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A London High Court has dismissed a lawsuit brought by Aiteo Eastern E&P Company Limited, an energy company led by Nigerian billionaire oil mogul Benedict Peters, against Shell in a long-running case involving a debt allegedly owed by Aiteo to Shell and several other claimants.
Aiteo, founded in 2013 and based in Abuja, is an integrated energy company that focuses on petroleum product exploration, production, bulk storage, refining, supply, and marketing, as well as power generation and distribution services. The company’s founder, Peters, had an estimated net worth of $2.7 billion in November 2014, making him one of the continent’s wealthiest men.
The oil exploration company had contested a partial award of the tribunal dated March 15, 2022, and a second partial award dated July 22, 2022. The case centers around two agreements dated Sept. 2, 2014, in which the company borrowed $2 billion from various lenders, including Shell, to purchase an interest in Nigerian oil fields and facilities.
Around 75 percent of the funding came from Africa Finance Corporation and other banks, known as the onshore lenders, through a Nigerian-law governed facility agreement. The rest came from Shell in the form of vendor financing via an English-law governed agreement, known as the Offshore Facility Agreement.
In October 2018, the parties began to correspond about sums that the lenders claimed were due to them from oil exploration. On Aug. 19, 2019, the lenders alleged certain breaches of the agreements and asked Aiteo to remedy them. The company denied that any sums were due and commenced proceedings against the lenders in the Nigerian Federal High Court on Sept. 10, 2019, asking the court to declare that it was not liable as alleged in the demand letter.
In April this year, the UK court ruled that Shell, Africa Finance Corporation, and seven Nigerian banks had the right to block Aiteo from taking legal action while the suit initiated by them against Aiteo had not been resolved. This was because the commencement of proceedings in the Nigerian court by Aiteo 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.
The judge commented that the doctrines of waiver and estoppel would provide sufficient protection against any unfairness in the request for arbitration. The court also noted that if Aiteo started court proceedings, events in those proceedings might reach a point where a failure to act would constitute a waiver of the right to refer any dispute arising out of or in connection with the agreement to arbitration.
In the end, the judge dismissed the company’s suit against Shell and upheld the partial award of the tribunal. This means that the arbitration proceedings will continue, with the arbitration being consolidated with another arbitration as ordered by the tribunal. The case serves as a reminder of the importance of carefully navigating arbitration agreements and the potential consequences of breach.
