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Malabu Scandal: Shell, Eni seek to stop Nigeria in $1 billion UK lawsuit

Malabu Scandal: Shell, Eni seek to stop Nigeria in $1 billion UK lawsuit

Two international oil firms, Shell and Eni, paid out about $1.1 billion to Nigerian government accounts in the UK which then transferred most of the money to Malabu, a company then controlled by Nigeria’s former petroleum minister, Dan Etete.

Two oil giants, Eni and Shell, have argued to stop or stay proceedings in a $1 billion lawsuit brought by the Federal Republic of Nigeria (FRN).

Virtual hearings in the case took place between Tuesday and Thursday during which the companies argued to halt the $1 billion English suit as duplicating the ongoing criminal trial and parallel civil claim being brought by Nigeria in Italy over the controversial OPL 245.

The defendants – Eni, Shell and others – are asking for the court to decline jurisdiction under article 29 of the recast Brussels Regulation, as the Italian case against the companies is still ongoing.

In March, PREMIUM TIMES reported how the Nigerian government lost out in its bid to postpone the massive claim against oil giants, Eni and Shell, in a London court. Mark Pelling, a judge at the London court, ruled that it should not wait for a connected Italian ruling.

Nigeria wanted the April court date postponed until January 2021, when a connected criminal case in Milan is expected to have concluded.

The oil companies and former and current executives face corruption charges linked to the Malabu scandal, a 2011 deal involving a Nigerian oil block known as OPL 245.

Officials affected in the scandal have denied wrongdoing.

Between Tuesday and Thursday, parties in the lawsuit presented their arguments in the court.

Day 1

On Tuesday, the first day of the hearing, Richard Handyside, acting for Eni, outlined the similarities between the Italian criminal charges and civil claim based on international bribery charges and the English claim based on allegations of bribery, dishonest assistance and conspiracy.

Eni’s lawyer noted that the companies have made no profit on the deal as “the FRN has declined to grant a mining license” without which no oil can be produced and no profits made. He argued further that the FRN has brought two duplicative claims in Italy and England within months of each other and that the FRN acknowledged that they might have to choose between them down the road. They were hoping to have a “one way bet,” according to Eni.

Eni argued that Nigeria is wrong to say the Italian claim is different because the Public Prosecutor of Milan (PPM) is involved, adding that the PPM is not involved in civil claim in Italy and the FRN is the sole plaintiff for harms suffered as an injured person. The FRN’s point that the Milanese prosecutor could choose to end the case in Italy whenever they want, without the FRN having a say in that scenario, is not relevant, the lawyer added.

After a short break, Eni’s lawyer resumed to argue that while the FRN is asking the court to rescind the 2011 deal for the license, neither the company nor Shell were parties to the contract because their subsidiaries were. The oil giant argued further that President Muhammadu Buhari has ruled against issuance of licence.

In his submission, Justice Butcher noted that he could not bind the court to the length of any stay as the parties could apply to start the English case or extend it if they wanted. Eni, on its part, argued that no further money should have to be spent on an overlapping case. The company argued that permission to serve out of jurisdiction should not be allowed as there is no prospect of FRN winning its claim for an entitlement to rescind the OPL245 deal. It added that the NNPC would have to be joined as a party.

Afterwards, Shell’s lawyer took over and denied wrongdoing in all allegations levelled against the company. The oil giant argued further that FRN’s lawyers’ statement that the facts of the case became apparent after the Italian case was wrong and that they failed to explain what Nigerian law enforcements agent at the EFCC found.

The court finally called it a day.

Day 2

On Wednesday, virtual hearing resumed and, speaking on behalf of Shell, Peter Goldsmith argued that the FRN failed to bring the contents of two 2012 reports by the Economic and Financial Crime Commission (EFCC) to the attention of the judge who oversaw their application.

Mr Goldsmith explained that Nigeria has not presented evidence of what it knew about the EFCC 2012 reports. Shell is alleging that the FRN failed to give Justice Cockerill full and frank disclosure when she was asked to give them permission to serve out of jurisdiction. Shell argued that the FRN should have fairly presented the potential defence and evidence that the FRN did know about wrongdoing earlier.

The lawyer, on behalf of Shell, claimed that the FRN seriously misled Justice Cockerill by saying that evidence of alleged wrongdoing in the OPL 245 did not become apparent until it came out of the Italian investigation. According to him, it took many weeks of chasing for the FRN to disclose the EFCC reports with little explanation of why the FRN failed to inquire into the existence of these reports earlier, adding that responses to Shell’s letters on the EFCC report were “evasive”. They also point to 2012 articles by Sahara Reporters who quoted the 2012 EFCC report, adding that the FRN should have seen the Sahara Reporters article and made inquiries.

Mr Goldsmith explained that the EFCC investigation was initially triggered by a complaint made by people claiming to be shareholders of Malabu Oil and Gas but the investigation went much wider, identifying that Malabu made payments to companies controlled by Aliyu Abubakar. He claimed that the FRN’s point that the scheme “only started to emerge” with the Italian investigation is not true, adding that they should have recognised that what the court was told was false because the FRN had not told its lawyers what the EFCC investigations had discovered

He made clear that the FRN lawyers stated themselves that the EFCC investigation was in relation to bribery and corruption in the OPL 245 deal, not solely into a spat between shareholders. He thereafter went through the 2012 interviews the EFCC conducted with bureau de change operators showing details of large cash transfers from Malabu, adding that this shows the EFCC and by extension the FRN should have known about these allegations back then.

The lawyer outlined that in 2012, EFCC followed payments from Malabu to former Attorney General Bayo Ojo, Arcadia Petroleum and its CEO and a company belonging to Richard Granier-Deferrre. So the FRN had evidence of this scheme back then, he said. It was, therefore, a serious failing for the FRN to have not presented these earlier suspicions and EFCC investigations into the OPL 245 deal in what they told Justice Cockerill, he argued.

He accused the FRN of “misleading statements”, “a serious lack of candour” and that in failing to apologise, they are attempting to “brazen this out”, adding that the FRN’s reason for making the claim when it did was to avoid the claim being time-barred, and if they were allowed to make the claim without proper disclosure about the limitation issues then they received an unfair advantage.

Charles Fussell QC, representing Energy Venture Partners (EVP) took over from Lord Goldsmith and Shell. He emphasised that EVP and its owner, Emeka Obi, like Shell and Eni deny wrongdoing and Mr Obi is appealing his conviction in the Italian proceedings.

According to the lawyer, EVP shares the arguments made by Shell and Eni because EVP does not have the resources of Shell and Eni. Except for Mr Obi as its sole director and shareholder, it has no employees and no activities since the Italian proceedings, he argued.

Mr Fussell said Mr Obi appealed his conviction in March 2019 on several issues of facts and law. Mr Obi’s appeal hearing was to take place early this year, but it hasn’t because of the Coronavirus outbreak.

FRN’s barrister, Roger Masefield, responding to the allegation by Shell that they did not make full and frank disclosure, argued that Shell’s serious allegation is in danger of “Island hopping”, skipping over the FRN’s submission without context.

Mr Masefield explained that the court was told that in 2012 the EFCC was investigating, was told about the House of Representatives investigation, but the alleged wrongdoers were in control of the FRN at the time, so time should not run on limitation at that time. The EFCC discovery in 2012 is irrelevant because the wrongdoers were in control of the Nigerian government in 2015, he said. He explained further that the FRN also did not have enough credible evidence to plead the claim of fraud at that time.

Mr Masefield said the 2012 EFCC had only investigated the money flows part of the way. Even putting aside that President Jonathan was in power, the EFCC could not have pleaded then that President Jonathan was bribed based only on the link between Dan Etete and Aliyu Abubakar, he said. Mr Masefield added that in 2012, evidence of Shell and Eni’s involvement with the alleged bribes to Goodluck Jonathan and other public officials was not available to the EFCC instead they were looking at roles of Mr Etete and Mohammed Abacha at that point.

The lawyer explained that the duty of full and frank disclosure is to not mislead the court in any material respect on its jurisdiction and discretion, but does not extend to every matter that might be raised by the defence to a claim. The lawyer showed how the FRN’s law expert set out the law on limitations which allows 6 years for a claim to be brought with a provision to allow the clock to start on claims involving fraud only when the fraud is discovered or when it could have reasonably been found.

The lawyer noted that the point about the law on wrongdoers being in control was made in the without notice hearing before Justice Cockerill to deal with the possible defence argument on the knowledge of the FRN before 2015 about the OPL 245 deal and alleged scheme.

The first point, the lawyer noted, was that the FRN made their claim in December 2018, so the cut off point was December 2012. The OPL 245 agreements were signed in April 2011, when alleged wrongdoers were in control point.

The second point, he argued, was that until the Italian investigation, the FRN did not have enough evidence of alleged bribes to Nigerian public officials including President Jonathan, ex-attorney general Adoke, ex-petroleum minister Diezani Alison-Madueke and a retired general Gusau. The EFCC was investigating a different alleged fraud in 2012, between Mohammed Abacha and Mr Etete, so the FRN would not have had a solid basis for alleging bribery of Nigerian officials or that Shell and Eni knew about that and participated in that scheme.

The lawyer explained that the Sahara Reporters article on the 2012 EFCC investigation was mentioned in the FRN’s filings in the wrongdoers in control argument, saying that the president had got wind of the investigation and the report was gathering dust on the president’s desk. Mr Masefield argued that in 2012 the EFCC found money flowing to Aliyu Abubakar but did not identify any payments to Mr Jonathan or other public officials at the time. According to him, there was not sufficient evidence until years later to claim Eni or Shell were aware of bribes or that Aliyu Abubakar might have paid money to Nigerian public officials whatever his public reputation.

On the judgement against Mr Obi where Justice Barbara found that it was proven that former Eni manager Vincenzo Armanna had received a kickback of $1.2 million through Nigeria’s former attorney-general, Bayo Ojo, the lawyer noted that the allegation of a kickback scheme would be used at trial to argue that the executives had a motive to take part in an illicit scheme.

Day 3

On Thursday, the third and final day of hearing, Mr Masefield resumed addressing the defendants’ argument that the FRN didn’t make a fair presentation to the court in the hearing with notice before Justice Cockerill, adding that the evidence from the Italian investigation was very different to the EFCC 2012 probe.

The lawyer said that it would be unfair to read one line from the FRN’s solicitor’s witness statement out of context, instead he did flag to the court a few lines earlier that the EFCC had begun investigations. He then said it was in the Italian investigation that “the scheme” emerged.

Mr Masefield explained that the FRN’s solicitor, Mr Cary, did set out the evidence emerging from the Italian investigation into the OPL 245 deal with FBI interviews with participants in the deal, money flows, wiretaps, evidence of a kickback scheme etc. The lawyer said that Mr Cary explained that it was only with this new “credible evidence” that the scheme was revealed involving alleged bribes to then current Nigerian public officials including Messrs Jonathan and Adoke, ex-petroleum minister Diezani Alison-Madueke and a retired general, Aliyu Gusau.

The lawyer said that there was certainly no material misrepresentation, that they did raise the time limitation defence about when the FRN had reason to know about the alleged fraud and wrongdoers in control point which would have to be decided at trial.

Mr Masefield argued further that the money flows to Aliyu Abubakar and cash could not prove that bribes were going to Goodluck Jonathan, at most it could have been understood that Dan Etete, a convicted money launderer, was trying to launder money from the deal. He explained that the 2012 investigation was not into Shell and Eni or what they may have known about bribes, so there was no way the FRN could have argued a case against them at that time.

According to him, the EFCC’s knowledge in 2012 would not have been sufficient to argue there was this case of fraud, adding that the FRN legal team strongly disputes any allegation that they deliberately withheld the 2012 EFCC reports.

The lawyer moved further to say that if the FRN did prove at trial that Shell and Eni secured the 2011 deal through bribery, then the court should consider whether they would not allow the deal to be cancelled. If the FRN decided to rescind the 2011 deal the NNPC would not stand in the way, the NNPC could be joined to the case or could write to the court saying they do not object, he said.

The NNPC is state controlled, he noted, disputing the argument that the NNPC might stand in the way of rescinding the OPL 245 deal, they especially would not if it was proven at trial that the deal was obtained by bribery.

Mr Masefield said that the objects of the proceedings are different as they have different ends in view. In Italy, Nigeria can only ask for monetary damages, he said, but in the English case, Nigeria is asking for the OPL 245 deal to be rescinded.

In his response, Lord Goldsmith emphasised that the alleged facts and evidence brought by the FRN inferring bribes in the OPL 245 deal that he was discussing on Wednesday are not allegations that Shell accepts. He argued that despite Shell’s lawyers Debevoise and Plimpton repeatedly raising the lack of evidence from EFCC and FRN, the FRN has not provided evidence about what the FRN knew about the early EFCC investigation.

Richard Handyside, speaking for Eni, claimed as incorrect Mr Masefield’s statement where he said Justice Barbara ruled in the fast tracked Milan case that there were kickbacks to Eni executives. The lawyer wants the NNPC be joined to the case, adding that pre-2011 cases was being appealed, not just shut down.

In his submission, Justice Butcher asked for hard copies of authorities and transcripts from the hearing. He, however, said that he will reserve his judgement for a later date.

Scandal

The controversial Malabu deal was struck in 2011 under former President Goodluck Jonathan. The arrangement saw the Nigerian government stand as a negotiator in the controversial sale of the oil block in offshore Nigerian waters.

Two international oil firms, Shell and Eni, paid out about $1.1 billion to Nigerian government accounts in the UK which then transferred most of the money to Malabu, a company then controlled by Nigeria’s former petroleum minister, Dan Etete.

It was Mr Etete’s Malabu that transferred the over $500 million to accounts controlled by Abubakar Aiyu, who is also being prosecuted in Nigeria for his role in the scandal.

The payout immediately became a subject of cross-border investigation spanning over six countries. Several Nigerian government officials were believed to have received several millions of dollars in bribes for the enabling roles they played.

A larger trial including Shell, Eni and 13 other defendants is ongoing in Italy.

The London claim centers on the licensing rights for OPL 245 block, for which the oil majors purchased extraction rights in 2011. It is alleged that most of the $1.1 billion was used for bribes and kickbacks to government officials.

Nigerian officials involved in the alleged “scheme” have all denied wrongdoing.

SOURCE

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