Nigeria lost a $1.7 billion lawsuit on Tuesday against JP Morgan Chase, a US investment bank, over the transfer of proceeds from the sale of Oil Prospecting Licence (OPL) 245 in 2011.
Nigeria claims that 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, bringing the total to over $1.7 billion.
The lawsuit claimed that JP Morgan should have known about the transaction’s corruption and fraud, and that there were red flags that JP Morgan should have seen and stopped the transfers.
It was unable to substantiate its claim.
Payments “were suspected to have flowed,” according to the Federal Government’s lawyer, Roger Masefield.
It claimed that JPMorgan broke its duty by allowing bank transactions in 2011 and 2013 despite “reasonable grounds” for suspicion of fraud.
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Judge Sara Cockerill dismissed the claim in a 137-page ruling at London’s High Court on Tuesday, ruling that Nigeria had failed at the first hurdle because there was no evidence of a fraud against the country.
She acknowledged that the Nigerian government could not prove that it had been defrauded, saying 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 by the time the payments were made in 2013.
“There was a risk – but it was no more than a possibility based on a shaky foundation based on the evidence.”
In February, Masefield argued that Nigeria’s case hinged on demonstrating that there was a fraud and that JP Morgan was aware of the risk of fraud.
The lawyer told the court at the time, “The evidence of fraud is just shy of overwhelming.”
“Under its Quincecare obligation, the bank had the right to refuse to pay as long as it had reasonable grounds to believe its customer was being defrauded.”
Quincecare is a legal precedent that states that a bank should not pay out if it believes the payment will defraud its client.
The judge ruled that there had been no breach of Quincecare and that Nigeria had failed to prove its case.
According to the Financial Times, a Nigerian official said the country was “naturally disappointed by the outcome of the judgement and will be carefully reviewing it before considering next steps.” The FRN will continue its fight against fraud and corruption, as well as its efforts to recover funds for Nigerians.”
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According to the Financial Times, JPMorgan also reacted, saying, “The judgement reflects our commitment to acting with high professional standards in every country we operate in, and how we are prepared to vigorously defend our actions and reputation when they are called into question.”
What started it all
Etete awarded OPL 245 to Malabu Oil and Gas, an oil company in which he has a large stake, in 1998 as an oil minister under Sani Abacha’s military rule.
Following Abacha’s death and the country’s return to democracy, successive administrations contested Etete’s rights to the field until a deal to end the impasse through a sale to Shell and Eni was reached in 2011.
The oil giants paid about $1.1 billion for the block, and Malabu relinquished its interest in OPL 245, allowing international oil companies to buy it.
The agreement would later lead to a criminal trial in Italy for alleged government corruption.
However, the defendants were discharged and acquitted by a Court of Milan in March 2021, after a three-year trial.
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 OPL 245 sale proceeds.
In the trial, a 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 always denied the allegations.
