Process & Industrial Developments Limited v The Federal Republic of Nigeria
| Published date | 01 February 2020 |
| DOI | 10.3366/gels.2020.0007 |
| Pages | 101-103 |
| Date | 01 February 2020 |
The role of energy arbitration is relatively unknown to interdisciplinary scholars, however this will change in our view due to this following case:
There are a number of core issue we want to highlight without getting too specific – and we realize that this case will result in significant scholarship in future years. We highlight this case due to its potential impact on firstly, the energy transition and public policy, secondly the issue of justice in the energy sector and thirdly, expertise in energy sector. These issues are intertwined and our text below sets out these issues which are all worthy of further exploration on their own.
The UK Court in August 2019 stated there was no public policy issue in relation to this case. We would argue differently from a UK context and see that public policy should involve a case where there is energy, environmental and climate change issues and also closely related issues such as international development, finance and taxation issues. All these areas form part of public policy. There are fundamental issues here involving a gas project, the planned taxation structure, and the amount of the arbitration award that go against current public policy.
In brief, gas is a fossil fuel and reliance on it will slowly have to be reduced in order to develop a low-carbon economy. Then the company involved was based in a tax haven (BVI) from the outset and already planned to take advantage of a tax holiday and international tax structures utilized to for tax avoidance from the outset of the project. Finally, the amount of the award was excessive given the cyclical nature of energy prices over the short to medium term.
The narrow ruling on ‘public policy’ displays a clear lack of expertise in terms of how the energy sector operates today and also when the initial business decisions were made. A public policy decision needs to take account of (1) taxation structures and payment (2) project cost evaluation (3) environmental issues (inc. a social license to operate) and (4) climate change issues. Public policy needs to...
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