Avoiding Judgment Debt Doomsday

Scary. That, in one word, captures my conclusion after reading a chapter on judgment debts in Mr Mohammed Bello Adoke’s book, Burden of Service: Reminiscences of Nigeria’s Former Attorney-General, which is due for public release tomorrow. If care is not taken, judgment debts will bankrupt this country. For starters, judgment debts are court-ordered payments for breach of contract, infringement of rights and other failings on the part of the state. It is very, very scary the rate at which courts and tribunals are slamming heavy awards on the federal government because of avoidable lapses — although I reckon that some of these things are also orchestrated.

I find this very topical in the light of the award of $9bn against Nigeria by an arbitration panel in London following a breach of contract complaint filed by Process and Industrial Developments Limited (P&ID), a little-known Irish project management company. P&ID was awarded $6.6 billion for “loss of income” over the lifespan of a botched 20-year gas and supply processing agreement (GSPA) and another $2.3 billion in interests. The interests are still accumulating. The figure we are quoting is the sum awarded as far back as January 2017. It is now going to three years, so the figure would be higher. We are battling tooth and nail to stop the enforcement of the award.

Nigeria is contending that the GSPA was, and is, a scam. The Economic and Financial Crimes Commission (EFCC) has been quizzing those suspected to have participated in the entire arrangement. But while we are at it, a possible $2.3 billion fine is also hanging over us in France because of another alleged breach of contract in the Mambilla power project in Taraba state. This time around, it is a Nigerian company, Sunrise Power and Transmission Company Limited (SPTCL), making the claim. I understand there are several cases like these all over the place, some fresh and some inherited from previous administrations. They run into billions of dollars.

Adoke, who was AGF between 2010 and 2015, listed several instances in his book — such as the OPL 245 saga and the Ajaokuta Steel settlement — to illustrate how Nigeria sleepwalks into adverse situations that can drain its resources and bankrupt the treasury. In the OPL 245 case, for instance, Royal Dutch Shell dragged Nigeria to the International Centre for the Settlement of Investment Disputes (ICSID), an organ of the World Bank, claiming $2 billion in compensation for the revocation of the oil block by President Olusegun Obasanjo, who went on to enter into an out-of-court settlement agreement to return the juicy block to Malabu Oil & Gas Ltd.

OPL 245 is a pretty messy affair on a good day. In 1998, Gen Sani Abacha, then head of state, had awarded the oil block to Malabu — co-owned by Mohammed, his son, Chief Dan Etete, who was the minister of petroleum, and Alhaji Hassan Adamu, then Nigeria’s ambassador to the US. Obasanjo revoked it in 2001 and gave it to Shell under a production sharing contract with NNPC. Malabu went to court, lost and appealed, but the Obasanjo administration settled out of court in 2006 and agreed to return the oil block to Malabu. The moral question of Etete getting an oil block while serving as petroleum minister remains unanswered. In fact, there is yet no legal challenge to it.

The zigzagging was always going to end up in chaos as Shell headed to ICSID for arbitration, claiming the Nigerian government had expropriated its assets having given it the go-ahead to explore OPL 245 in 2001. It claimed to have spent $535 million already on exploration. According to Adoke, Shell was cocksure it would win the case in arbitration. So the federal government was damned: return OPL 245 to Malabu and get slammed with a $2 billion award; or restore OPL 245 to Shell and face further legal action from Malabu with a demand for billions of dollars in compensation. It was a Catch-22. This is what the government faces all the time for unilaterally ditching contracts!

When Malabu wrote to President Goodluck Jonathan in 2010 asking for the 2006 Consent Judgment to be enforced, Adoke said he told Jonathan the agreement was legally binding — but the Shell shadow remained. Now joined by ENI of Italy, Shell was still in love with the oil block but its relationship with Malabu had hit the rocks. He said the federal government agreed to mediate on the condition that Shell would drop its $2 billion claim against Nigeria. It seemed everything was settled when Shell and ENI paid $1.3 billion — $210 million “signature bonus” to the federal government and $1.1 billion to buy OPL 245 off Malabu. It all looked like a closed matter.

But, of course, we now know that dirty dealings went under the table. The deal has been tainted by allegations of graft — which Adoke swore he did not partake in (“not even a cup of tea or a slice of cake,” he wrote in the book). For me, the question remains why Obasanjo withdrew OPL 245 from Malabu without a justification that could withstand legal challenge. He could have said Etete, being minister of petroleum, violated the code of conduct by the award of the oil block to a company in which he had interest. In fact, Etete should have gone on trial for abuse of office. That, in my opinion, would have made the revocation legally justifiable and probably saved us all the scandals.

In the P&ID case, I can see that the federal government is trying to prove that the entire deal was a scam ab initio. EFCC may put some people on trial following a series of invitations of the key characters. If you ask me, I would argue that this is what we should have done when the case was in arbitration, or before the final award was given in January 2017. We were simply too slow and nonchalant over the arbitration. I am not a legal expert — truth be told — but based on some technicalities about arbitration that I have read so far, proving that the deal was a scam could be enough ground to impeach the award. I hope we have not woken up too late.

In Burden of Service, Adoke discussed the knotty case of Obasanjo’s concessioning of the Ajaokuta Steel Company Limited (ASCL) and National Iron Ore Mining Company (NIOMCO), Itakpe, to Global Infrastructure Nigeria Limited (GINL), a company promoted by the Mittal Group, in 2006. A panel set up by President Umaru Musa Yar’Adua in 2007 had found GINL wanting in the execution of the concession agreements. In June 2008, President Umaru Musa Yar’Adua finally cancelled concessions. GINL decided to pursue arbitration in a London court, claiming billions as compensation. Apparently, Nigeria was at fault in the NIOMCO case but had a good case on ASCL.

According to Adoke, before he assumed office as AGF in 2010, a panel had recommended that the federal government should pay a compensation of $525 million to GINL for “wrongful termination” of the Ajaokuta concession. It would appear — and this is tragically typically Nigerian — that some insiders had proposed the compensation in order to have their own cut. This is a case of Nigerians working against Nigeria — punishable by death in China. When Jonathan asked him to review those recommendations, Adoke said he set up a committee which concluded that Nigeria should adopt a different approach to settle the dispute because most of the facts were in the country’s favour.

Adoke wrote: “I invited the officials of Global Steel for a meeting where I got the chance to appraise them and to discover their underbelly. I challenged them regarding the compensation they were claiming, making it clear that I was aware that they had taken undue advantage of the negotiations. Prior to the meeting, I had done my homework and discovered that they had not been paying their taxes. I threatened them with criminal proceedings for tax evasion, in addition to other criminal infractions that they had clearly committed. I also observed that they had cannibalised machines and equipment at Ajaokuta Steel and had taken them to Aladja Steel” (page 207).

Long story short, the tone of the discussion tilted the matter in Nigeria’s favour. “When they noticed that I was closing in on them, the prime promoters refused to come to Nigeria for negotiations for fear of arrest and trial for tax evasion. I employed that tactic as a carrot-and-stick approach. To amicably resolve the issue, I insisted that Global Steel should relinquish their interest in ASCL for free without any form of compensation… In respect of NIOMCO, Nigeria was apparently in the wrong, unlike in the Ajaokuta matter. The requisite notices had not been given and the procedure for termination had not been followed,” Adoke wrote. We saved the sum of $525 million in the end.

As we try to dodge P&ID’s Sword of Damocles, I think there are many lessons we need to take home. One, we must be more diligent in the nature of agreements we enter into. Two, we must understand the consequences of unilaterally breaking contracts. Three, if we must break contracts, we must be sure there are loopholes and leeway we can capitalise upon to avoid catastrophe — as in the cases with GINL and OPL 245. Four, those who conspire to foist unfavourable contracts on Nigeria should know that they could be called to account someday. It has taken the P&ID case for Nigerians to pay a serious attention to judgement debts. Are we learning any lessons? If not, Armageddon beckons…

AND FOUR OTHER THINGS…
PEPT TALK
A lot has been said about the unanimous decision of the Presidential Election Petitions Tribunal (PEPT) to dismiss Alhaji Atiku Abubakar’s petition against President Muhammadu Buhari. While we are still debating it, I think the judgment provided enough grounds for Atiku to head to the Supreme Court if he so wishes. It seems the most contentious issue is whether or not Buhari lied on oath when he said his secondary school certificate was with the military authorities — who denied having it. The tribunal does not think it is perjury since Buhari, who attended several post-secondary institutions, is eminently qualified and did not need to lie about a basic certificate. Remarkable.

DISAPPOINTED LOVE
The last thing you expected Nigerian returnees from South Africa to do is sing the national anthem, but that was exactly what they did when Air Peace airlifted them for free from the xenophobic country. Chief Allen Onyeama, chairman of the airline (God bless him), said he was moved to tears. I was moved to tears too. I have always maintained that Nigerians love their country. Their anger and bitterness are as a result of disappointed love and unfulfilled dreams. This incident further renews my faith in the country despite all the discouragement around me. Everything to make Nigeria great is here. Who will heal our wounds? Who will unite us? Who will inspire us? Posers.

VAT RISE
The federal executive council has proposed to increase the rate for value-added tax (VAT) from 5 percent to 7.5 percent in 2020 to improve our revenue profile. Predictably, Nigerians are not enthusiastic about it. But that is not my point. Mrs Zainab Usman, the finance minister, said the proposed increase is subject to the approval of the national assembly which will have to amend the law. Not so, Madam Zainab. Section 38 of the VAT Act says the minister “may by order published in the Gazette amend the rate of tax chargeable”. It is very interesting that the senate has already promised to “summon” the minister over it. Hilarious.

SEUN’S ‘SIN’
Mr Seun Onigbinde, co-founder of BudgIT, has been appointed as a technical adviser in the ministry of budget and national planning. That is not the news, though. Having been a fierce critic of the Buhari administration, he was immediately subjected to serious scrutiny on Twitter over his past vicious tweets against this government. This is a situation critics face all the time. Some are questioning why he should serve the same government he has been so critical of — but many also think it is an opportunity to practise what he has been preaching. There is no doubt that he is eminently qualified for the job and he will be a plus to the system. Never say never. Pragmatism.