Aiteo loses again to Shell in London court

A London High Court has dismissed a suit by Aiteo Eastern E&P Company Limited challenging a partial award in which the court held that it had jurisdiction to determine Shell’s claims against Aiteo in the long-running case involving both companies.

The judgement, dated November 17, was handed down by Justice Foxton remotely by circulation to the parties’ representatives by email.

The judge dismissed two applications brought forward by Aiteo under Section 67 of the Arbitration Act 1996 (the 1996 Act), according to court documents seen by PREMIUM TIMES.

Details of the case showed that Aiteo contested a partial award of the tribunal dated 15 March 2022 in which the tribunal held that it had jurisdiction to determine the defendant’s (Shell’s) claims against Aiteo, and rejected Aiteo’s challenge to the tribunal’s jurisdiction.

It also contested a second partial award of the tribunal dated 22 July 2022 in which the tribunal made an order for the consolidation of the arbitration with another arbitration.

Background

The long-running case concerns a debt allegedly owed by Aiteo to Shell and several other claimants. Details seen by PREMIUM TIMES show that based on two agreements dated September 2, 2014, Aiteo borrowed some US$2 billion from the lenders in order to purchase an interest in Nigerian oil fields and facilities, including Shell’s OPL 29.

About 75 per cent of that funding came from AFC and the banks, regarded as “the onshore lenders”, via a Nigerian-law governed facility agreement known as “the Onshore Facility Agreement”. The rest came from Shell in the form of vendor financing via an English-law governed agreement and was dubbed “the Offshore Facility Agreement”.

In October 2018, the parties began to correspond in relation to sums which the lenders said were due to them from the borrower. On August 19, 2019, the lenders alleged certain breaches of the agreements and asked the borrower to remedy them. On September 10, 2019, the borrower denied that any sums were due in a letter addressed to the lenders.

Eight days later, Aiteo commenced proceedings against the lenders (and four other parties) in the Nigerian Federal High Court, asking the court to declare that it was not liable as alleged in the demand letter.

PREMIUM TIMES understands that the basis of the claim concerned allegations of force majeure which led to requests by the borrower to restructure the facility agreements.

Force majeure is an unforeseeable circumstances that prevent a party from fulfilling a contract. The borrower argued that since the lenders refused to restructure, there was no default.

Since then, both parties have been locked in legal battles involving arbitration proceedings and claims in the English court.

Earlier in April, the UK court noted that the commencement of proceedings in the High Court of Nigeria by the borrower seeking declarations of non-liability was a breach of the arbitration agreement in the Onshore Facility Agreement and the continuation of those proceedings was a breach of the arbitration agreement in the Offshore Facility Agreement.

It consequently ruled that Shell Plc, Africa Finance Corporation, and seven Nigerian banks established their right to block Aiteo Eastern E&P Company Limited from taking legal action when a suit initiated by them against the oil firm had not been resolved.

Verdict

Commenting on the request for arbitration, the judge noted that the doctrines of waiver and estoppel will provide sufficient protection against any unfairness. In particular, the court noted that if Aiteo commences court proceedings, events in those proceedings may well generate a point in time when a failure to act will amount to a waiver of the clause 41.1 right.

According to details of the court judgement, clause 41.1 provides that any party to the agreement (other than an Obligor) may elect to refer for final resolution of any dispute arising out of or in connection with the agreement by arbitration under the Rules of Arbitration of the International Chamber of Commerce (the ‘ICC’) in force at that time (the ‘ICC Rules’).

The judge also noted that section 67 challenge to the second award was parasitic on the success of the section 67 challenge to the first award, and fails for that reason.

“In those circumstances, it is not necessary to address Mr Juratowitch KC’s (challenging) argument that even if the clause 41.1 right had never been exercised, such that no right or obligation to arbitrate ever came into existence, the tribunal appointed in the Offshore Arbitration nonetheless had jurisdiction to make the Second Award,” the judge noted.