Interocean Oil Development Company and Interocean Oil Exploration Company v. Federal Republic of Nigeria, ICSID Case No. ARB/13/20
In an October 6, 2020 award, an ICSID tribunal considered indirect expropriation and breach of customary international law claims brought by two American companies, Interocean Oil Development Company and Interocean Oil Exploration Company (claimants), against the Federal Republic of Nigeria (respondent), pursuant to the Nigerian Investment Promotion Commission Act (NIPCA). These claims were largely based on international law principles of attribution. In particular, the claimants maintained that the collective actions of the respondent’s agencies and domestic courts, as well as the private actions of Festus Fadeyi, which allegedly led to the expropriation of their investments in Nigeria, were attributable to the respondent.
The tribunal dismissed all claims on the merits and awarded costs in the sum of USD 660,129.87, in respondent’s favour. Regardless of the dismissal, it is notable that the tribunal similarly dismissed all jurisdictional objections raised by the respondent.
Background and claims
The claimants, through the Nigerian corporate vehicle Pan Ocean Oil Company (Pan Ocean), owned a 40% participating interest in Nigerian Oil Mining Lease (OML) 98 and Oil Prospecting License 275 (the assets). Consistent with the Nigerian oil and gas joint venture structure, the respondent, through Nigerian National Petroleum Corporation (NNPC), retained the remainder of the interest in the assets. Until mid-1998, the claimants cumulatively held 2,500 shares, which were the only issued shares out of the Pan Ocean’s 10,000 authorized shares.
However, in 2005, Fadeyi, as managing director of Pan Ocean, allotted the outstanding 7,500 shares to himself and associates. In addition, Fadeyi appointed new directors. These actions were taken without notice to or the participation of the claimants. Resolutions affecting these actions were subsequently validated by a Federal High Court (FHC), and relevant corporate documents supporting the allotment were filed at the Nigerian corporate registry. These actions resulted in the dilution of the claimants interests in Pan Ocean (and, ultimately, the assets) and caused the claimants to lose ownership and control of their investment in Pan Ocean, despite the claimants’ persistent efforts to regain control.
Relatedly, the claimants alleged that the unlawful detention of Herbert Rooks (who was to have assumed Fadeyi’s managerial role) by Nigerian security operatives, constituted part of the expropriatory and conspiratorial acts of the respondent; moreover, it constituted a violation of the respondent’s protective duty under customary international law.
Premised on the foregoing, The claimants brought the claims against Nigeria pursuant to certain provisions of the NIPCA.
Pan Ocean’s non-registration with the Nigerian Investment Promotion Commission (NIPC) did not rob the tribunal of jurisdiction to entertain the claims (but Justice Torgbor dissented)
Premised on the fact that the claims were solely based on NIPCA, as opposed to an international investment agreement or treaty, the respondent opposed the tribunal’s jurisdiction, contending that the claimant had no basis to invoke the jurisdiction of the tribunal because Pan Ocean, having foreign shareholders, was not registered with the NIPC, and therefore could not claim any of the protections under NIPCA, including the ICSID-dispute resolution mechanism contemplated under Section 26 of the NIPCA.
In response, the claimants maintained that Section 29(2) of the NIPCA dispelled the need for registration because Pan Ocean was in existence prior to the enactment of the NIPCA; more so, the NIPCA was silent as to the legal implications for non-registration with the NIPC.
The tribunal, by a majority, dismissed the challenge, finding that it was not barred from assuming jurisdiction for this singular reason. Notably, the tribunal held that the claims related to the respondent’s failure to protect the claimants’ investment in Nigeria. What’s more, the majority alluded to the fact that it would be unfair to refuse jurisdiction based solely on NIPCA registration technicalities.
Language in NIPCA is broad enough to entertain indirect expropriation claims and protections afforded under customary international law
Alternatively, Nigeria urged the tribunal to decline jurisdiction, arguing that the claims were outside the scope of the NIPCA as the protective guarantees provided in Section 25 of NIPCA are limited to only direct expropriation. Moreover, the respondent contended that there was neither language in the NIPCA nor existing bilateral or multilateral agreements between the parties upon which claims for breach of customary international law could be found.
Conversely, the claimants asserted that based on the FHC decision, the involuntary surrender/dilution of their interest in Pan Ocean constituted indirect expropriation as contemplated by Section 25(1)(b) of the NIPCA. Regarding the contention against breaches of customary international law, the claimants argued that references to treaty agreements in the NIPCA implicate claims for customary international law breach. Additionally, the claimants maintained that customary international law was embedded in Nigerian legal system pursuant to Section 32 of the Interpretation Act.
The tribunal held that the broad language in Section 26 of the NIPCA covered the claims, even as customary international law had formed part of Nigerian law to the same extent as common law. It observed that a narrow construction of the NIPCA to hold otherwise would result in unwarranted findings.
Acts of NNPC, FHC, Fadeyi, and other state instrumentalities are not attributable to the respondent based on the relevant provisions of the International Law Commission’s Articles on State Responsibility for Internationally Wrongful Acts (ILC Articles)
The claimants argued that the actions of the FHC in approving the dilutive corporate actions of Fadeyi, NNPC’s failure to investigate into the affairs of Pan Ocean based on their joint venture relationship as well as its continuous interactions with Fadeyi (in his capacity as a representative of the OML 98 joint venture), were attributable to the respondent pursuant to Articles 4 and 7 of the ILC Articles.
However, the tribunal held that regardless of the fact that the claimants had lost their investment in Pan Ocean, the actions of Fadeyi and all state-owned instrumentalities were not tantamount to expropriation. Although the tribunal concluded that acts of Nigerian courts could amount to judicial expropriation, such finding could not be made in the present case as only a miscarriage of justice had occurred. The tribunal alluded to the fact that the claimants ought to have exhausted available domestic remedies by appealing the FHC’s decision before a judicial expropriation could be considered to have taken place.
Regarding NNPC’s inactions, the tribunal concluded that to the extent NNPC acted exclusively in a commercial capacity, the relevant provisions of the ILC Articles were not triggered to hold Nigeria culpable for expropriation.
No breach of minimum standard of treatment and FET standards
Finally, regarding Rooks arrest, the tribunal held that the claimants failed to link the arrest to a violation of these standards. Precisely, the tribunal noted that the standards for violation as articulated in Neer v. Mexico had not been established evidentially by the claimants.
Notes: The ICSID tribunal was composed of Prof. William W. Park (Presiding arbitrator, Swiss/American national), Prof. Julian D.M. Lew (British national; nominated by the claimants) and Hon. Justice Edward Torgbor (Ghanaian/British national; nominated by the respondent). The award is available at https://www.italaw.com/sites/default/files/case-documents/italaw11819.pdf.
Viola Echebima holds a Master of Laws degree from New York University (NYU), School of Law. She graduated from the University of Nigeria, where she obtained her Bachelor of Laws degree. She is currently an International Finance and Development Fellow at IISD in Geneva.