Things fall apart

London’s Commercial Court is currently hearing a case involving SJ Berwin, Stephenson Harwood, Dibb Lupton Alsop, an ex-dictator, a Swiss company, and accusations of paying the expert witness. David Wigan reports.

A few hundred yards from the neo-gothic grandeur of London’s High Court, in a quiet corner on Fetter Lane, is St Dunstan’s House, named after the nearby St Dunstan’s Church on Fleet Street. The architecture of the building is dire, a Rubik’s cube of square windows and poured concrete.

St Dunstan’s House is a court of civil law, one of the highest in the land, and outside stands a group of officials of the Nigerian government. They are in London not for the sights and the shopping, but to fight a case which could either save or cost their country hundreds of millions of US dollars.

Inside the cramped confines of court number one, all eyes are on the man in the witness box. He is old, wears gold-rimmed spectacles, and is so small he is partly obscured behind the ranks of barristers, solicitors and box files lined up in front of him. The old man is answering questions that are fired at him by a bony-faced inquisitor – David Railton QC of Fountain Court chambers.

The court is hearing a case which brings together some of the leading London barristers and law firms – SJ Berwin and Gordon Pollock QC are acting for the family of the late dictator Sani Abacha and his associates, Stephenson Harwood and Stephen Gee QC for Swiss company Noga, and Dibb Lupton Alsop and Railton are acting for the Nigerian government.

Railton is reconstructing a meeting which took place in Nigeria last August. He wants to know dates and times, and is unrelenting in asking the witness to answer questions on who, when, what and where. The old man has a heavy accent, his voice rises and falls so that it is sometimes a struggle to hear him. The questions come in waves, but on one point the old man’s story remains the same. The Nigerian government, or one of the parties in court, owes him $100m (£62.5m).

In order to understand how these people ended up in a court in London with some of the UK’s leading legal heavyweights involved in the case, you have to go back more than 20 years.

In 1979, the Nigerian government contracted with the Russian government for the construction of a Steel plant at Ajaokuta, in Kwara State in the country’s tropical heartland.

The plant was built but the government failed to pay, and in 1992 Swiss-based businessman Nessim Gaon, through his company Noga, entered into an agreement with Russia to buy the debt. The agreement was contingent on a payment by Noga to the Russia government of DM413m (about £133m at today’s exchange rate), and the consent of the Nigerian government.

Meanwhile, in Nigeria the military, headed by General Sani Abacha, seized power following the 1993 presidential elections, imprisoning members of the democratic government. In 1995, Abacha’s eldest son Mohammed and his business partner Abubakar Bagudu negotiated through intermediaries to buy back the debt owed to the Russians. In a deal arranged through banking connections in London, their company Mecosta paid the intermediaries 26 per cent of the face value of the debt. They subsequently sold the debt on to the Nigerian government for 56 per cent of face value, saving the government some $300m (£187.5m) and making themselves approximately the same amount.

In August 1998, General Abacha died following a short illness and General Abubakar took power, promising a peaceful transition to democratic government. As a confidence building measure Abubakar set up investigations into the financial dealings of the Abacha family. A special investigation panel was set up, and part of its remit was to look at the Mecosta deal on the Russian debt.

By January 1999, following meetings between Mohammed Abacha, Abubakar Bagudu and Nigerian government officials including President Abubakar, the government indicated that it was prepared to accept reimbursement of $50m (£31.3m) from Mecosta’s profit on the debt buy-back. Negotiations continued and before they were concluded Noga re-entered the fray.

The company claimed that under its 1992 agreement with the Russian government it was entitled to the money paid by Nigeria in the debt buy-back before Mecosta. Noga launched two actions in the London Commercial Court. The first was against the Estate of the late General Abacha, Abubakar Baguda, Mohammed Abacha, Mecosta and several banks and financial institutions, where Noga believed the proceeds of the Ajaokuta buy-back were held. The second was against the Russian federation.

In order to prove its case Noga had to deal with the problem that the Nigerian government had never given its consent to the transfer of the debt to Noga, as was required under the terms of the 1992 agreement. Noga’s argument was that General Abacha had corruptly conspired to withhold the consent in order that the deal could proceed through his son’s company. In March 1999 Noga persuaded the London court to impose worldwide freezing orders on the buy-back money, which was held in various banks around the globe.

On 10 May 1999 Mohammed Abacha concluded negotiations with the Nigerian government and agreed that Mecosta would pay the government back the $50m on the release of the Noga freezing orders.

On 26 May SJ Berwin received files from the Nigerian government which it said showed that the Noga freezing orders should be removed. It said Noga had withheld information from the court when it obtained the orders, including the fact that the Nigerian government had never consented to the transfer to Noga from the Russians.

On 29 May, General Abubakar honoured his promise to turn over power to an elected government, and the democratically elected party of President Obassanjo took power.

The new government took a much harder line against Mecosta than its predecessor, and in June last year issued a claim in the London court against the estate of General Abacha, Mohammed Abacha, Abubakar Bagudu , Mecosta and the same banks that had been sued by Noga.

The government’s case was that Mecosta could not have made the $300m profit on the debt buy-back without the corrupt agreement of General Abacha. It did not admit the legitimacy of the previous agreement that Mecosta could repay $50m in full and final settlement. The Nigerian government wanted its own set of freezing orders, and obtained the necessary injunctions from the London court.

Between 20 and 24 of July last year SJ Berwin, acting for the Abacha interests, applied to Mr Justice Bernard Rix for the Noga injunctions to be removed. Justice Rix declined to remove the freezing orders on the assumption that Noga might be able to prove its factual allegations at trial.

SJ Berwin later claimed that evidence presented by Noga to Justice Rix was tainted because the expert involved had an agreement with Noga that he would receive a percentage of any monies received in the litigation. Payment of independent experts is against Commercial Court rules, and SJ Berwin says that the matter will be the subject of a further application to lift the Noga injunctions in due course.

In late July and early August last year Nessim Gaon, Noga’s chairman, travelled to Nigeria to meet with Mecosta and government representatives to try to find a negotiated solution.

Following a series of meetings in the capital Abuja, the attorney-general of Nigeria prepared a memorandum of understanding which was the basis for a settlement. The document was signed on 11 August by the attorney-general on behalf of the government, Gaon for Noga, and Bagudu for Mecosta. The terms of the agreement were that all actions would be withdrawn on the basis that the government would take delivery of the instruments of the debt and Mecosta would pay Noga an unspecified sum. An intermediary of Noga’s later claimed that sum was $100m.

However, Mecosta never paid and the Nigerian government later argued that the memorandum of understanding was contingent on the agreement of the president of Nigeria, which was not forthcoming. Bagudu later said it was politically unacceptable for the Nigerian government to come to any agreement which did not involve recovery of funds from the family of the late General Abacha.

On 13 August Bagudu and the attorney-general came to a separate agreement that Mecosta would pay the Nigerian government around $100m on the release of the freezing orders in full and final settlement of all claims against the Abacha family.

The agreement stood for precisely three days. On 16 August a third document was signed between the government and Bagudu. The document said that the agreement was only in respect of a settlement relating to the Ajaokuta Steel Plant, and not other matters relating to the Abacha family. Bagudu claims he was strong-armed into signing the document and negotiations broke down once again. Towards the end of September, Mohammed Abacha was placed under arrest.

Back to London last Monday (21 February), and the small room in St Dunstan’s House. The old man in the witness box is Nessim Gaon, Noga’s owner. Railton, the barrister questioning him about the settlement discussions of last August, acts for the government of Nigeria.

Gee, Gaon’s barrister, and Pollock, barrister for Mecosta and the Abacha interests, look on.

Gaon is coming under intense pressure from Railton to admit there was never any binding agreement between Noga and the other parties. He is refusing to bend, insisting there was and that he had the personal backing of the president of Nigeria. In the back row the men shake their heads in disbelief. This one is set to run and run.