This menace was brought firmly into the spotlight in late 2023, in the English case of Nigeria v Process & Industrial Developments Limited, when the English High court, reliant on Section 68 of the Arbitration Act 1996, set aside a USD 11 billion arbitral award. The court found that the award had been procured through fraud and in a manner contrary to public policy.
The court’s willingness to set aside the award gives comfort in protecting arbitral processes and ensuring they remain credible. However, considered in detail, its decision to do so might be said not to have been as straightforward as it should have been. Further, the outcome was heavily reliant on documents disclosed during the course of the court proceedings, but not all arbitrations will see such voluminous disclosure.
What lessons can be drawn from the case, and what else can be done to ensure that arbitral proceedings remain free of the taint of fraud?
Nigeria v Process & Industrial Developments Limited (P&ID)
By way of summary:
- On 11 January 2020 Nigeria and P&ID signed a Gas Supply and Processing Agreement for Accelerated Gas Development (the GSPA). Under the GSPA, P&ID was to construct Gas Processing Facilities (GPFs), which would strip 'wet' gas supplied by Nigeria into 'lean' gas to be delivered to Nigeria for power generation.
- The GSPA was for a minimum term of 20 years.
- P&ID did not build any GPFs. Nigeria did not supply any 'wet' gas. Seemingly, neither party did anything.
- In the third year of the GSPA, P&ID commenced an arbitration, alleging that Nigeria had committed a repudiatory breach of GSPA, entitling P&ID to terminate the GSPA and claim damages.
- After rejecting a jurisdictional challenge, the Tribunal issued a Final Award, requiring Nigeria to pay P&ID USD 6.6 billion plus interest at the rate of 7% per annum.
The set aside application
By early 2023, with interest, the final award exceeded USD 11 billion. At this time, Nigeria made application in the English courts to set the final award aside. Nigeria did so relying on Section 68 - alleging "serious irregularity affecting the tribunal, the proceedings or the award".
Applications under Section 68 are rarely successful, intended only for extreme cases where:
"the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected".
Nigeria’s application was heard by Mr Justice Robin Knowles CBE. He had no reluctance in setting the award aside, concluding that it had been obtained by "practising the most severe abuses of the arbitral process":
- P&ID’s legal team had obtained and made use of privileged and confidential legal documents belonging to Nigeria, which it relied on to track Nigeria’s strategy. The judge described the handling of this material as 'indefensible' and reported P&ID’s legal team to their regulatory authorities for doing so.
- P&ID had presented and relied on evidence that it knew to be false, seeking to avoid and hide from the Tribunal that the GSPA had been procured through bribes paid to a Nigerian official.
- Throughout the Arbitral proceedings, P&ID had continued to bribe a Nigerian official to 'buy her silence' about the bribes she had accepted.
The judge concluded that the Tribunal had not known any of these issues and, if it had "the entire picture would have had a different complexion". He found the matters constituted "serious irregularity", causing "substantial injustice to Nigeria". That said, of significance, he concluded the second ground – bribes paid to procure the contract – would not have been sufficient in itself for the award to be set aside. Rather it was the process through which the award was obtained during the arbitration that was significant.
The judge’s reflections
The judge was keen for there to be 'debate and reflection' as to whether arbitration processes need further attention to prevent such abuse, particularly where the value was so large and where a state was involved. He suggested four key points of analysis:
1. Drafting major contracts: The importance of proper professional standards and ethics in the drafting of major contracts. Perhaps not one for litigators, but certainly a key issue for our corporate partners to consider.
2. Disclosure/Discovery: Highlighting that the fraud was uncovered through the disclosure process, the judge noted the importance of robust documentation production. Given the widely different disclosure obligations/practices across jurisdictions, this is (putting it lightly), a thorny issue.
3. Inadequate representation: The judge found that, P&ID’s dishonest behaviour notwithstanding, Nigeria’s legal team and those instructing them put Nigeria at risk, the result of which was that "The Tribunal did not have the assistance it was entitled to expect, and which makes the arbitration process work". But is it an Independent Tribunals’ job to make it a fair fight, and, if so, how do they do it?
4. Transparency: The forever debate – do issues of confidentiality put arbitration at risk of corruption? Is that risk avoidable?
The Arbitration Act 2025 – a missed opportunity?
Various proposed amendments to the Arbitration Act 2025 had included placing duties on arbitrators to raise suspicious of corruption with the parties, and to engage in 'red flag' analysis where appropriate. However, none of these amendments formed part of the act when it received Royal Asset in February 2025.
The ICC’s red flags
In December 2024, the ICC Commission on International Arbitration and ADR published its guidance on "Red Flags or other Indications of Corruption in International Arbitration". This document is intended to provide "detailed guidance on the identification and assessment of corruption in arbitration proceedings" and sets out three stages of analysis which an arbitral tribunal should carry out:
a) identifying the potential/asserted red flags;
b) validating or confirming (or negating) the red flags; and
c) assessing red flags from the perspective of the law of evidence.
The note sets out in detail the steps an Arbitral Tribunal and the parties should consider in these analyses. Nevertheless, the guidance is clear that "the tribunal must resolve the dispute submitted before them by the parties, and must do their best to ensure that the award rendered is enforceable". It concludes: "the arbitrator must not divert the process and resources to unnecessary investigations that may create an unjustified burden on the parties or, in some cases, violate due process." Hardly reassuring for those concerned about fraud and corruption.
Conclusion
Arbitral rules may empower tribunals to police proceedings and safeguard against abuses, but it is evident that fraud, and those who seek to abuse the process, will always lurk beneath the surface. Parties to arbitration proceedings should always be on guard and should consider such risks when choosing the arbitral seat and applicable law – at the end of the day arbitration, it is access to and the support of robust court systems that gives it the best protection.
If you have any questions or would like to discuss any of these topics and what they mean for you and your business, please contact our International Arbitration expert below.
