Case of the Day: Process & Industrial Developments v. Nigeria

The case of the day is Process & Industrial Developments Ltd. v. Federal Republic of Nigeria (D.C. Cir. 2022). The case, which is for recognition and enforcement of a multi-billion dollar arbitral award, has a long and complicated history, which I’ll give very briefly, but the issue that the court decided last week was fairly straightforward.

P&ID entered into a 20-year contract with the Nigerian government for natural gas supply and processing. Nigeria provided the gas, which PI&D refined so that it could be use to power the Nigerian electrical grid. PI&D could keep valuable byproducts for its own use. The substantive contract was governed by Nigerian law, and the arbitration clause provided that the arbitration would be governed by the “rules of the Nigerian Arbitration and Conciliation Act.”[eft_note]This was not good drafting, I think, because the Nigerian Arbitration and Conciliation Act, Nigeria’s version of the UNCITRAL Model Law, has a set of arbitral rules based on the UNCITRAL Rules appended to it. Did the parties intend that the law of the arbitration should be Nigerian law, or only that the arbitration should be conducted in accordance with the rules appended to the statute? Or both?[/efn_note] The “venue of the arbitration” was London.

In 2012, PI&D demanded arbitration in London, alleging that Nigeria had not supplied the agreed quantity of gas or to construct the infrastructure it had agreed to build. The tribunal rejected Nigeria’s challenge to its jurisdiction and issued an award on liability in 2015. Nigeria sought to set aside the award in an English court, but the court refused on the grounds that Nigeria sought relief after the deadline under English law for seeking relief. Nigeria then sought to set aside the award in a Nigerian court, even though the arbitration had taken place in England. The court obliged in a short and unreasoned decision. The arbitral tribunal held that the Nigerian court had lacked jurisdiction to set the award, and it awarded damages of more than $6 billion.

PI&D sought enforcement in England, and the English court found that the award was enforceable. But on the basis of a criminal investigation into the procurement process, Nigeria sought and obtained an extension of time in England to seek to set aside the award; the English court said that Nigeria had “established a strong prima facie case” that PI&D had obtained the contract by fraud and bribery. Those issues have not yet been tried in England.

In 2018, PI&D sought confirmation of the award in Washington. There was some initial skirmishing that I won’t get into but that resulted in a DC Circuit opinion holding that a foreign sovereign is entitled to a decision on any FSIA jurisdictional arguments before it should be required to make its merits arguments. The district court then held that it had jurisdiction because Nigeria, which is a party to the New York Convention, had implicitly waived its foreign sovereign immunity.

This implied waiver argument has a good pedigree. The Second Circuit decided the leading case, Seetransport, in 1993. The idea is that any country that signs the Convention “must have contemplated enforcement actions in other signatory states.” The DC Circuit has approved of Seetransport and its reasoning twice. The first instance was Creighton Ltd. v. Government of Qatar (D.C. Cir. 1999), although there its discussion was in dicta, because Qatar was one of the few states that at the time had not signed the New York Convention. The court again approved the rule of Seetransport, this time in a holding, in Tatneft v. Ukraine (D.C. Cir. 2019), but the decision is unpublished and non-precedential.

Nigeria appealed, and the court asked the United States for its views. The government recommended that the court should avoid deciding whether to adopt Seetransport formally, because whether or not Nigeria had implicitly waived its immunity, the court clearly had jurisdiction under the arbitration exception. That is precisely the path the court took in today’s decision. It again spoke approvingly of Seetransport, but it declined to reach the issue, affirming on the alternative ground that the arbitration exception applied.

It’s evident that there is a lot of overlap between the arbitration exception and the implied waiver theory of Seetransport. Are they coextensive? No–Creighton itself is an example of a case that came within the arbitration exception but not the waiver exception. And of course there are many cases, not arbitration cases, that come within the waiver exception but not the arbitration exception. So there is good sense to having two independent exceptions, but since most implicit waiver cases will also be within the arbitration agreement, it may be that the DC Circuit will be able to keep refusing to rule for a good long while.

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