The news that the High Court in London has rejected the Federal Republic of Nigeria’s application to pursue a $1.1 billion-plus claim against Shell and Eni in England, over the OPL 245 deal, raises major concerns that the asset recovery arrangements that the Federal Republic of Nigeria (FRN) has put in place aren’t working and are not fit for purpose.
As oil prices tumble and the world heads into a COVID-19-induced recession, Nigeria needs every naira that it can recover from looted assets that are hidden abroad.
It was never going to be easy getting Nigeria’s money back. The forces lined up against justice for the victims of corruption are mighty, and if they are to be countered, it demands nothing less than the full commitment of the Ministry of Justice to a coherent, well-funded, transparent asset recovery programme.
Unfortunately, Nigeria’s asset recovery strategy, which relies on outsourcing claims to private law firms, appears to be running into the rocks.
The news that the High Court in London has rejected the Federal Republic of Nigeria’s application to pursue a $1.1 billion-plus claim against Shell and Eni in England, over the OPL 245 deal, raises major concerns that the asset recovery arrangements that the Federal Republic of Nigeria (FRN) has put in place aren’t working and are not fit for purpose. A rethink is urgently needed.
The Shell and Eni ruling is shocking, not because the FRN lost – but because the case arguably should never have been taken. Worse still, the FRN has been landed with a huge bill for taking the case – some £2 million (N981 million), which is enough to support more than 16,000 households for a year under the National Cash Transfer Programme that is redistributing other recovered Abacha-era loot.
Many observers were deeply sceptical when the FRN instigated its claim against Shell and Eni in London. Given that the FRN already had a damages suit against the companies in Milan (where a criminal trial against them is still proceeding), an adverse judgment in London appeared all but inevitable. As any rookie lawyer knows: A damages claim cannot be taken on the same facts and same grounds in two separate jurisdictions.
The FRN certainly needed to protect its position in the event that the Milan court only awarded token damages: But this could have been achieved via a standstill agreement with Shell and Eni, pending the outcome of the Milan case. This is the route that Verdant, the London solicitors that recovered $73 million of OPL 245 funds in an earlier civil action, took when launching a claim against JP Morgan for its handling of the OPL 245 monies. Why was this path not taken in the Shell and Eni case?
As many predicted, the London High Court comprehensively rejected the FRN’s arguments – in the oral hearings, the judge described one line of the FRN’s pleadings as “incomprehensible to most lawyers”. One is therefore bound to ask why the Ministry of Justice ever gave its consent to the case being taken. What input did the attorney general have? Why was such a hugely risky intervention approved?
The public needs to know that the Ministry of Justice is fully on top of these asset recovery cases and is not exposing Nigeria to unwarranted risks. The signs are not encouraging. As was revealed in the Shell and Eni case in London, the Ministry of Justice took some six months to disclose a document that was key to the FRN’s case.
That question is all the more pertinent given the enormous costs of the case. The FRN’s legal team charged a hefty £850,000 (N417 million), while the defendants, including Shell and Eni, collectively clocked up some £3 million (N1.47 billion) in fees. The judge ruled that the FRN would have to pay the said £2 million (N981 million) towards the defendants’ costs, with an interim payment of more than £800,000 (N392 million) due on June 19 (this Friday).
Under the FRN’s asset recovery policy, the risks and costs of asset recovery have been outsourced to Nigerian private law firms in return for a 5 per cent success fee.
The fiat for all OPL 245 recovery claims was granted to the Lagos firm of Johnson & Johnson, although it had no previous experience of asset recovery.
As previously reported in PREMIUM TIMES, Johnson & Johnson has entered into an opaque funding arrangement with Drumcliffe Partners, a U.S. litigation fund, to finance its various OPL 245-related asset recovery cases.
But the London court was told that Drumcliffe would not be paying the £2 million that the FRN has been ordered to pay. The Johnson & Johnson appointed barrister could not have been clearer: “M’Lord there was a suggestion in Eni’s note that these adverse cost orders would be met by a third party litigation funder Drumcliffe. That is not the case m’lord. The adverse costs will fall to be paid by the FRN and not by Drumcliffe; and it is therefore the FRN that needs to make the payments and obtain the necessary approvals and we need time for that.”
So has the FRN changed its asset recovery policy? Or has a special dispensation been made for Johnson & Johnson? If so, why? And when was it granted? Will Johnson & Johnson now receive less, by way of a success fee the next time they successfully recover funds?
And, if it is now government policy that the adverse court costs of failed asset recovery challenges are to be borne by the FRN, what contingent liabilities now face the country?
Answers to these questions are urgently needed. It would be wholly unacceptable if recovery agents are allowed to pick up 5 per cent if they win – but to offload costs onto the FRN when they lose.
…to counter what he describes as “the great laxity in the Federal Ministry of Justice with regards to the pursuit of claims of the Federal Government”, the FRN should set up a small monitoring team made up of lawyers and civil society organisations, with authority to follow every step of the cases that have been bought expeditiously in order to avoid bad judgments…
The public needs to know that the Ministry of Justice is fully on top of these asset recovery cases and is not exposing Nigeria to unwarranted risks. The signs are not encouraging. As was revealed in the Shell and Eni case in London, the Ministry of Justice took some six months to disclose a document that was key to the FRN’s case. This does not suggest a Ministry that is fully committed, let alone organised, to support Nigeria’s asset recovery efforts.
The opacity of the funding agreements signed by Johnson & Johnson are also a cause for concern. Solicitor General Apata has said that neither the Ministry of Justice nor the attorney general’s office are party to the agreements that Johnson & Johnson has signed with Drumcliffe or privy to their terms.
The FRN therefore appears to be flying blind: Without sight of the funding agreements, it cannot give any assurance that the terms and effects of the funding agreements have not given rise to actual or potential conflicts of interest between the funders, the instructing solicitors and the FRN.
Where asset recovery has been outsourced to a third party asset recovery agent who, in turn, has entered into funding agreements with a third party litigation funder, the commercial pressures to take cases is huge. If the FRN is liable for costs, where such cases are lost, the temptation to pursue even weak cases may be overwhelming.
What is the way forward? In response to a draft of this opinion piece, Professor Itse Sagay, chair of the Presidential Advisory Committee Against Corruption, has made two suggestions which should receive urgent consideration.
First, that in cases where costs are awarded against the FRN, the federal government should pay those costs but recover them from the asset recovery agent (in this instance, Johnson & Johnson) through the 5 per cent fees paid for successful cases.
Second, to counter what he describes as “the great laxity in the Federal Ministry of Justice with regards to the pursuit of claims of the Federal Government”, the FRN should set up a small monitoring team made up of lawyers and civil society organisations, with authority to follow every step of the cases that have been bought expeditiously in order to avoid bad judgments and disastrous delays.
Parliamentarians should urgently inquire into these matters and insist that the attorney general reviews the funding contracts entered into by appointed recovery agents and makes their terms public. Parliament should also seek details of the Ministry of Justice’s handling of asset recovery cases. Is there a central register of the cases being pursued? What risks for the FRN do each involve? What is the strategy behind the cases?
Global Witness is a U.K. based international organisation working on transparency and accountability in the oil and gas sector; Cornerhouse is also a U.K. research and advocacy organisation, with a reputable profile in judicial review and activism; Recommon is an Italian NGO with a huge profile in investigating corruption at local and international levels; and
HEDA Resource Centre is Nigerian research and advocacy group in accountability, transparency and good governance.