Nigeria has allegedly failed to abide by its obligation to pay the USD 200,000,000 million compensation agreed upon in its January 2020 settlement agreement with Sunrise Power Transmission Company of Nigeria Ltd (SPTCL) regarding their 2017 ICC arbitration proceedings, reports local news.
As part of their settlement agreement, Nigeria reportedly pledged to pay SPTCL USD 200,000,000 within 14 days of the execution of the agreement, failing which Nigeria would have to pay compound interest at the yearly rate of 10%. Nigeria also reportedly agreed to reinstate SPTCL as the local content partner for the $5.8 billion Mambilla Project.
Once completed, the 3,050MW project in Mambilla, Taraba state will be the second largest hydro power plant in Africa.
In new ICC arbitration proceedings against Nigeria on 11 May 2021, SPTCL is now seeking USD 400,000,000 million in compensation. A final award is expected soon since the parties have agreed to conduct the new arbitration following an expedited procedure, as reported by local news.
The case brings into sharp focus the debate about the economic impact of the Covid-19 global pandemic on developing states’ ability to comply with their financial obligations within the framework of commercial or investment arbitrations.
This is because Nigeria may be attempting to characterise the Covid-19 global pandemic as an event of force majeure — although it does not use this terminology in its letter to SPTCL. Instead, Nigeria refers to “unforeseen intervening circumstances” which could be construed as an “unforeseeable event” necessary to fulfil the criteria for a force majeure event.
In the letter sent to SPTCL by the Nigerian Attorney-General in late April 2021, Nigeria stated that it intends reviewing the parties’ settlement agreement due to lack of resources after it was forced to reallocate funds to combat the global Covid-19 pandemic. Nigeria also cites plummeted oil price earnings as a result of the reduction in oil demand among the “unforeseen intervening circumstances”, as reported in part of the letter published by local news.
Such allegations, if proven, could warrant the application of the force majeure doctrine by the arbitral tribunal. However, as details of the parties’ settlement agreement remain unknown, it is uncertain whether the settlement agreement included a force majeure clause.
The failure to explicitly invoke a force majeure clause together with the reference to soft law concepts like Corporate Social Responsibility and ‘good will,’ in the published paragraph of the above mentioned letter, seem to indicate that no force majeure clause was included in the settlement agreement. Instead, Nigeria appeared to be trying to renegotiate the settlement agreement to avoid being dragged into a new arbitration.
It will be interesting to see how this dispute is resolved, and how other arbitral tribunals deal with non-compliance events in the wake of the Covid-19 pandemic and related crisis-measures taken by governments.
Much is at stake given the human rights and public health issues involved. Indeed, in the case of developing countries, many governments may be forced to choose between using their resources to fund measures to strengthen their healthcare systems in order to combat the pandemic, or complying with their international obligations towards transnational corporations.
SPTCL first initiated ICC arbitration proceedings against the Government of Nigeria and its partner Sinohydro Corporation on 10 October 2017, seeking USD 900,000,000 in compensation over an alleged breach of contract. According to local news reports, SPTCL claims it was awarded the build, operate and transfer (BoT) contract for the Mambilla project in 2003.
The Arbitral Tribunal that heard the 2017 Sunrise Power and Transmission Company v. Nigeria and Sinohydro Corporation case was composed by Peter J. Rees (President), Charles N. Kaplan (arbitrator appointed by Claimant) and Michael Tselentis (arbitrator appointed by respondent).