Malabu Oil Scandal: Nigerian Government Lost Against JP Morgan But Can …

The Federal Republic of Nigeria (FRN) claimed damages of $875,740,000.03, in contract and tort, in respect of money paid out of a “Depository Account” by the JP Morgan Bank (JPMC). These payments were made in August 2011 (in the sum of c.$800m) and August 2013 (in the sum of c.$75m).

The Payments were made by JPMC to an entity called “Malabu”. This was in respect of an oil prospecting licence called “OPL 245”.

Nigeria’s case is that those sums were paid in furtherance of a fraudulent and corrupt scheme. The Nigerian government was, therefore, the victim of this scheme, Gbenga Oduntan and Akalemwa Ngenda, Coordinating Attorneys for World Anti-Corruption Research Network (WARN), Centre for Critical International Law, UNIKENT, said in a report on Sunday.

JPMC presented several technical defences. These include the so-called ‘No Quincecare Duty’ because– that duty was excluded by contract. It was also asserted that JPM’s role under the Depository Agreement was intended to be, “largely automatic or mechanical”. As leading counsel for JPM put it in oral submissions, the bank’s role was “to act like an ATM machine or a robot”.

The judgment did not find fraud and, the FRN’s case failed. Cockerill J however, highlighted the presence of very unattractive features in the transactions and an association with past corruption.

Yet the judge concluded that this was not enough to trigger the duty in relation to a specific fraud in 2011.

Cockerill J maintains a highly artificial distinction between significant features of a transaction which highlight high risks that are relevant for Anti Money Laundering procedures on the one hand and other general financial crimes and wider corruption on the other hand. 

The Court concludes that JPMC was not ‘on notice’ of fraud in relation to the 2011 payment. Even though JPMC was on notice for the 2013 payment, the test for gross negligence was not met. The judgment will be studied by banking law experts for years to come.

Meanwhile, the Nigerian government was restrained by the United Kingdom High Court of Justice from appealing last month’s ruling dismissing a $1.7 billion (£1.4 billion) claim against JP Morgan Chase Bank over the transfer of proceeds from the sale of OPL 245 in 2011.

The high court said there was “no real prospect” of overturning the ruling, City A.M reports.

The government had in June lost its $1.7 billion claims against JP Morgan Chase Bank over the transfer of proceeds from the sale of OPL 245 in 2011, operated by Malabu Oil and Gas Limited.

According to the judgment delivered by the Business and Property Courts of England and Wales Commercial Court, there was no proof that Nigeria was defrauded in the deal.

The government had sued JP Morgan on the grounds of “Quincecare duty”, alleging that the bank “ought to have known” that there was corruption and fraud in the transaction, which saw Malabu Oil and Gas Limited sell its 100 per cent stake in OPL 245 to Shell and ENI for $1.1 billion.

Nigeria argued that there were enough “red flags” for JP Morgan to have halted the transfers. However, the bank rejected Nigeria’s claims, maintaining that all due processes were followed and money-laundering checks were done, arguing that allegations of fraud only came up after a new government took over in Nigeria.

In the judgment, Sara Cockerill ruled that the Nigerian government could not prove that it was defrauded, saying it might be that, with the benefit of hindsight, “JPMorgan would have done things differently” but “none of these things individually or collectively amount to triggering and then breaching” the bank’s duty of care to its client.

Citing the London and Milan judgments, a former Attorney General of the Federation and Minister of Justice, Mohammed Adoke has called on the current Attorney General (Abubakar Malami)  to discontinue the cases against him. He suggests a “refrain from wasting Nigeria’s hard-earned foreign exchange by way of legal fees on local and foreign counsel in a bid to prove the existence of a fraud that never was”.

The report urged Nigeria to resist this siren, self-serving plea. “Firstly, because many of the charges against Adoke do not relate to fraud but hang on other alleged criminal offences.

“For example, there are issues concerning unlawfully granting tax and other benefits to Shell and Eni. Secondly, the evidence before the Nigerian courts including witness evidence are wider than that before the courts in London and Milan,” the report said.

It further said, “Justice in Nigeria is not to be allowed to rest on rulings outside of Nigeria. It must be contested in Nigeria under Nigerian law and the scrutiny of the Nigerian courts. The London judgment will for a long time stand as further evidence of an imperialistic and relativistic English justice. This is more especially revealed in international commercial matters and in relation to African and other developing states. This is what makes it imperative for Nigeria to pursue a sovereign redeeming jurisprudence as an independent country. The imperatives are clear, charges against Adoke and the other accused persons must be pursued. The rule of law demands nothing less.”

Meanwhile, there are many ramifications of this unsatisfactory judgment. The effects it has on the fight against grand corruption in Nigeria are particularly deserving of analysis. More specifically it may have negatively impacted ongoing and future prosecutions relating to the notorious Oil Prospecting License 245 scandal. The effects on the legal attempts to bring the former Attorney General of the Federation, Mohammed Bello Adoke to justice deserves special attention.

The London judgment has brought sheer disappointment to anticorruption campaigners both in Nigeria and abroad. This is particularly true for those seeking to expose Adoke’s role in Nigeria’s most scandal-ridden oil deal. It appears that to exonerate JPMC from ultimate liability for Nigeria’s losses the judge arguably had to whitewash Adoke’s failings.

The court’s reasoning curiously rendered a most artificial and favourable view of Adoke’s official as well as personal actions and activities. For JPMC to avoid liability a scandalized Nigerian official facing multijurisdictional censure is now near completely exonerated in the eyes of British law.

It is important to discuss this unsatisfactory outcome because of the effects this judgment will have on anticorruption and transparency law and practice in Nigeria. The judgment may also have implications on a couple of ongoing criminal and civil actions in Nigeria against this former law chief.

Mr Adoke has, of course, seized on this recent judgment in a London Commercial Court as exonerating him of any wrongdoing related to the controversial sale of the OPL 245 oil licence to multinationals Shell and Eni, which resulted in over a billion dollars being paid to Malabu Oil & Gas, a company owned by Dan Etete who had effectively awarded the licence to himself when he was an oil minister during the notorious military regime of Ibrahim Abacha.

The deal was alleged by the Nigerian government to be corrupt and fraudulent. The FRN sued JP Morgan Chase bank for negligence in its handling of the funds from the deal. Nigeria identifies three masterminds of the scheme. They are Mr Dan Etete (1998), Mr Bayo Ojo (2006) and Mr Mohammed Adoke (2011). The judge in the London case controversially concludes that Adoke acted honestly in negotiating the deal. The judgement nonetheless describes the whole deal as an “unattractive” transaction with a “murky” past mired in corruption.

The judgment has apparently taken a very liberal view of several actions and situations involving Adoke. There are significant instances where the court admits that the fact ‘looks sinister’. Nevertheless, through various contortions of logic, it excused things away. The learned Mrs Justice Cockerill apparently does not fully understand the complexities and nuances of Nigeria’s grave problems with grand corruption.

Much of the evidence on the corruption of Nigerian officials rested on matters and issues the Judge really would have been able to take judicial notice of if the court was familiar with the terrain of grand corruption in Nigeria. Indeed the judgment appears to confess to a sheer lack of familiarity with financial realities of Nigerian life.

For instance, as the FRN alleged between 2011 and 2013 Mr Adoke as Attorney General was making property deals for himself running into millions of dollars. Mr Adoke received over $2 million into his account in cash. Yet the judgment concluded that the mere fact of the house being bought cannot be enough without more to conclude that Mr Adoke was living above his income. A Nigerian judge will of course be in a better position to understand the types of sums that suggest a Nigerian official leaving above his means.

Adoke’s spin on the judgment is thus in a sense understandable, even as it may be opportunistic. This is because he is facing three sets of charges in Nigeria for corruption and other offences related to the OPL 245 deal. However, on an impartial reading, the judgment fails to provide Adoke with a safe harbour. On the contrary, it provides grounds for new charges being brought against the former Attorney General. It also may have complicated his defences in a defamation claim that has been lodged against him. This suit is brought by Olanrewaju Suraju, Chair of the Human and Environmental Development Agenda (HEDA).

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