The Federal Republic Of Nigeria v Process & Industrial Developments Limited

An application under section 68(2)(g) of the Arbitration Act 1996 focuses on the award and the arbitral process by which it was obtained, not merely on whether the underlying contract was procured by bribery. An overall fraudulent plan to procure an award may fall within the provision. Serious irregularity is established where fraud or conduct contrary to public policy caused substantial injustice. It is sufficient that, without the irregularity, the outcome might well have been different. Materially false evidence, continuing corrupt payments to suppress bribery, and systematic retention of privileged documents may collectively satisfy the test. The statutory reasonable-diligence bar remains applicable to arbitration challenges, although a victim is ordinarily entitled to assume honesty unless a fraud investigation is properly triggered.

Nigeria challenged arbitral awards requiring it to pay Process & Industrial Developments Limited billions of dollars under a gas supply and processing agreement. The challenge alleged bribery in procuring the agreement, knowingly false evidence, continuing corrupt payments during the arbitration, and improper retention of Nigeria’s privileged legal documents.

The arbitration tribunal had issued awards on jurisdiction, liability and quantum. The central questions were whether the awards had been obtained by fraud, or whether the award or its procurement was contrary to public policy, within section 68(2)(g) of the Arbitration Act 1996, and whether Nigeria had lost its right to object under section 73.

Nigeria succeeded on its challenge under section 68(2)(g) of the Arbitration Act 1996. The court did not accept every allegation and reserved the consequential order under section 68(3) for further argument.

1. Scope of section 68(2)(g). The focus was the award and the process by which it was procured. Bribery or misrepresentation which merely procured the underlying contract was insufficient by itself. An overall fraudulent enterprise, in which the contract was an early step towards procuring an award, would fall within the provision.
2. Serious irregularity and substantial injustice. The statutory test had a high threshold and concerned due process, not an appeal on the correctness of the tribunal’s decision. Substantial injustice could be established where the outcome might well have been different. Three connected abuses were decisive: knowingly false evidence which purported to explain how the agreement came about while concealing bribery; continuing corrupt payments intended to suppress that bribery; and improper retention of more than 40 privileged legal documents to monitor Nigeria’s position and knowledge. The arbitration would have been conducted on a fundamentally different basis had the tribunal known the truth.
3. Section 73. The statutory reasonable-diligence requirement applied to objections arising from fraud or public-policy violations. Takhar v Gracefield Developments Ltd [2019] UKSC 13 did not displace that statutory requirement. In the context of fraud, however, the law entitled a party to assume honesty unless it had a proper basis to investigate. Nigeria could not reasonably have discovered the bribery before 2019 or the privileged-document abuse before 2021.
4. Order. The awards were obtained by fraud and the awards, and the way in which they were procured, were contrary to public policy. The form of relief under section 68(3), including whether to set aside, declare the awards of no effect, or remit them, was reserved.

This was a first-instance determination of Nigeria’s challenge to the arbitral awards.

• Arbitral tribunal: Award on Jurisdiction on 3 July 2014, Award on Liability on 17 July 2015, and Final Award on 31 January 2017.
• Commercial Court: Earlier proceedings addressed the seat of the arbitration, enforcement, extensions of time and relief from sanctions. The present judgment determined the substantive section 68 challenge after trial.