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Abuja Court orders Nigeria to pay $20million damages to Transnational Energy

The judge says the federal government was wrong in reneging in the agreement it entered into with Transnational Energy.

A Federal High Court in Abuja has restored the Hely Creek and Abigborodo fields in OML 49 farmed-out to Transnational Energy Limited by Chevron/NNPC (Joint Ventures partners) back to the company, Transnational Energy Limited.

The Farm-out, which was concluded in 2017 between Transnational Energy and the Joint Venture operators, Chevron Nigeria Limited, was, amongst other things, for the purpose of providing feedstock to a gas-to-power project developed by Transnational Energy Limited and partners which started in 2012.

In a letter dated 20th February 2017, the Department of Petroleum Resources (DPR) had conveyed a letter of ministerial consent by the Minister of Petroleum Resources approving the farm-out and its terms.

It equally directed the company to pay a prescribed premium to the Federal Government, after which the farm-out would become effective. Transnational Energy paid the prescribed fee; but in a twist, in January 2019, the late Chief of Staff to President Buhari, Abba Kyari, wrote a memo revoking the earlier ministerial consent, purportedly on the instruction of the President.

The Department of Petroleum Resources, without any notice to the farmee (Transnational Energy Limited), put the two fields in the 2020 marginal fields basket, though the fields were not part of the original 57 fields approved for the bid round.

The Plaintiff, Transnational Energy Limited, and its sister company in the power business (Bresson A.S. Nigeria Limited) filed a suit FHC/ABJ/CS/1067/2020 in the Federal High Court Abuja to challenge the actions of the respondents – the minister of petroleum resources, the minister of state for petroleum resources, the Department of Petroleum Resources, the National Petroleum Investment Management Services (NAPIMS) and the Attorney General of the Federation and Minister of Justice.

The suit, which was filed by way of originating summons by Transnational Energy Limited’s lawyer, Sijuwade Kayode, was backed by a 27 paragraphs affidavit and 16 exhibits.

Transnational Energy contended that the fields were legally farmed-out to it and that having paid the prescribed premium to the Federal Government, the farm-out was completed and that later actions of Mr Kyari was null and void.

The Plaintiff asked for four reliefs amongst which is the award of US$20million (Twenty Million United States Dollars) as liquidated damages against the defendants.

The company exhibited its audited accounts, business plan and financial model which shows both plaintiffs had jointly expended US$22.718million (Twenty-Two Million, Seven Hundred and Eighteen Thousand United States Dollars) on the development of the gas and power side of the project. The financial models also show it has lost an estimated sum of over US$164million due to the actions of the defendants while the Federal Government itself may have lost over US$68million in royalty and taxes not earned as a result of the actions of the defendants.

In paragraph 7 of the affidavit, the plaintiffs asserted that its gas-to-power project elicited massive international cooperation spanning over 15 countries and involving over 100 international experts. As a matter of fact, the Hungarian Exim Bank went to parliament to amend its legislation in order to raise her scope of participation in the power side of the projects

The defendants on their own part argued that the court lacks jurisdiction to hear the case and that the actions of the plaintiff were “Statute Barred”. They also argued that the Department of Petroleum Resources which communicated the letter of 2017 has no power to grant marginal fields and that only the president can do so.

In two and a half hours judgment running to 58 pages, the presiding judge in the case, Justice Taiwo Taiwo held that the court has jurisdiction because the issue is that of contract. He listed a plethora of authorities to back his judgment.

On the main opposition of the defendants to the plaintiffs originating summons, Justice Taiwo held that the doctrine of presumption of regularity for the action of the Department of Petroleum Resources in the cases favours the plaintiff.

He further held that Mr Kyari had no locus to act in the manner he did. He counselled government officials to always abide by contracts entered into and not to seek to terminate or abort them after the government has financially benefitted from such contracts and that the sanctity of contract is fundamental to the development of the economy.

The Judge also held that the defendants did not challenge the claimant’s deposition and exhibits of its financial statements and therefore, he will be granting the main relief sought and not the alternative reliefs. He awarded US$20million as liquidated damages against the defendants.

Information from the court registry indicates that one of the defendants might have filed a notice of appeal backed by an application of stay of execution of the Judgment.

The plaintiffs on their own part, according to a company official, said they would welcome an amicable resolution of the dispute rather than further disputation at the appellate level, especially since this viewpoint had earlier been canvassed by senior government executives in the industry.

“You know the government may have lost over US$68m (Sixty-Eight Million United States Dollars) in possible royalties that could have been earned if the farm-out has not been disrupted; apart from the gas that by now could have been available to many power plants. Transnational Energy Limited too has lost a lot of money. It is in the nation’s interest to resolve the matter quickly amicably,” said the Transnational Energy official who asked not to be named because he had no official permission to speak on the matter.

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