A United States of America (USA) Court on Friday, July 8, 2022, said Exxon Mobil Corp and Royal Dutch Shell Plc affiliate may enforce part of the $1.8 billion arbitration award against Nigeria state-run oil company in a dispute concerning oil extraction near the country’s coastline.
In a 3.0 decision, the 2nd United States Circuit Court of Appeal in Manhattan said a lower Court judge erred in rejecting the entire October 2011 award, which by 2018 had grown to $2.67 billion including interest against Nigeria National Petroleum Corporation (NNPC).
The judge said the lower court judge should have determined which parts of the award had been deemed enforceable by a Nigerian Appeal Court, as counsel to the companies did not immediately respond to requests for comment.
The dispute arose from a 1993’contract for Esso Exploration and production Nigeria Limited and Shell Nigeria Exploration and Production Company to invest billions of dollars to develop the Erha Oilfield in the Gulf of Guinea and share profit with NNPC.
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Extraction began in 2006, but disagreement soon arose and Exxon and Shell said that by late 2007, NNPC was lifting more oil than the contract allowed at the government’s behest, thereby depriving the companies billions of dollars. Following the arbitration ruling, Exxon and Shell sought to enforce the award in Manhattan, while NNPC sought to set it aside in Nigeria.
In Friday’s decision, Circuit judge Susan Carney said Exxon and Shell did not prove that setting aside part of the award violated public policy and said United States courts should not second-guess the Nigerian court’s substantive view on the country’s laws.
But she said the Nigerian judgments were ambiguous, as to how much of the award was set aside and more fact finding was needed Friday’s decision partially reversed a September 2019 ruling by United States District judge, William Pauley in Manhattan.
Following Pauley’s death in July 2021, another judge will take over the case of Esso Exploration and Production Nigeria Limited and others versus NNPC and United States Circuit Court of Appeal.
