any party dealing with the State, perfectly understands the ponderous consequences of dealing with a State entity which has not expressly waived its immunity.
The key important questions and answers a party should ask when State immunity may become an issue, as applicable under English law, i.e, under the SIA, now follows:
Is it true that the King can do no wrong? Some Exceptions
When State actors invest in private equity funds, they play by different rules. Under the doctrine of “sovereign immunity”, if the relationship sours, governmental investors may be protected from legal recourse, in ways that other investors are not.
The doctrine of sovereign immunity, is simply about the proposition that the government cannot be sued without its consent – that is, “the King can do no wrong.” Sovereign immunity, though simple in concept, is nuanced in application. It can apply to a wide range of investors, including nation States, State agencies or departments, supranational organisations, sovereign wealth funds and governmental pension plans. This means that, a fund owner may have limited legal recourse against certain “sovereign” investors, unless it has taken appropriate precautionary steps at the time of the initial investment. The stakes could be very high.
Immunity from Suit v Immunity from Enforcement
Sovereign immunity takes two forms: (1) immunity from suit (also known as immunity from jurisdiction or adjudication), and (2) immunity from enforcement. The former prevents the assertion of the claim; the latter prevents, even a successful litigant, from executing a judgement already delivered.
None of these forms of immunity, is actually absolute. Both recognise certain exceptions, that permit actions under certain circumstances. Depending on the facts, a litigant may be able to invoke an exception to immunity from suit, in a situation where though he could bring and win a case, he may yet be unable to collect his money, because none of the exceptions to immunity from enforcement applies. In any particular case, it is essential to consider both immunity from suit and immunity from enforcement, as well as relevant exceptions to each.
United States Law v English Law
For United States, private equity funds and investors, sovereign immunity most often arises under either under U.S. law or under English law (or the law of territories that follow English law, such as the Cayman Islands). Whichever law applies in any particular circumstance, will likely be determined by the jurisdiction in which the proceedings are brought, although the law chosen by the parties to govern their agreements, may also have a direct impact on the proceedings. Either way, at each step, the key questions are the same: Who or what is entitled to immunity? If immunity exists, does an exception apply?
U.S. Law: The Foreign Sovereign Immunities Act of 1976
The Foreign Sovereign Immunities Act of 1976 (“FSIA”) governs the rights and immunities of foreign – as opposed to U.S. – States and agencies. Under FSIA, foreign States are immune both from jurisdiction and from enforcement in the U.S., unless an exception applies.
FSIA defines “Foreign State” broadly, and extends immunity not just to the sovereign nation State, but also to its political subdivisions, agencies and instrumentalities. “Agencies and instrumentalities” include (i) any separate legal entity (ii) that is (or is majority-owned by) an organ of a foreign State or political subdivision, and (iii) that is created under the laws of that foreign State. The net effect of these broad definitions, is that sovereign wealth funds may be entitled to immunity from suit under FSIA.
FSIA recognises numerous exceptions to immunity from suit, however. Three of those exceptions are particularly relevant for funds and their investors – and only one need apply for the suit to proceed:
Commercial Activity
An otherwise immune State entity can be sued in a U.S. court, if the action is based upon a commercial activity with a sufficient nexus to the U.S. Investing in a private equity fund has been recognised as a “commercial activity” under FSIA, and a failure to make a payment in the U.S. may be sufficient to permit the suit.
Waiver
A State entity can waive its immunity under FSIA either explicitly (e.g. in a side letter) or by implication (e.g. by filing a responsive pleading in an action, without raising a defence of sovereign immunity). (To be continued).
THOUGHT FOR THE WEEK
“A government for the people, must depend for its success on the intelligence, the morality, the justice, and the interest of the people themselves.” (Grover Cleveland).
“A SUCCESSFUL PLEA OF STATE IMMUNITY (AS NIGERIA INTENDS TO DO), WILL MEAN THAT EITHER THE COURTS WILL REFUSE TO HEAR THE DISPUTE, OR THEY WILL BE UNABLE TO GIVE EFFECT TO ANY JUDGEMENT OR AWARD MADE AGAINST THE STATE”