P& ID: US Court Bars Nigeria from Accessing Hedge Fund’s Documents

Nigeria’s bid to set aside the P&ID Limited’s arbitration award has suffered a setback as VR Capital Group Limited has secured a United States’ court ruling to block the federal government from accessing its internal documents.

The move to access the documents was part of the federal government’s attempt to stop P&ID Limited, partly owned by VR from collecting the nearly $10 billion arbitration award.

US District Judge, Paul Engelmayer in New York granted the hedge fund’s motion, overturning a ruling from May and quashing subpoenas issued by Nigeria.

Bloomberg reported that Nigeria sought the information to aid a corruption probe into P&ID Ltd., a company in which VR Capital acquired a 25 per cent interest in 2018.

Nigeria’s anti-graft agency is investigating a gas-supply contract a former minister concluded with P&ID in 2010 and subsequent arbitration proceedings that resulted in the hefty penalty against the country three years ago. The federal government alleged that the British Virgin Islands-registered company developed sham arrangements designed to fail and has accused P&ID of bribing its officials.

Nigeria is in English courts attempting to overturn both the 2017 arbitration award and a decision by a UK judge last year upholding it, claiming P&ID’s alleged fraud only recently came to light.

P&ID had denied any wrongdoing, saying Nigeria invented the accusations to evade its legal obligations.

Six months ago, Judge Lorna Schofield, also in the Southern District of New York, granted Nigeria permission to gather information from US banks concerning transactions involving companies and people affiliated with P&ID, as well as former government officials.

The Nigerian government also wanted VR Capital to hand over documents concerning its purchase of P&ID shares as well as the decade-old contract and ensuing arbitration.

But VR Capital applied to the federal court in New York to set aside the subpoenas principally on the grounds that Nigeria should have sought authorisation through its mutual legal assistance treaty with the United States. While the hedge fund is based in London, the four entities and two directors targeted by Nigeria are in New York.

Nigeria “misled” Schofield by denying any intention to use the documents in the English proceedings, according to Engelmayer’s November 6 opinion.

VR Capital claimed Nigeria would use the information provided by the hedge fund for the same goal.

Nigeria told Engelmayer that the main use of VR Capital documents would be in its domestic corruption probes. In his ruling, Engelmayer accepted Nigeria’s argument that it would be permissible for the government to present some material to support efforts to challenge the arbitration award in England.

However, a review of the request by the U.S. Justice Department under the treaty would help decide if the information sought was “genuinely intended for use in a criminal prosecution or investigation” or “the improper purpose of fortifying Nigeria’s attempt in the English courts to void the multi-billion-dollar arbitral award against it,” Engelmayer said.

It is unclear if Nigeria plans to submit a new application under the bilateral agreement.

“Delay tactics” adopted by VR Capital and P&ID are “prolonging the discovery process and preventing us from obtaining critical evidence,” a spokeswoman for Nigeria’s Attorney General and Minister of Justice, Mr. Abubakar Malami, said.

“These evasive efforts are manifestly inconsistent with P&ID’s position that it has nothing to hide,” she said.

“Misleading the U.S. court” is part of Nigeria’s last-ditch efforts to avoid payment of the arbitration award,” said Zachary Rosenbaum, a lawyer at Kobre & Kim LLP who is representing P&ID and VR Capital.

Nigeria scored a victory in September when a London judge ruled the government had established a “strong prima facie case of fraud” against P&ID and should be permitted to test its allegations at a trial to determine the legitimacy of the arbitration award.

Following the decision, Nigeria’s lawyers wrote to Engelmayer asking him to dismiss VR Capital’s motion.

Information collected from the banks had contributed evidence to the anti-corruption agency’s probe, which in turn had been “critical” to the country’s success in the English court, they said.

The case is Federal Republic of Nigeria v. VR Advisory Services Ltd., 20-mc-00209, U.S. District Court, Southern District of New York (Manhattan).

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