arbitration / adr news

Owners of $11 Billion Arbitration Award Against Nigeria Fall Out

14 December 2022

By William Clowes

The owners of a company the Nigerian government accuses of defrauding its way to an arbitration award worth more than $11 billion have fallen out. A hedge fund has sued the business partners it bought its stake in the firm from, according to court documents.

A subsidiary of VR Capital Group Ltd commenced its own arbitration case against Process & Industrial Development Ltd’s other shareholder and founder in London in September 2020, previously unreported US court filings show. 

The dispute began shortly after a UK judge allowed Nigeria to proceed to a fraud trial scheduled for January where the West African country aims to overturn the award, which is now worth about a third of its foreign reserves. Several attempts to settle the matter for a much smaller sum – most recently in mid-2017 when Nigeria offered $600 million in cash and oil assets – failed. 

The confidential arbitration between the P&ID shareholders came to light in recent filings from a US court case in which Nigeria is seeking documents from various VR Capital companies for use in the upcoming trial in the UK.

Changing Ownership

President Muhammadu Buhari’s government argues that British Virgin Islands-registered P&ID obtained a gas-supply deal from a previous administration in 2010 and the subsequent arbitration victory through bribes and lies. A tribunal granted the company $6.6 billion in damages in January 2017 — a sum that’s ballooned with interest. P&ID has always denied any wrongdoing and accuses the government of evading its legal responsibility to compensate the firm.

P&ID’s ownership was restructured following its arbitration success as the firm turned its attention to the ongoing campaign to enforce the award in UK and US courts.

Court documents show that Seamus Andrew, the firm’s lawyer during the arbitration, acquired 75% of P&ID in October 2017 via his litigation funding business, Lismore Capital Ltd. Soon after, VR Capital bought the remaining 25% through a new entity called Process Holdings Ltd, according to the filings.

VR Capital is an alternative asset manager focused on distressed securities and “event-driven/special situations investments,” according to its website. Nigeria has referred to the company as a “vulture fund” in court filings.

‘Tainted’ Arbitration

Nigeria introduced its fraud allegations after a UK court ruled in August 2019 that P&ID could enforce the award. The following September, another judge paved the way for January’s trial when he found Buhari’s government had established a strong case that the contract was “procured by bribes” and the arbitration was “tainted.”

The arbitration that Process Holdings initiated in 2020 against Lismore and P&ID founder Brendan Cahill was “precipitated” by that second judgment and is currently stayed, according to recent communication from VR Capital’s lawyer to a US court.

Nigeria wants access to more information about the shareholders’ disagreement. The P&ID owners’ “infighting over the fraudulent nature of the award is very much relevant,” Nigeria’s lawyer said during a conference with a US judge on Nov. 1.     

Whether the September 2020 ruling was “a breach of some kind of contractual guarantee” has “no relevance” to the underlying dispute over the gas deal and arbitration award, VR Capital’s lawyer told the US court last month.

VR Capital declined to comment. Andrew and Cahill didn’t respond to requests for comment.