Arbitrating Against a Foreign State

In a recent case from the District of Columbia Circuit, Process and Industrial Developments Ltd. v. Federal Republic of Nigeria, the DC Circuit allowed an arbitration enforcement action to proceed against Nigeria despite a foreign court’s setting aside of the arbitral award.

Claimant P&ID was an engineering and project management company that signed a 20-year contract with Nigeria to process its natural gas supply. In 2012, P&ID initiated an arbitration against Nigeria in London, and the arbitrators ruled in P&ID’s favor, issuing an arbitral award that, with interest, now amounts to more than $10 billion. Nigeria first attempted to set aside the award in the UK but, after that failed, it had the award set aside in its own courts. Nigeria later developed evidence of alleged fraud in the underlying contract and the arbitration and applied again to the English courts to set aside the award. A trial on these issues is scheduled to begin in January 2023 before the English courts.

In the meantime, P&ID applied to the US courts to confirm the arbitral award for enforcement in the United States. Nigeria objected on sovereign immunity grounds, asserting protection by the Foreign Sovereign Immunities Act (“FSIA”), which renders foreign countries presumptively immune from civil suit in the United States unless an exception applies.

In P&ID v. Nigeria, the DC Circuit determined that the case fit squarely within the arbitration exception, which states that foreign states are not immune from actions to confirm arbitral awards governed by international agreement, which includes the New York Convention.

Nigeria argued that the arbitration exception should not apply because P&ID lacked a valid and enforceable arbitration award, as the award had been set aside by Nigerian courts. But the DC Circuit stated that the validity or enforceability of an arbitration award is a merits question, not a jurisdictional question, for purposes of the FSIA. Accordingly, Nigeria’s sovereign immunity was abrogated, and the courts have jurisdiction to consider the validity of the arbitral award on remand.

This case shows once again why arbitration is the preferred method of dispute resolution, even against foreign sovereigns.



Fitch Law Partners LLP reports news and insights on complex litigation topics. Clients, colleagues and friends may receive The Fitch Briefs by signing up here.