Aiteo, Shell, Seven Nigerian Banks Tango over Alleged $2bn Debt

Emmanuel Addeh

The legal tussle between Aiteo Eastern E&P Company Limited, Shell Plc, Africa Finance Corporation (AFC) and seven Nigerian banks over a $2 billion loan, has landed the parties in an English court, THISDAY learnt yesterday.

A high court in England has therefore ruled that Aiteo could not block the complainants from proceeding with the case against it when a suit initiated by the plaintiffs against the oil firm had yet to be decided upon.

In 2014, Aiteo, as part of its strategy to position itself for greater participation in Nigeria’s oil and gas industry, acquired Oil Mining Licence (OML) 29, from Shell Petroleum Development Company (SPDC).

The oil lease, considered as one of the most endowed acreages, was acquired along with Nembe Creek Trunk line, an associated crude oil pipeline, after the Group’s $2.7 billion bid was approved by the authorities.

While the actual cost of the acquisition of the oil block and Nembe pipeline was reported to be $2.562 billion, the balance was additional funds earmarked as working capital for the takeoff of the project.

A few years later, specifically in 2918, Aiteo was said to have approached its creditors for a renegotiation or restructuring of the debts after the declaration of incessant force majeure, a request the complainants reportedly turned down.

On October 23, 2019 the lenders’ Nigerian lawyers, Aluko & Oyebode, was said to have sent a letter demanding payment of the outstanding debt within seven days.

But eight days later, Aiteo commenced proceedings against the lenders as well as four other parties in the Nigerian Federal High Court, asking the court to declare that it was not liable as alleged in the demand letter.

The matter later dragged beyond the borders of Nigeria, with the verdict approving the “final anti-suit injunction” delivered on April 1, last week, according to court documents quoted by Premium Times, an online news outlet.

Aiteo had urged the court to set aside the interim anti-suit injunction that had been granted ex parte.

The claimants, according to the report, aside AFC and Shell include Ecobank Nigeria Limited, Fidelity Bank plc, First Bank of Nigeria Limited, Guaranty Trust Bank plc, Sterling Bank plc, Union Bank of Nigeria plc and Zenith Bank plc.

While about 75 per cent of the funding came from AFC and the banks, the rest came from Shell in the form of vendor financing via an English-law governed agreement dubbed “the Offshore Facility Agreement”.

Aiteo had obtained an injunction from a Nigerian court restraining the banks from taking legal action against it and “…acting in any way or manner or taking any step to interfere with the res of this dispute by giving effect to the content of the [demand letter], or taking any step to enforce any right in respect of alleged indebtedness of the plaintiff.”

According to the document, it also restrained the creditors from “…acting on or taking any step pursuant to or in furtherance of the [demand letter], from taking over, obstructing, or interfering in any way or manner howsoever with the running of the business of the plaintiff…”.

But dissatisfied with the Nigerian court, the banks appealed against the court injunctions, and sought an order dismissing the borrower’s suit.

In 2020, one of the claimants said that it was becoming clear to all the lenders that the negotiations were stalling and although some lenders continued to hope that they would be successful, others began to doubt that there would be a successful restructuring.

On November 23, 2020, an attempt by the chief executive officer of Sterling Bank, one of the lenders, to break the impasse with the borrower was said to have failed.

Subsequently, in December 2020, the lenders prepared arbitration proceedings and an arbitration claim in the English court seeking an anti-suit injunction.

But in the the English court judgement, the judge noted that the commencement of proceedings in the High Court of Nigeria by the borrower seeking declarations of non-liability was a breach of the arbitration agreement.

It stated that the continuation of those proceedings was a breach of the arbitration agreement.

“That dismissal (by the Nigerian court) sits unhappily with the suggestion that the Lender’s Notice of Appeal had caused the Lenders to have lost their right to arbitrate,” the judge noted.

Court documents sighted by Premium Times, stated that the court found that there had been no waiver of the right to arbitrate and that the decision binds the borrower and the sixth claimant.

“Thus, there is in the present case a clear case of a breach of the agreements to arbitrate. The court will in such a case grant an anti-suit injunction unless there are strong reasons for not doing so,” the judge affirmed.

Last year, Aiteo instituted a legal action against Shell seeking the sum of over $2.5 billion compensation over the sales of the OML.

Aiteo in the court action dated July 27, 2021  accused Shell of selling two Marginal Fields – Kugbo West and Okiori to it when it, “knew or ought to have known that the defendant had handed over the wells to the federal government of NigeriaNigerian national petroleum corporation for which the defendant received valuable consideration in or about 2009 prior to the agreement for assignment.”