By Lionel Faull

High profile courtroom dramas involving multiple sides often have the feel of a WWE Smackdown wrestling match: titanic egos clashing with each other, trying to batter their foes into submission. The fighters forge alliances, and the argy-bargy can sometimes spill out of the ring and break out elsewhere in the auditorium. 

An epic international corruption trial that is now drawing to a close under the glamorous lights of Milan is a case in point.

In the red team — and the long time star of the show — is one of Italy’s most feared anti-corruption prosecutors, the walrus-mustachioed Fabio de Pasquale. Halfway through the bout he was joined in his corner by the Federal Republic of Nigeria.

Fabio De Pasquale
Fabio de Pasquale (pictured 2012) Photo: Matteo Bazzi/Shutterstock

In the blue team, two superstars from the corporate world: Italy’s heavyweight oil giant Eni, and Anglo-Dutch major Shell — plus a host of current and former executives, middlemen, an ex-government minister and even ex-MI6 spies.

The cause of the fight? A $1.3bn deal for a massive Nigerian oil block known as OPL245. The blue team stands accused of various corruption charges relating to the deal they struck in 2011. All have denied wrongdoing.

This courtroom battle has been going on since 2018. To many observers, it seemed as though the corporate heavyweights were taking a real beating from de Pasquale. 

But as with all good contests, there could be some significant late twists. 

In May next year the oil companies face a make-or-break deadline: the 10-year prospecting licence they hold to explore the block will expire, without having been converted by the Nigerians into a production licence.

Having invested hundreds of millions in the block and now facing disaster, Eni has just attempted to fight itself out of a tight corner by landing swift punches to Nigeria’s ribs. The company feels it has spotted a weak link in Nigeria’s armour — a US litigation funder called Drumcliffe Partners. Eni has also threatened to turn the tables on Nigeria by taking them to an international investment tribunal. It hopes to exploit any Nigerian weaknesses to the fullest.

Backstory

There is a long history to this saga. 

Back in the late 1990s during his last weeks in office, then Nigeria petroleum minister Dan Etete awarded the prospecting licence for block 245 (a vast untapped deposit of undersea oil and gas 150km off the coast) to a company called Malabu which he secretly controlled.

Over the next few years he lost it, won it back and then in 2011 he sold it to Eni and Shell for $1.3bn, in a deal brokered by the then-Nigerian government.

The deal had a whiff about it, not least because Etete (pictured) was already known to Eni and Shell as being both the owner of Malabu, and a convicted money launderer.

De Pasquale investigated and informed the parties that they would be charged with international corruption in 2016. The trial-proper began two years later.

The prosecution wrapped up its case in July, asking the court to jail the senior executives allegedly responsible, to fine Eni and Shell $1 million each, and to confiscate $1.1 billion (representing the total amount of the alleged bribe) from the defendants.

Nigeria — under new political management since 2015 — has asked the court to award it the $1.1 billion as part of compensation it hopes could run to several billions more once its potential losses from the terms of the 2011 deal are totted up.

The Tribunale di Milano, scene of the OPL245 trial (Photo: Barnaby Pace, Global Witness)

The judges have since been hearing closing arguments from the accused, and appear to be in a hurry to conclude the trial by the end of the year — or early 2021 at the latest.

In a nightmare double whammy scenario, Eni and Shell could lose their rights to the asset entirely, while also being compelled by the court to pay massive damages to Nigeria. 

Funding

This is the point at which Eni, its back against the ropes, has directed two punches into Nigeria’s ribcage.

Eni’s left-hand jab was targeted at what it perceives to be one of Nigeria’s weak points: the perennially cash-strapped government’s ability to sustain costly legal actions.

Eni approached a court in the US state of Delaware in early October, asking a judge to grant it access to sensitive commercial information about Drumcliffe Partners, a little-known investment fund which is paying Nigeria’s legal fees in return for a cut of any successfully recovered funds. Drumcliffe is incorporated  in Delaware.

Eni appears to have seized on the recent leak of Drumcliffe’s funding agreement, as well as on concerns raised by Finance Uncovered and the Premium Times as well as multiple anti-corruption NGOs  about the opacity of Nigeria’s outsourced asset recovery strategy.

In its application in Delaware, Eni said it “intends to establish that the Federal Republic of Nigeria’s actions against Eni are driven by undisclosed interests that are financing the FRN’s litigation through opaque, possibly unlawful arrangements.”

Antonio Tricarico, a campaigner for Italian NGO Re:Common that was jointly responsible for filing the criminal complaint against Eni and Shell that led to their prosecution in Milan, said Eni has launched “a strategy of delegitimisation” against Nigeria. 

He said that by fishing for information in Delaware, Eni is trying to turn up anything that could discredit Nigeria as a civil party to the Milan trial.

Given that the trial is at an advanced stage, however, and the length of time it would take to obtain documents from Drumcliffe through the courts, Tricarico believes Eni is eyeing an appeal against any guilty verdicts or damages awards against it in Milan, and “wants a lever for the future”.

For its part, Drumcliffe has accused Eni of manufacturing a “staged controversy” and said it would oppose their efforts “to the fullest”.

‘Stonewalling’

But Eni has also launched a right-hand counter-punch: a request for an international arbitration hearing against Nigeria before a tribunal in New York. It has accused Nigeria of “unjustifiably stonewalling” its efforts over several years to negotiate the conversion of OPL245 into an oil mining licence (OML). “The FRN has refused to grant Eni’s conversion application until the conclusion of the very proceedings that the FRN itself elected to bring or join [in Milan and elsewhere],” Eni complains in its affidavit.

“If the FRN refuses to convert the license … it will have effectively expropriated Eni’s rights to the block by the mere passage of time, having itself brought about that result by initiating groundless legal actions funded by [Drumcliffe],” Eni argues.

The arbitration would take place behind closed doors and could turn the tables on Nigeria, opening it up to the possibility of a multi-billion dollar damages award under bilateral investment treaty law. At the very least, it would be another legal front on which Nigeria would have to fight — and fund.

Interestingly, Nigeria hired a dispute resolution consultant in June to represent it in “discussions” with Eni over the OPL245 dispute. Although neither side would comment further, it is highly likely these talks have already begun.

An out-of-court settlement would not absolve Eni, Shell or their current and former executives of any possible criminal sanctions in Milan — a process over which they have no control — but it would accomplish two things.

Firstly, if Nigeria withdraws their claim against Eni and Shell from the Milan trial as part of the deal, it would become a straight fight between de Pasquale and the oil companies. 

Secondly, a settlement would avert — in the nick of time — the ultimate nightmare scenario of them losing their rights to the block altogether.

Hardball

Babajide Ogundipe, an independent Nigerian asset recovery lawyer and international arbitrator, said he would not rule out the Nigerian government reaching a settlement (while stressing that he has no direct knowledge of their strategy on this matter).

“My understanding is that Nigeria was never averse to a commercial resolution, but everyone has played hardball. The bottom line is that the government wants more money, which is why it’s bought all these proceedings in Milan and elsewhere.”

How might such a settlement work in practice? “If Shell and Eni were prepared to offer more than what they have already paid to get this oil field, then they have the capability in place to develop it. And in the process of it being developed, Nigeria would get something. I honestly believe there is no problem that exists in this oil field that money can’t solve, one way or another,” Ogundipe surmised. 

Drumcliffe could also receive a cut of any settlement agreement, because the terms of their leaked funding agreement provides for it. Investors in the litigation fund would welcome a return on the millions spent funding Nigeria in court battles which have not, to date, resulted in any decisive wins.

Having fought Nigeria to a standstill, Eni and Shell could soon be putting down their fists and reaching for their wallets. Eni’s threat to drag Nigeria to an international arbitration hearing appears to be a negotiation tactic to reduce the final bill.

* Editing by Ted Jeory and Nick Mathiason

*Main image: Inside the Milan courtroom during the OPL245 trial (Photo: Luca Manes, Re:Common)

Lionel Faull

Posted by Lionel Faull

Lionel Faull began his career as a journalist at the Mail & Guardian newspaper in South Africa before joining the country's pre-eminent non-profit investigations team, amaBhungane, in 2011. He has been working with Finance Uncovered since January 2017, joining as a full-time senior reporter a year later. His investigative interests include following the money flows behind mega-infrastructure procurement and natural resource exploitation, as well as exposing the professional enablers of grand corruption. Lionel has worked on several award-winning team investigations, including the GuptaLeaks in 2017, the Panama Papers in 2016, and lavish state spending on then-President Jacob Zuma’s private home in 2013. He has also freelanced for the Daily Telegraph and The Guardian in the UK.