A United States’ District Judge sitting in the Southern District of New York has rejected efforts by Exxon Mobil Corporation and Royal Dutch Shell Plc to revive a US$1.8 billion arbitration award against the Nigerian National Petroleum Corporation (“NNPC”), which was published in October 2011. The value of the award is reported to have grown to US$2.67 billion as of November 2018, including interest.
Papers filed by the companies in Case No: 14-08445 – Esso Exploration and Production Nigeria Ltd et al v. Nigerian National Petroleum Corporation reveal that the award stemmed from a dispute over a 1993 contract to extract oil near Nigeria’s coastline. The 1993 contract with NNPC anticipated that Exxon and Shell affiliates would invest billions of dollars to extract oil from the Erha field, off Nigeria’s coast, and share profits with NNPC. The affiliates, Esso Exploration and Production Nigeria Ltd and Shell Nigeria Exploration and Production Co Ltd, accused NNPC of unilaterally lifting more oil than was contractually permitted, at the behest of Nigeria’s government, depriving them of billions of dollars in oil revenue.
In their attempts to enforce the award, Exxon and Shell alleged that it might be difficult to enforce the Award in Nigeria. The Court on 4 September 2019, however, rejected this argument and on the grounds that Exxon and Shell still had multiple appeals pending against the decision to set aside the award. The Court also found that since both companies executed a contract in Nigeria with another Nigerian corporation containing an arbitration clause requiring any arbitration to be held in Nigeria under Nigerian law, they cannot reasonably complain that efforts to enforce the award will be frustrated in Nigeria.
The Court cited public policy and due process considerations in deciding not to enforce the award, finding that while the Court may have inherent authority to fashion appropriate relief in certain circumstances, exercising that authority to create a US$1.8 billion judgment against the NNPC is a bridge too far.
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