Breach of Contract: Appeal Court Asks Statoil to Pay Abebe $3bn

Dr. John Abebe

The Lagos Division of the Court of Appeal Tuesday dismissed the appeal filed by a Norwegian oil firm, Statoil Nigeria Limited, challenging the judgment of a Federal High Court, that it should pay a businessman, Dr. John Abebe, and his company, Inducon Nigeria Limited, 1.5 per cent of its (Statoil) profit accruable from the three oil blocks allocated to it (Statoil) by the Federal Government.

If calculated based on the income of the oil firm since it entered the nation’s oil industry, the 1.5 per cent of the profit amounts to about $3 billion.

The payment is to compensate Abebe for bringing the oil firm, in the early 1990s, to do business in the country.
Statoil, THISDAY gathered, started crude oil production in 2008 and was allocated OPL 213, 217 and 218 by the Federal Government.

Of these, the firm had been prospecting for crude oil from one of the blocks since 2008 from which it had made over $8 billion, while the other two have proven reserve of over four billion barrels of oil and gas.

In a unanimous decision, the panel of the justices held that it would amount to an injustice if Abebe and his company were not paid the amount knowing full well that he brought the foreign firm to Nigeria to explore crude oil.

In the lead judgment read by Justice Helen Ogunwumiju, the court said Statoil’s appeal did not only lack merit, it dismissed it and awarded a cost of N50,000 against it.

She faulted the argument of the oil firm and its counsel, Fidelis Oditah (SAN), that judgment of the lower court was against the weight of evidence adduced, adding that it had no value.

Justice Ogunwumiju also held that based on the evidence before the court, it was clear that there was an agreement between Abebe and Statoil, “whether orally or written”.

She said since there was an alliance between British Petroleum (BP), Statoil and Abebe, the fact that BP later pulled out and left the country did not mean that the agreement reached with the businessman had died.

She added that because Statoil was a beneficiary of the crude oil exploitation which was the reason why it came to Nigeria, it meant that it inherited the terms of agreement BP made with Abebe based on the 50:50 alliance and agreement.

The judge faulted the argument of the appellant that the policy of the Federal Government on local content as canvassed by the respondent had not taken off when the alliance was struck.

She said the testimony of a prosecution witness (PW3), Dr. Abdullah Jibril Oyekan, who was the Head of the Department of Petroleum Resources (DPR) at the time the alliance was entered, was credible to show that indeed there was an agreement between the appellant and the respondent.

The court resolved that the issue of privy of contract and lack of fair hearing raised by the appellant were not sustainable because it was given the opportunity to present its case before the lower court.

Abebe, who filed an action against Statoil at the lower court in 2010, said in April 1990, that he was informed by BP that it was interested in pursuing opportunities in the Nigerian oil industry together with its partner, Statoil of Stavanger, Norway, with whom it had entered into an alliance agreement.

According to him, the alliance, as it was represented to him, would present the first ever opportunity for Statoil, then an indigenous Norwegian company, to operate outside its home base and to venture into West Africa, amongst others.

In his statement of claim, argued through his lawyer, Uche Nwokedi (SAN), he stated that at all material times, it was the representation of the alliance to him that BP and Statoil would be equal partners on a 50:50 basis in the alliance and that although the alliance would not be set up as a separate legal personality, the two companies would operate as one.

The businessman added that he was also instrumental to ensuring that the production sharing contracts for the blocks were signed with the Nigerian National Petroleum Corporation (NNPC) and these were achieved due to his “extensive contacts in government and the oil and gas sector”.

But in its defence, Statoil described the claims as unfounded, adding that Abebe and his company were retained by it in Nigeria throughout most of 1990s and that the contract had long been terminated.

It stated that the role of Abebe was to offer advice and assistance in connection with Statoil’s business in Nigeria and that for a period, he had a seat on the board of Statoil’s Nigerian subsidiary until the alliance it had with BP was dissolved in 1999.

Statoil wondered if there was actually an oral agreement as claimed by Abebe, why he did not use his position as the vice-chairman of the oil firm from 1991 to 1997 to regularise it, stating that from his own testimony, there was no conceivable evidence to show that there was an agreement between them.

In his judgment delivered on December 2010, Justice Charles Archibong had ordered Statoil to pay Abebe and his company 1.5 per cent interest on the net profit accruable to it from the three oil blocks allocated to them for bringing the firm to Nigeria to explore oil resources.

The judge held that there was indeed an agreement between him, BP and Statoil contrary to the claim of the oil firm, which must be honoured.

He added that it was clear that there were short-term, intermediate-term and long-term remunerations in connection with the contractual agreement, resulting to the ceding of the 1.5 per cent of the oil blocks to the plaintiffs.

In resolving the question of whether there was enforceable agreement in law between the plaintiffs and the defendant, the court held that though it appears that there was no written agreement, BP and by extension, Statoil engaged the plaintiff as partner and thereby took up the commitment of BP to the defendant.

This commitment with the oil firm, the judge held, was not terminated or abandoned with the plaintiff, even though Statoil later resisted it after its entrance into the Nigerian economy.

Besides, the court appointed the firm of J.K Randle to audit the accounts of Statoil to determine its income and make a report back to it. This, the firm has done.