Tackling corruption in the arbitral process: reflections on Nigeria v P&ID

On 23 October 2023, the English High Court handed down a landmark decision overturning a USD 11 billion arbitral award obtained by a BVI company, Process & Industrial Developments Limited ("P&ID"), against the Federal Republic of Nigeria.

The Section 68 challenge

Section 68 of the Arbitration Act 1996 is one of only a handful of narrow grounds on which arbitral awards can be set aside (or remitted to the tribunal) under English law. Successful challenges on this basis are rare: Commercial Court data record that in 2020-2021, only one out of 26 applications succeeded – a success rate of 4%.[1] This is consistent with the intention behind the Act: section 68 was "designed as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected".[2]

The Court had no difficulty concluding that this was such an extreme case.

The Judge found that P&ID had, among other things, improperly obtained and retained privileged and confidential legal documents, which enabled P&ID and its lawyers (including an English solicitor and a Kings Counsel) to track Nigeria's case strategy during the arbitration. He observed that P&ID recognised that this was "less than honest … but their attitude was that this was the sort of thing you took advantage of if it happened". The Judge described P&ID's lawyers' handling of the privileged material as "indefensible" (noting that they were each due to receive "life-changing sums of money" (up to £3 billion to the solicitor and up to £850 million to the Kings Counsel) if P&ID's claim succeeded).

It was also found that P&ID's C.E.O., Mr Quinn, had conducted himself dishonestly in giving evidence of which parts were knowingly false and that P&ID had continued to bribe a Nigerian official during the arbitration to "buy her silence" about the fact that she had been bribed at the time the underlying contract was made.

The Court found that the tribunal had not known of any of these issues and, if it had, "the entire picture would have had a different complexion".

The Judge found that these matters constituted "serious irregularity" causing "substantial injustice" to Nigeria, in that the award had been obtained by fraud and in a manner contrary to public policy.

A call for "debate and reflection"

The Judge invited the arbitration community to "consider whether the arbitration process, which is of outstanding importance and value in the world, needs further attention where the value involved is so large and where a state is involved". He identified four particular issues for further reflection, which we briefly consider below.

Drafting major commercial contracts involving a State

Given the potential exposure of States (and hence public funds) under these contracts, the Judge reiterated the importance of proper professional standards and ethics in the drafting of major commercial contracts involving a State.

Disclosure or discovery of documents in arbitration proceedings (and related ethical obligations)

Highlighting that it was disclosure of documents that enabled the truth to come out in this case, the Judge noted the importance of robust document production in arbitral proceedings. 

However, the nature of the corruption being what it was in this case, the difficulty remains that even if additional disclosure had been ordered in the arbitration, the relevant documents may not have been discovered as P&ID deliberately sought to conceal the truth.

These issues can be difficult for tribunals to grapple with, in particular because there is no standardised set of ethical obligations applicable to counsel from different jurisdictions. While valuable 'soft' guidelines (such as those adopted by the IBA in 2013) already exist, it will be important to consider going forward how such standards can be given real teeth and arbitrators given a means to enforce them.

Inadequate representation: should a tribunal do more?

The Judge found that – even without the dishonest behaviour of P&ID – the failings of Nigeria's legal representatives, experts, politicians and civil servants put Nigeria at a significant disadvantage compared to the well-resourced legal team of the claimant. The judge noted, "[t]he result was that the Tribunal did not have the assistance that it was entitled to expect, and which makes the arbitration process work".

This raises the question, should a tribunal intervene if it is clear that there is a lack of instructions (or weak instructions), such as a legal team's failure to test the expert's opinions, leading to a compromised presentation of the case? Where it does, to what extent?

This is a thorny issue on which judgement calls will need to be taken on a case-by-case basis. Arbitrators have a difficult line to tread between ensuring a "fair fight" and making a party's case for them. Clear guidance (perhaps at an institutional level) would be welcome.

Is more transparency necessary to ensure the integrity of the process?

The final issue flagged is one that is already heavily debated in the arbitration community (and commentators in the mainstream media): does the confidential nature and the lack of public scrutiny of awards put arbitration at risk of corruption by its users? These issues plainly become more acute where there is public interest in the outcome of a dispute, as is generally the case with claims involving a State as party.

A number of measures have been introduced by arbitral institutions and bodies in response to these concerns. For example, since 2019, there has been a presumption that ICC awards may be published (albeit with parties having an opportunity to object or require anonymisation), and a similar presumption was introduced in last year's amendments to the ICSID Rules. These reforms represent an attempt to strike a balance between the preference of many users of arbitration for a confidential procedure and calls for more 'open justice', particularly in cases where public interest is engaged.

Practical considerations for arbitration users

As well as shining a light on broader areas for reform, this case underscores the importance of careful selection of both the applicable rules and the seat of an arbitration. If a less effective seat had been selected in these proceedings, it is possible that P&ID's abuses of process may have remained undetected.    

Arbitral rules that empower tribunals to take the steps necessary to police the proceedings to the best of their ability are a crucial safeguard against abuses of the process. Where a tribunal does not (or cannot) prevent due process violations occurring, selection of a strong arbitral seat allows recourse to a robust court system with judges who are empowered to act and will exercise their powers appropriately.

This judgment affirms that, while England & Wales remains a pro-arbitration jurisdiction, the English court is committed to investigate allegations of fraud and will not tolerate corruption of the arbitral process.