Nigeria lost a $1.7 billion lawsuit against JP Morgan Chase, a US investment bank, on Tuesday over the transfer of proceeds from the 2011 sale of Oil Prospecting Licence (OPL) 245.
Nigeria claims JP Morgan was “grossly negligent” in transferring funds paid by Shell and Eni to an escrow account controlled by a former minister, Dan Etete, who was convicted of money laundering in a separate case in France in 2007.
Nigeria sought damages in the amount of $875 million paid to Etete’s company, Malabu Oil and Gas, in three instalments between 2011 and 2013, plus interest, for a total of over $1.7 billion.
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JP Morgan should have known there was corruption and fraud in the transaction, according to the lawsuit, and there were red flags that JP Morgan should have seen and stopped the transfers.
It was unable to back up its claim.
The Federal Government claimed it was the victim of a “fraudulent” scheme because payments “were suspected to have flowed,” according to its lawyer Roger Masefield.
It claimed JPMorgan had failed to fulfil its obligations by allowing bank transactions in 2011 and 2013 despite “reasonable grounds” to suspect fraud.
Judge Sara Cockerill dismissed the claim in a 137-page ruling on Tuesday at London’s High Court, ruling that Nigeria had failed at the first hurdle because there was no evidence of a fraud against the country.
She noted that the Nigerian government could not prove that it had been defrauded, and that while “JP Morgan would have done things differently” with the benefit of hindsight, “none of these things individually or collectively amount to triggering and then breaching” the bank’s duty of care to its client.
Judge Cockerill stated that the bank was “aware of a risk” of fraud at the time of the 2013 payments.
“There was a risk – but it was nothing more than a possibility based on a shaky foundation based on the evidence.”
In February, Masefield argued that Nigeria’s case hinged on proving that there was a fraud and that JP Morgan was aware of the risk.
The lawyer told the court at the time, “The evidence of fraud is a little short of overwhelming.”
“Under its Quincecare obligation, the bank was entitled to refuse to pay as long as it had reasonable grounds to believe its customer was being defrauded,” the court wrote.
Quincecare is a legal precedent that states that if a bank believes it will be defrauded by making a payment, it should not do so.
The judge ruled that there had been no Quincecare breach and that Nigeria had failed to prove its case.
According to the Financial Times, Nigeria was “naturally disappointed by the outcome of the judgement and will be reviewing it carefully before considering next steps,” according to an unnamed Nigerian official. The FRN will continue to fight fraud and corruption while also working to recover funds for Nigerians.”
“The judgement reflects our commitment to acting with high professional standards in every country we operate in, and how we are prepared to robustly defend our actions and reputation when they are called into question,” JPMorgan said in a statement to the Financial Times.
How it all began
Etete awarded OPL 245 to Malabu Oil and Gas, an oil company in which he has a large stake, as an oil minister under Sani Abacha’s military rule in 1998.
Following Abacha’s death and the country’s return to democracy, successive administrations challenged Etete’s rights to the field until a deal was struck in 2011 to end the impasse by selling the field to Shell and Eni.
The oil giants paid about $1.1 billion, and Malabu relinquished its interest in OPL 245, allowing international oil companies to buy the block.
The agreement would later lead to a criminal trial for the Italian government’s alleged corruption.
The defendants were, however, discharged and acquitted by a Court of Milan in March 2021, after a three-year trial.
As a result, the Federal Government filed a lawsuit seeking a $1.7 billion award against JP Morgan Chase Bank, which facilitated the transaction, for allegedly failing to meet its Quincecare obligations when it transferred $810 million to Malabu from the proceeds of the OPL 245 sale.
In the trial, the Nigerian legal team accused Mohammed Bello Adoke, the Attorney-General of Nigeria from 2010 to 2015 under former President Goodluck Jonathan, of corruption.
Adoke, on the other hand, has consistently denied the allegations.