Procedural Posture

This document is a Part Final Award on liability issued by an ad hoc arbitral tribunal seated in London, United Kingdom, under the Nigerian Arbitration and Conciliation Act 1988. The arbitration was commenced by Process and Industrial Developments Limited (Claimant) against the Ministry of Petroleum Resources of the Federal Republic of Nigeria (Respondent). Following a bifurcation of the proceedings into liability and damages phases, this Award resolves the Respondent's substantive defenses to liability.

Factual Background and Legal Issues

The dispute arises from a 2010 Gas Supply and Processing Agreement (GSPA) under which the Respondent was obligated to supply Wet Gas to the Claimant for processing, with the Claimant returning Lean Gas to the Respondent and retaining Natural Gas Liquids. The Claimant alleged that the Respondent failed to supply any Wet Gas, constituting a repudiatory breach which the Claimant accepted in March 2013. The Respondent raised several defenses, arguing that the Ministry lacked the legal capacity to enter into the GSPA, that the agreement was vitiated by misrepresentation or mutual mistake regarding the availability of Wet Gas from specific oil fields, and that performance was discharged by frustration or force majeure due to the refusal of third-party oil operators to provide the necessary gas.

Tribunal's Analysis

The Tribunal systematically dismissed the Respondent's defenses. On the issue of capacity, the Tribunal held that the Ministry of Petroleum Resources possessed the requisite authority to execute the GSPA on behalf of the Federal Government of Nigeria, rejecting the argument that such powers were exclusively vested in the Nigerian National Petroleum Corporation (NNPC). Regarding misrepresentation and mistake, the Tribunal found no evidentiary basis to conclude that the Respondent relied upon any false representations by the Claimant or that a vitiating mistake occurred, noting that the Respondent was best positioned to ascertain gas availability.

The Tribunal further rejected the defenses of frustration and force majeure. It determined that the GSPA did not restrict the source of Wet Gas to the specific third-party fields that ultimately refused cooperation. Consequently, the Respondent's inability to procure gas from those specific operators did not render the contract impossible to perform, nor did it trigger the force majeure clause, which the Respondent had effectively abandoned during the hearing. The Tribunal also dismissed arguments concerning legitimate expectations and public policy, finding them inapplicable to the private contractual obligations at issue.

Decision

The Tribunal declared that the Respondent repudiated the GSPA by failing to perform its obligations to deliver Wet Gas and install the necessary infrastructure. It further held that the Claimant was entitled to, and did validly accept, the repudiation on 20 March 2013. Accordingly, the Tribunal ruled that the Claimant is entitled to damages, the quantum of which is to be determined in the subsequent phase of the arbitration. The parties were held jointly and severally liable for the unpaid costs of the arbitration.