FG may lose N7.58tn to contract disputes, damages
The Federal Government is currently facing several court cases over alleged breach of contract and a compilation of suits filed against the government by local and foreign entities in the past two years may see Nigeria losing about N7.58tn if the nation loses the cases.
Last week, the Attorney-General of the Federation and Minister of Justice, Abubakar Malami, disclosed that the Federal Government had agreed to pay a foreign investor $496m (N212b.3bn, using the official exchange rate of N428/dollar) to settle a long-standing $5.26bn (N2.25tn) contractual dispute.
The government said the mediation proceedings were under the Alternative Dispute Resolution framework of the International Chamber of Commerce led by Phillip Howell-Richardson.
According to the government, the settlement agreement came into effect on 19 August 2022.
However, the latest findings by The PUNCH show that local and foreign entities have filed suits in local and foreign courts running to about N7.58tn in compensation claims.
The PUNCH learnt that in June 2021, Sunrise Power Transmission Company of Nigeria Limited filed a fresh $400m (N171.2bn using the current official rate of N428/dollar) lawsuit at the International Court of Arbitration, Paris, France, against the Federal Government.
This was in addition to the $2.354bn (N1.008tn using the current exchange rate of 428/dollar) it demanded from the Federal Government at an arbitration court, citing “breach of contract” concerning a 3,050MW plant in Mambilla, Taraba State.
Also, in December 2021, the Nigerian Ports Authority and Attorney-General of the Federation and Minister of Justice, Abubakar Malami (SAN) were listed as second and third defendants in a suit filed against Shell Production Development by Stevedoring servicing company, Matreach Logistics Limited.
The firm said it was one of the Stevedoring service providers recommended by the Federal Ministry of Transport in 2012 for appointment to carry out dock labour operations within Bonga on/offshore terminal operated by SPDC.
It said the SDPC refused it access to the Bonga onshore/offshore terminal, a thing the firm claimed amounted to frustration and breach of contract.
In a suit with Ref No FCT/CV/408/19, filed by its lawyers, Onyeka Osigwe and Ekene Arubaleze from the law firm Goalcast Legal Services, the firm demanded N6.4tn royalty dues, operational cost and general and exemplary damages by SPDC.
In August 2021, 36 state governments dragged the Federal Government to the Supreme Court on the grounds that it diverted over N1.8tn in recovered loot and also N450bn worth of non-cash assets which were recovered from the proceeds of crime since 2015.
The plaintiffs said the sum which was supposed to be paid into the Federation Account, was illegally diverted into the Consolidated Revenue Accounts and others which the Nigerian constitution doesn’t recognise.
They said the CRA only belongs to the Federal Government and some states, adding that funds in the account were not distributable among the federating units.
In the suit, the plaintiffs asked for the remittance of N1.8tn cash and N450bn non-cash into the federation account.
In September 2022, the Centre for Transparency and Defence of Human Rights sued the Federal Government at a Federal High Court in Lagos for alleged irregularities in the bid process for the concession of Murtala Muhammed International Airport, Lagos.
The rights group alleged that Tav Airport Holding Company and GMR Airport Ltd. which submitted two separate bids were owned by the same company, Airport De Paris.
It said the action by the companies was contrary to the Request For Qualification (RFQ) guidelines set out by the Ministry of Aviation, which prohibits companies owned by the same entity from submitting separate bids for projects.
When contacted, Dr Umar Gwandu, the Special Assistant to the Attorney General of the Federation on Media and Public Relations, told The PUNCH that he could not confirm the amount Nigeria risked losing as a result of alleged contract breaching cases.
He stated, “This is because issues are connected to different sectors of government’s Ministries, Departments and Agencies.
“Providing right and correct responses requires inquiries, contacts and confirmation from relevant MDAs.”
Gwandu, however, allayed fears over the cases, adding that the Buhari regime would win them.
He stated, “In view of the established and historically indelible facts, the Buhari-led Federal Government of Nigeria is optimistic about winning all similar cases. The successes recorded in the P&ID, inter-ocean and Ajaokuta, among others, proved the capacity, political will and determination of the government to record successes in similar cases.
He also spoke on the victory recorded by the Abubakar Malami-led Ministry of Justice in the Ajaokuta steel industry suit whose penalty was reduced by over 91 per cent.
Gwandu was asked if the government would enter into negotiation on some of the cases.
He responded, “The Federal Government remains guided by public interest, rule of law including the provisions of the extant laws in its undertakings. Whatever is legally tenable and is in the interest of justice and of public good could be counted as an option. “
But senior lawyers who commented on the issue in separate interviews with The PUNCH accused government officials of carelessness.
Olu Daramola SAN, from Afe Babalola’s Chambers, said that the government was not in the habit of defending cases.
He stated, “Most cases against the government are due to negligence and poor handling leading to judgment against the government even where there could have been no judgment because it has been poorly defended. But unfortunately, the tragedy is that when you file a case against the government, they may not bother until you get a judgment.
“When you already have a judgment, negotiations become difficult because if you win your case in court and the person is now negotiating with you to take a smaller sum than the one that was awarded in court, definitely you won’t be willing.
SAN flays govt
“A lot of contracts are signed with negligence; a good example is the P&ID where the government signed to commit itself to a contract that is clear that those people who entered into the contract with Nigeria have no capacity to implement the contract.
“There are so many cases against the government because most of those contracts were signed without thoroughly studying the document. They (the government) become wiser after the event. Unfortunately, there is nothing you can do once you have committed something into writing you abide by it.”
According to him, the government has no reason to enter into agreements carelessly because there are many lawyers working for it.
He stated, “The contracts were made to fail. It’s not only limited to foreign contractors there are also local contractors too who are also defrauding the government.
The SAN added that the careless signing of contracts was creating problems for the government.
On his part, another SAN, Ifedayo Adedipe, advised the Federal Government to settle out of court if there was clear evidence of a breach of contract.
He said, “If the issue is a breach, they should settle out of court; it’s cheaper and faster. And because the constitution allows the right of appeal, to go through the three tiers of court, irrespective of the litigation, it will take not less than 10 years. By this time, the value we are talking about would have become weak.”
On his part, Prof Sam Erugo SAN, said that it should be disturbing to citizens that the Federal Government continuously faced threats and imminent penalties or liabilities for alleged breach of construction contracts.
He stated that the Federal Government’s apparent multiple breaches and defaults in settlement agreements on the Mambila power project represented another sad episode.
Erugo said like the other previous cases, they constituted national embarrassment and must be condemned in strong terms.
He stated, “To a large extent, most of the actions and inactions of government officials border on criminality or incompetence. The revelations in respect of the P&ID contract scam and arbitration with pending action by the government to avoid liability remain current. In that case, the government had strenuously canvassed that the nine contracts were signed in clear breach of due process and gone ahead to show the connivance of Nigerian citizens and officials in the scheme. Unfortunately, nothing tangible has been done to punish all the culprits. It boils down to impunity and failure of rule of law, especially crime and punishment.
“There is no doubt that similar challenges have impacted the Mambila power project breaches and defaults in settlement agreements. The Federal Government will rather shy away from prosecuting indicted officials and face the embarrassment of breaches and defaults. Corruption is killing the system,” Erugo said.
Human rights lawyer, Mike Ozekhome, SAN, in a telephone interview, noted that the FG could be embarrassed if its accounts were subjected to garnishing proceedings.
Garnishee proceedings is a judicial process of execution or enforcement of the monetary judgment by the seizure or attachment of the debts due or accruing to the judgment debtor which form part of his property available in execution.
Ozekhome said, “It is better to negotiate once a judgment has been given. Otherwise, the Federal Government can be embarrassed when its accounts are garnished by garnishing proceedings, and this will embarrass Nigeria as a country.”
Another SAN, Babatunde Ogala, said it was the prerogative of the court of law to decide whether contracts were breached or not.
Ogala said, “I can’t specifically state whether it is proper or not for the Federal Government to find itself in such a situation since the details of the contracts allegedly breached are unclear.
“However, it is left to the courts to decide whether contracts were beached by the FG or not. The fact that the case is in court and that there are allegations of breaches doesn’t mean that the courts would determine that there were breaches.
“Also, people need to know the terms of those contracts, to know if indeed there were breaches because anyone could claim that a contract has been breached, whether it’s true or not. An example is the P&ID case which has now been found to have some underhand involvement. So, it is when the facts of the cases have been established that we can talk about the FG entering into negotiations or doing otherwise.”
A senior legal practitioner, Matthew Burkaa, noted that the Federal Government had tried to negotiate a settlement which was a proactive step to take towards sorting out litigation issues.
“Nobody will be happy to see that funds that are supposed to be used for other things being used for settlement of litigation expenses.
“As a legal practitioner, I will not support a situation whereby valid contracts negotiated between parties will be breached by any party,’’ the Senior Advocate submitted.
Burkaa stated that the outcomes of the cases depended on whether FG would follow through or go into negotiations.
“However, if a case is viewed by the FG to be built on fraud and meant to scam Nigeria, the government will have to fight the case to the end. But if the case is built on trust and integrity, why will the government not settle that kind of a matter? he asked.
But Daniel Makolo observed that some of the contracts were entered into by selfish and corrupt officials who wished to make more money for themselves.
The lawyer stated, ‘’If you look at the documents or agreements with foreign partners, companies etc, the proponents who signed on behalf of the Federal Government have vested interest in the contracts. They sign Nigeria into deeper problems than it is.
“They do not protect Nigerians even though they are government workers. If you remove the veil of the company, they are the promoters of the companies. They signed it in such a way that Nigeria will default and they will make money out of it.’’