Auwal Ibrahim Rafsanjani, Executive Director of CISLAC
Auwal Ibrahim Rafsanjani, Executive Director of CISLAC

CISLAC: How Nigeria can prevent looting of funds and losing abroad

NEWS DIGEST – The current global economic recession is likely to harm Nigeria in an unprecedented way. While the Nigerian Government cannot influence the slump of the prices of natural commodities, it is responsible for the continuous disappearing of Nigerian illicit funds abroad.

A case in point is the Process and Industrial Development (P&ID), a company founded by two Irishmen, registered in the British Virgin Islands. The company signed a contract in 2010 with the Nigerian Ministry of Petroleum Resources. Less than three (3) years after the contract was signed, P&ID initiated international arbitration, alleging that Nigeria had not performed its obligations under the contract and seeking damages for lost profits. No real work has ever been concluded under this contract.

Due to the unprecedented damage to Nigeria, President Buhari singled out this case in his speech at the UN General Assembly last year when he acknowledged suspected ‘international scam.’ CISLAC has been investigating this case of enormous corruption and mismanagement.

Despite a number of ‘red flags’ of corruption relating to the contract since 2010, successive Nigerian governments did not raise the issue of corruption in its defence in the international arbitration. The international tribunal based in the UK concluded that Nigeria had repudiated the contract. It awarded P&ID USD 6.6 billion in damages plus interest of 7% per year, even though neither party had taken steps to perform their obligations under the contract. In response, P&ID commenced proceedings in English courts in 2018 to enforce the award. Nigeria has now belatedly raised allegations of corruption in its attempt to avoid enforcement of the award in English courts. It alleges a long-running corrupt conspiracy in which associates of P&ID paid bribes to Ministry of Petroleum Resources officials to obtain the contract. While we take no position on the case, we note a number of Red Flags which indicate how the Nigerian public pays the price for potential corruption and incompetency:

Red flag 1: ‘Off-shore’ companies and lack of transparency in procurement

According to P&ID’s own account, the contract was based on an unsolicited proposal presented to the Nigerian Government by P&ID. This proposal was accepted by the Government in 2010. The full terms of multi-billion contract have never been made public. From the extracts of the contract that are annexed to the UK judicial decisions of the arbitration tribunal, there are questions about whether the contract contains the technical specificity and detail that one would expect of a contract genuinely intended to govern the development and operation of a multi-billion dollar gas facility over several decades.

Red flag 2: Doubts about whether the arbitration was contested by the Nigerian Government – incompetency or corruption?

The P&ID case has become ‘political’ in Nigeria. With allegations that the acting head of EFCC has not pursued the case timely and with required competency. However, despite enough time and opportunities provided by the UK-based tribunal, Nigeria’s lawyers, intentionally or out of incompetency, failed repeatedly to file expert evidence on jurisdictional issues of Nigerian law. As a consequence, the Government of Nigeria appears to have failed to challenge any of the significant claims made in the statement of P&ID. Nigeria only called a single, ineffectual witness (Mr Ikechukwu Oguine) in the merits phase of the proceedings. Certainly, the tribunal was unimpressed by the expert evidence. Our research shows that the Government of Nigeria failed to cross-examine P&ID’s witnesses on key aspects of their evidence.

Red flag 3: Questions about Nigeria’s delays in raising its suspicions of corruption

Nigeria changed its solicitors three times during the course of the proceedings, (first represented by Ajumogobia & Okeke, then Twenty Marina Solicitors LLP, then B. Ayorinde & Co, Adebayo Chambers). Nigeria’s allegation that the arbitration with P&ID was a ‘sham’ is based on the allegation of corruption on the part of the lawyers representing Nigeria in that proceeding. Defending the legal proceedings was initially the responsibility of the allegedly corrupt Ministry of Petroleum Resources. However, the Ministry of Justice assumed control of the defense at the ‘damages phase,’ taking over from the Ministry of Petroleum in January 2017. This timeline raises serious questions about why the issue of corruption was not raised earlier and, in particular, why Nigeria did not initiate proceedings to set aside the award in English courts on the basis of the alleged corruption within 28 days of the Final Award. The EFCC was called to investigate the P&ID contract only in June 2018 until July 2019, with an investigation formally opened in August 2018; too late in the proceedings.

Policy responses: How to prevent looting at industrial scale

As we speak, the case is now proceeding. However, it is clear that Nigeria has suffered enormous economic and reputational damage at a time when ordinary Nigerians suffer from health pandemic, economic recession and widespread insecurity. As the case is still not concluded, we urge the Government to prevent this and other looting by taking the following steps:

Institutional controls to prevent the conclusion of contracts like the P&ID

From the evidence available to us, it seems that no proper planning and tender process was conducted in a multi-billion-dollar deal. It is evident that the commercial terms of the agreement represented a catastrophic value for money from a Nigerian perspective. If Nigeria had had a clearer and more robust set of laws and processes around public procurement, such a deal would have never happened! Public procurement laws and procedures need to be upgraded, made unconditionally public and be rigorously enforced!

The lack of legal capacity to contract on behalf of the state

This case and the subsequent catastrophic defence led by the Nigerian Government points at the lack of legal capacity to contract on behalf of the state. The competency and professionalism of the Nigerian legal representation must be decisively strengthened. Legal teams representing the Government must be able to demonstrate that contracts that are not concluded through proper processes are void. Having such laws in place are prerequisite in proving corruption in the arbitral proceedings. If Nigeria had argued corruption in the arbitration, the Nigerian taxpayers and citizens would not be faced with billions of damages.

Clear and binding legal requirement to publish contracts in the resource sector

This case has been possible only because Nigerian public contracts, especially those in the resource sector, are shrouded in secrecy. Government officials who decide about the fate of our economy do so without any accountability. Corruption thrives in secrecy. Unless all government contracts, especially those concerning the oil sector, are made public, we will continue to lose billions of dollars monthly due to corruption, incompetency and international scams.

While the P&ID scandal is only one case, it shows how Nigerians lose billions of dollars abroad due to the lack of legal and policy framework preventing corruption in public procurement, shocking lack of oversight of public funds and the general lack of law enforcement.

In this connection, I commend the announcement made by the Ministry of Justice last week about the establishment of the Database on recovered asset and the Central Criminal Justice Information System. This long-overdue action shall contribute to transparency in the recovery and management of stolen  assets, which we have been advocating for since the 2017 Global Forum for Asset Recovery through numerous international and national advocacy events and research and policy papers.

While this announcement is a step in the right direction, I challenge the President and the Ministry of Justice to clarify if:

the database is publicly accessible to ALL stakeholders including ordinary citizens;
the database includes domestically recovered assets where risks of mismanagement and re-looting have been far greater compared to international recoveries and;
how the numerous agencies with the mandate to recover assets will comply in the continued absence of the Proceeds of Crime Bill.

Only these steps can ensure that all the agencies that recovered assets harmonize their procedures while regularly updating the data. The management of these assets must be entrusted to people with integrity to prevent public officials using these assets for their political objectives and personal enrichment.

Lastly, let me reiterate that Nigeria will continue suffering from international scams and enormous wealth disappearing abroad if no effective prevention is put in place to reduce illicit financial outflows, which disappear in places like London, Dubai, British Virgin Islands and other tax havens. This week the enormous leak of the 2, 100 Suspicious Transaction Reports (STRs), so-called FinCEN Files, shows how UK and US banks launder proceeds of corruption and organized crime while knowing that this is illegal. As in the past leaks, many Nigerian politicians are flagged in these leaks as prominent ‘customers’ buying luxurious houses, yachts and other luxuries for money stolen from Nigerian citizens. This case once again shows that we recover only an insignificant fraction of assets while we continue losing billions. It must be noted that ‘enablers’ such as prominent international lawyers, banks, tax advisers and others, are just as criminal as those that commit the stealing and have to be made accountable.

Let me conclude by assuring the Nigerian public that we will keep holding the corrupt officials accountable for the lack of prevention of corruption, money laundering and illicit financial flows along with their Nigerian and international enablers.

I believe that this statement highlights simple, actionable and clear steps, which must be implemented if Nigeria is to move forward from the socio-economic catastrophe which we are facing.

God bless the Federal Republic of Nigeria!

Auwal Ibrahim Musa (Rafsanjani)
Executive Director, CISLAC