Nigeria: JPMorgan Wins $1.7bn Lawsuit over Controversial Malabu Oil Transaction

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There was report yesterday that JPMorgan Chase has won a $1.7billion lawsuit against Nigeria. The report said a London High Court dismissed Nigeria’s claims over the bank’s role in a 2011 oilfield transaction.

JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company headquartered in New York City and incorporated in Delaware.

Judge Sara Cockerill of the Business and Property Courts of England and Wales Commercial Court held on Tuesday that the Nigerian government couldn’t show that it had been defrauded.

Nigeria’s government had sued JP Morgan, alleging that the bank “ought to have known” that there was corruption and fraud in the transaction which saw Malabu sell its 100% in OPL 245 to Shell and ENI for $1.1 billion.

During a trial which lasted six weeks, Nigeria argued among other things that the bank acted negligently when it transferred $875 million in funds between 2011 to 2013 from government accounts to Etete, who had been convicted of money laundering.

The country sought $1.7billion as damages including interest for what it identified as “glaring” red flags, including “overwhelming” evidence of fraud and stark warnings from its own compliance staff when it authorized the payments.

The bank in its defence rejected Nigeria’s claims, maintaining that all due processes were followed and money laundering checks were done, arguing that allegations of fraud only came up after a new government took over in Nigeria.

JPMorgan also argued that it filed suspicious activity reports with enforcement authorities and gained their consent before making the transfers.

In the judgement, Judge Cockerill ruled that the Nigerian government could not prove that it was defrauded, saying it may be that with the benefit of hindsight, “JPMorgan would have done things differently” but declared that “none of these things individually or collectively amount to triggering and then breaching” the bank’s duty of care to its client.

Shell and ENI had paid a total of $1.3 billion to Nigeria’s account at JP Morgan — $801 million for Malabu, the original OPL 245 allottees, and $210 million as signature bonus to the federal government.

In the JP Morgan case, it was alleged that Mohammed Bello Adoke, the attorney-general of the federation when the transaction was concluded in 2011, was corrupt and that the entire deal was fraudulent.

But Adoke denied all the charges, insisting that political persecution was behind Nigeria’s new position. Etete maintained that there is a grand conspiracy to twist a failed mortgage transaction he did in 2013 as evidence of the alleged corruption.

Citing proceedings from Nigerian courts, JP Morgan said that on April 13, 2018, “the Nigerian Federal High Court granted declarations to the effect that Mr. Adoke could not be held personally liable in respect of the payments to Malabu (and the giving of instructions to JPMC to make them) because he was merely carrying out the lawful directives and approvals of the President.”

The bank said for Nigeria to make a case, it must prove that “Mr. Adoke caused the Resolution Agreements to be concluded and the payment instructions to be issued; and that he did so in exchange for bribes.”

Nigeria initially filed a lawsuit against JP Morgan in 2017, over claims related to the purchase of offshore production license (OPL) 245 oilfield by Shell and Eni.

Nigeria argued that JPMorgan has violated its Quincecare duty, which mandates the banks to ignore a customer’s instructions which may lead to fraud against that customer.

JP Morgan rejected Nigeria’s argument, which emphasised its primary duty to abide by payment instructions, and challenged a few factual elements produced by Nigeria.

Reuters said yesterday that JPMorgan welcomed the judgment saying it underlined its commitment to acting with high professional standards in its operations.

But Nigeria said it was disappointed and is planning to review the judgment carefully before considering the subsequent steps.

It would be recalled that in 1998, late Nigerian military leader, General Sani Abacha had awarded licence OPL 245 to a company owned by Etete.

The subsequent Nigerian administrations had challenged Etete’s rights to the field over many years until a deal was signed to sell the field to Shell and Eni in 2011.

The damages include a cash payment of around $875m to Etete’s Malabu Oil and Gas, paid in three instalments from 2011 to 2013, which brings the total to over $1.7billion.


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