By Brian Brivati
The laws of international trade and investment arbitration have been weighted heavily against developing and emerging economies and in favour of developed states from their inception. Historically, the regulation of global trade and investment has followed patterns of Empire, persisting for long periods after formal control ended. This has typically been to the benefit of the old Imperial powers.
A 2015 survey of 500 investment arbitrations between the developing and the developed world concluded that: international trade arbitration tends to ‘favour the “haves” over the “have-nots”, making the international investment regime harder on poorer than on richer countries.’
A case which breaks the mould?
It is a complex tale, the best full account of which has been featured in Bloomberg. It starts with a former Irish show band promoter and arms dealer, Michael Quinn, and his accomplice Brendan Cahill, who created a shell company called P&ID. With high-level support from government representatives in Nigeria, Quinn is alleged to have bribed his way into securing a contract for a gas supply and processing agreement (GSPA) to build a costly processing plant for the government in Abuja.
Years passed and it became obvious that, not only did Quinn and P&ID have no clue how to build the plant they promised to deliver, but cancelling the deal would mean the government of Nigeria could be liable to pay billions in damages. Nevertheless, Abuja cancelled the contract citing non-delivery. P&ID launched closed arbitration proceedings in London, which the Nigerian Ministry of Petroleum Resources kept a tight hold over – a highly unusual move. The government lost, and in March 2013 P&ID was awarded $6.6 billion; compensation for what P&ID might have made if they had constructed the plant they clearly didn’t know how to build. P&ID was also awarded interest of $1 million a day for each day the Nigerian state fails to pay them. Today, the total amount owed by Nigeria to P&ID is roughly $10 billion.
Up to this point in the story it is neo-colonial business as usual. The West has created and used cultures of corruption for decades. Indeed, the West has a genius for inventing new and ever more elaborate ways of keeping neo-colonialism alive. Corruption gradually replaced direct rule as the most efficient means of continuing to milk the natural resources of Africa as independence movements swept the continent. China has listened and learned but arguably the most successful adventurers remain the Western heirs of those who broke open the continent in the 18th and 19th centuries, reinventing the great game through corruption and the systems of international trade law.
And over the decades, when African governments have exposed that the international arbitration system works against them. Vulture funds that specialise in recovering bad debt put massive resources into these legal fights knowing that, if they win, states will have to pay them back in order to maintain their position in the international legal system and defend their credit ratings. In this case, Lismore Capital and VR Advisory (which is owed by VR Capital), acquired majority stakes in P&ID whose only “asset” was the debt owed to it by the Nigerian government.
But, in this case, things have been unravelling for the neo-colonialist con men and their vulture fund backers. In Nigeria, officials were convicted of fraud. Nigeria’s Minister of Justice who oversaw the deal was arrested. Michael Quinn has since died, and two Britons, James Nolan and Adam Quinn, linked to P&ID have been charged with 32 counts of money laundering and corruption.
Nigeria has also had success in the British Virgin Islands (BVI), where it was recently granted access to crucial documentation following a successful appeal. Most importantly, in 2020, Nigeria was granted the right to appeal the arbitration before the High Court in London. Technically, Nigeria had missed its window to appeal the award, but the High Court judged that the evidence for fraud on the part of P&ID was so strong that Abuja would be allowed to bring its case.
When the High Court decided that the case should be heard it did so because it found, as summed up on one anti-corruption site, that there was a ‘strong prima facie case’ that:
- the underlying P&ID contract ‘was procured by bribes paid to insiders as part of a larger scheme to defraud Nigeria’; and
- P&ID’s main witness had given perjured evidence during arbitration including as to whether P&ID was in a position to perform the contract;
It would be a good result if Nigeria wins this case, and not only because the award P&ID is claiming would be enough to pay the country’s health budget for seven years. A Nigerian win would represent a rare victory for the developing world over its former rulers.
But, regardless of the outcome, the vulture funds will still be in operation, the West and China will still use corruption to exploit the natural resources of Africa and legal systems created in the age of Empire will still be heavily weighted against the former colonies.
The Nigerian legal strategy and the sheer scale of corruption exposed in this case show the high threshold needed to win in these kinds of battles, but the signs are encouraging. Perhaps the age of neo-colonial justice is beginning to pass into history – where it belongs.