EXCLUSIVE: Nigeria’s foreign assets at risk as Enron seeks to enforce $22m arbitration award

Nigeria is making frantic efforts to stop Enron Nigeria Power Holding (ENPH) from enforcing a $22 million arbitration award that could risk the country’s assets in the US, TheCable can report.

ENPH, an incorporation of the defunct Enron International, is seeking a turnover of Nigeria’s claim to proceeds from an $80 million mega yacht that was sold in the US.

In 2019, a US federal court had given Nigeria approval to sell the yacht, named “Galactica Star”, as part of an ongoing corruption case against Kola Aluko, Nigerian businessman who allegedly acquired it with diverted profits from oil sales in Nigeria.

The yacht has been sold for $37 million and ENPH is trying to lay claim to part of the proceeds in enforcing its $22 million arbitration award.

Abubakar Malami, attorney-general of the federation (AGF) and minister of justice, is now seeking approval from President Muhammadu Buhari to negotiate the award to protect the country’s assets, TheCable can report. 

He told the president that ENPH could further target the country’s assets in California, New York and other states in America.

ROAD TO CONTRACT BREACH

On December 6, 1999, ENPH had entered a power purchase agreement (PPA) with the Lagos state government, guaranteed by the federal government through the now-defunct National Electric Power Authority (NEPA), later named Power Holding Company of Nigeria (PHCN).

ENPH was to build, arrange, finance  and run electricity generating plants and natural gas pipelines in Lagos state.

NEPA suspended the PPA on December 15, 1999 for renegotiation.

However, construction continued on the different phases of the porject.

By September 30, 2000, phases one and three of the contract were completed while negotiation for phase two of the construction failed. 

At the time, Enron International had gone bankrupt, but it wrote to the federal government that this would not affect ENPH, the Nigeria arm, in carrying out its own part under the contract.

After several failed attempts at negotiating, ENPH commenced an arbitration against Nigeria on June 13, 2006 at the international chambers of commerce court of arbitration in London, accusing the government of breach of contractual agreement.

Six years later, on November 12, 2012, a final award (“Quantum”) was given against Nigeria in the sum of $11.22 million, with 2 per cent interest from June 13, 2006, and also expenses for legal services.

Attempts by the Nigerian government to negotiate the settlement failed.

ENRON SEEKS ENFORCEMENT

On July 19, 2013, ENPH, under the convention on the recognition and enforcement of foreign arbitral awards which Nigeria is also a signatory, approached the US court in the southern district of Texas to seek enforcement of the award.   

The court granted ENPH the motion for confirmation of the award on October 16, 2015, prompting Nigeria government to appeal the judgement at the US district of Columbia circuit.

ENPH had also argued that Nigeria, following the contract, had waived its rights to challenge the award.

Nigeria’s appeal was subsequently dismissed, and the court affirmed the order to confirm the award. 

In an interesting approach, ENPH also sought from the court a writ of garnishment to be issued against the JP Morgan Chase Bank on the ground that it has in its possession commercial assets belonging to Nigeria which could be garnished in satisfaction of the judgement in favour of ENPH.

The company’s prayer was, however, denied. 

And in a fresh move on March 9, 2020, ENPH filed an amended application and this time asking the court for the turnover on the Galactica Star Nigerian assets.

The US department of justice (DoJ) and counsel to the Nigerian government again challenged the application, and on May 21, 2020, the court denied ENPH’s request. 

ENPH, however, secured another order on July 15, 2020 to file an appeal. 

MALAMI SEEKS BUHARI’S APPROVAL TO NEGOTIATE 

In a letter dated July 28, 2020, Malami sought Buhari’s approval to negotiate the arbitration award against Nigeria in the failed power project.  

Without a settlement, the AGF said, ENPH will continue to cause problems for Nigeria with different litigation which may put the Galactica case at risk.

“Without conceding, should ENPH succeed in attaching the USA v Galactica funds by deducting $22 million all that will be left for FGN will be about $5.4 million which may be less after deduction of the 3% success fee accruable to BCR,” Malami wrote in a letter seen by TheCable.

“The resultant implication would mean FGN will lose an asset it is rightfully entitled to, loss of revenue to FGN, loss of revenue as regards the huge litigation cost that has been paid to FGN counsel (disbursement and retainership fees) etc.  

“In other to avoid unwarranted delay and ENPH further intervention,, it has been advised that is is in FRN’s interest to deal expeditiously with the intrusion of an unrelated issue (ENPH issue) in the repatriation of funds in the ongoing USA v Galactica case.” 

Malami said without a settlement, ENPH will definitely hold up the earlier repatriation of the Galactica funds for a year or more. 

The AGF asked the president to approve for Berliner Corcoran & Rowe (BCR), Nigeria’s counsel, in collaboration with the ministry of justice designated officers to proceed to engage in negotiation and settlement meeting with ENPH. 

He argued that a negotiation may halt ENPH’s consideration of further action.

He also added that it may reduce the present amount being claimed by the company. 

Ibrahim Gambari, chief of staff to the president, in another letter dated August 13, 2020, directed Saleh Mamman, minister of power, and Zainab Ahmed, minister of finance, to review the matter and revert with “considered views to inform Mr President’s further directives”.

The development comes at a time government is also trying to get an upturn over the $9.6 billion awarded P&ID Ltd, an Irish firm, in arbitration against Nigeria.