A British Commercial Court has asked Nigeria to pay $9bn to Process & Industrial Developments Ltd. (P&ID), a tiny engineering company founded in 2006 by two Irishmen, Michael Quinn and Brendan Cahill.
In 2010, P&ID reached a deal with the Nigerian government to build a natural gas plant in Calabar, but the deal fell through. Thus, P&ID sued the Nigerian government for failing to provide pipelines to the proposed gas plant as stated in the agreement. The company blamed the government for all the financial losses it suffered.
Consequently, in 2017, a London Arbitration Tribunal awarded P&ID the sum of $6.6bn—with more than $1.2 million in interest accruing daily. Last week, a London Court’s ruling converted this 2017 award to a legal judgement, which gave P&ID the powers to seize assets from Nigeria. The total fine on Nigeria is now a staggering $9bn. This sum is equivalent to 2% of Nigeria’s GDP and 20% of our foreign reserves, which is being used to maintain the value of our currency.
Though Nigerian lawyers have argued that the sum awarded was excessive and that the P&ID did not ‘put a shovel on the ground’, the company seems to have a very strong case, at least according to international standards.
Actually, the alarm bells should have started ringing when some sections of the media reported, in March, that a hedge fund managed by VR Capital Group had bought over a large stake in P&ID. But it didn’t! At almost the same time, the media also reported that P&ID hired lobbyists, lawyers and public relations officers to help it enforce the judgment it had against Nigeria. In fact, last year, two well-known and influential firms – with histories of enforcing judgments against foreign governments — registered with the U.S. Senate to lobby Congress and the Trump administration on behalf of P&ID.
This kind of bet and legal battle by a hedge fund-backed investment or company is not new. Elliot Capital, a global hedge fund, is known for its 15-year legal battle with the government of Argentina, after it refused to have the debts owned it by Argentina to be restructured. This was after other creditors accepted a debt restructuring, with most creditors walking away with nothing after Argentina defaulted on its $80bn debt. But Elliot Capital insisted it must be paid and even went as far as the US supreme court.
In fact, in order to collect its money from Argentina, Elliot Capital attempted to claim money deposited by Argentina’s central bank in the U.S. and Europe. Elliot capital also tried to seize two satellite launch contracts between Argentina and SpaceX.
In 2016, after a prolonged legal battle with Argentina, the company received $2.4bn – almost four times its initial investment in Argentina’s bonds market.
Elliot Capital’s legal battle with Argentina has shown the power hedge funds can wield in power countries. Despite calling Elliot capital all kind of names in Argentina, including branding it a “Vulture Fund’’, it did not change the court rulings the hedge fund had against Argentina. Thus, the latest court ruling against Nigeria should not be taken for granted. Emotions from Nigeria will not solve the issue at hand. (As a Nigerian, it’s easy to feel cheated by this judgement).
Nigeria has said it would appeal last week’s court ruling. But one thing is clear: as the case drags on, the new investors in P&ID would have to spend more money pursuing their case– including their initial investments in the company — and they would do everything possible to collect these monies with interest, even if they end up not getting what the court has awarded P&ID.
In Argentina’s case, it got so bad that it became a campaign issue in 2016. Argentines debated about who could end the dispute between the country and the hedge fund during its presidential election campaigns. In Nigeria’s case, paying the imposed fine could crumble its economy. The Buhari-led government should explore all political means within its disposal to negotiate this fine. This is exactly how the Argentine President Mauricio Macri’s did with Elliot Capital in 2016. Maybe, Nigeria might get some sympathy from political mediators during the negotiations.
Happy Birthday to Engr. Chilaka Ugorji
Engr Chilaka Ugorji, the CEO of Bridgsite Nigeria Limited (BNL), has shown that with focus, godliness, determination and perseverance Nigerian businessmen can build engineering companies that could compete with foreign companies in Nigeria.
Engr. Ugorji built BNL from the scratch and today the company is widely respected by many IOCs in Nigeria. The company has constructed bridges, highways,offshore structures, process plants, etc. Interestingly, Engr Ugorji believes he still has to do more. His vision is to grow BNL into a world class engineering company.
The good thing about being an employer of labour is that you have hundreds of people who depend on you for their livelihood praying for you. Happy Birthday, Engr. Chilaka Ugorji. I know hundreds of people are praying for you, as well!!