THE FEDERAL REPUBLIC OF NIGERIA, and ABUBAKAR MALAMI, THE ATTORNEY GENERAL OF THE FEDERAL REPUBLIC OF NIGERIA, Applicants, -v- VR ADVISORY SERVICES, LTD., VR ADVISORY SERVICES (USA) LLC, VR CAPITAL GROUP, LTD., VR GLOBAL ONSHORE FUND, L.P., VR ARGENTINA RECOVERY ONSHORE FUND II, L.P., RICHARD DIETZ, JEFFREY JOHNSON, and ASHOK RAJU, Respondents.
20 Misc. 209 (PAE)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT
November 6, 2020
PAUL A. ENGELMAYER, District Judge
OPINION & ORDER
PAUL A. ENGELMAYER, District Judge:
Petitioners the Federal Republic of Nigeria and the Honorable Abubakar Malami, the Attorney General of the Federation and Minister of Justice of Nigeria (together, “Applicants“), initiated this matter as an ex parte petition for judicial assistance pursuant to
I. Background1
A. Nigeria and P&ID‘s Dispute and Arbitration
In January 2010, the Nigerian petroleum ministry entered into a natural gas processing agreement, the Gas Supply and Processing Agreement (“GSPA“), with Process & Industrial Developments Limited (“P&ID“), for a term of 20 years. Application at 1. The agreement required P&ID to construct and operate a gas processing plant in Nigeria that would turn wet gas, a by-product of crude oil production, into electricity. Id. at 1; App. Opp‘n at 3. The GSPA provided that, in the event of a dispute, the parties could refer the dispute to arbitration under the rules of the 2004 Nigerian Arbitration and Conciliation Act (“the Act“). See Fed. Republic of Nigeria v. Process & Indus. Devs. Ltd. [2020] EWHC (Comm) 2379 [22] (Eng.) (also at Dkt. 27-1 (“English Appeal“)).
In 2012, after such a dispute arose, P&ID sent a Notice of Arbitration to Nigeria to commence proceedings under the Act and brought an arbitration action in London, claiming that Nigeria had failed to perform under the аgreement. App. Opp‘n at 3; English Appeal at [27].
In 2015, the London arbitral tribunal found that Nigeria had repudiated the GSPA. See Process & Indus. Devs. Ltd. v. Fed. Republic of Nigeria [2019] EWHC (Comm) 2241 (Eng.), 2019 WL 03848529 (“English Judgment“). In 2017, the tribunal issued an arbitral Award (the “Award“) granting P&ID $6.6 billion, plus interest, from Nigeria for the profits that P&ID had lost on account of Nigeria‘s breach. App. Opp‘n at 3; English Judgment.
B. P&ID‘s Enforcement Actions and VR‘s Stake in P&ID
In March 2018, P&ID brought actions to enforce the Award in the Commercial
Also in 2018, VR Advisory Services, Ltd. (“VR Advisory“), a respondent here, acquired a 25% interest in P&ID. Application at 2. The discussions between VR Advisory and P&ID that led to that agreement had begun in August 2017. Arg. Tr. at 21.
C. Nigeria‘s Investigation and Prosecution of P&ID
In August 2018, the Nigerian Economic and Financial Crimes Commission (the “EFCC“) commenced an investigation into P&ID and the GSPA. App. Opp‘n at 6. In mid-2019, Nigeria initiated a prosecution of P&ID, certain of its affiliates and agents, and Nigerian officials who were alleged to have accepted bribes from P&ID. Application at 11. Applicants state that Nigeria‘s investigations demonstrated that P&ID had never had the capacity to perform its obligations under the GSPA and never did any work on the project. Id. at 1. Applicants also state that the investigation uncovered evidence of hundreds of thousands of dollars of bribe payments paid by P&ID and its affiliates to Nigerian government officials to avoid proper scrutiny during the GSPA‘s approval process. Id. at 2. Applicants further assert that the investigation yielded evidence that P&ID won the Award as a result of perjured testimony by bribed Nigerian officials. App. Opp‘n at 5-6, 8. The EFCC‘s investigation and proseсution arising out of P&ID‘s alleged corrupt practices relating to the Award are ongoing. Application at 12.
In December 2019, Nigeria, based on facts gained in the investigation, challenged the Award and brought an appeal in London. App. Opp‘n at 3. Enforcement of the Award in England has been stayed pending Nigeria‘s appeal. Id.
D. Nigeria‘s Initial § 1782 Application in this District
On March 25, 2020, Nigeria filed an application in the Southern District of New York, pursuant to
Judge Schofield granted Nigeria‘s
Based in part on the discovery that Nigeria obtained through its prior
E. The Instant § 1782 Action
On May 5, 2020, Applicants—the Federal Republic of Nigeria and Abubakar Malami, its Attorney General—initiated this action, bringing an ex parte petition for judicial assistance pursuant to
On May 14, 2020, this Court, based on the ex parte application, granted Applicants’ discovery request under
On September 8, 2020, Applicants, by letter, notified the Court of the recent judgment of the High Court of Justice for England and Wales giving Nigeria additional time to challenge the Award and finding that Nigeria had established a prima facie case of fraud perpetrated by P&ID. Dkt. 27 (“App. Letter“); English Appeal. On September 18, 2020, Respondents filed a letter noting that, in so ruling, the English High Court had made only a prima facie, not a conclusive, finding of fraud, and that Nigeria retained the burden of proving fraud at trial. Dkt. 28. Respondents also emphasized that VR and its affiliates and officers are distinct from P&ID. Id.
II. Discussion
The Court first reviews the legal standards for granting a
A. Applicable Legal Standards
Under
Once a court is satisfied that these statutory requirements are met, it “is free to grant discovery in its discretion.” Schmitz v. Bernstein Liebhard & Lifshitz, LLP, 376 F.3d 79, 83-84 (2d Cir. 2004) (internal quotations omitted). A “district court has considerable discretion as to whether to exercise its authority to grant a discovery application under
(1) whether “the person from whom discovery is sought is a participant in the foreign proceeding,” in which casе “the need for
§ 1782(a) aid generally is not as apparent“; (2) “the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance“; (3) “whether the§ 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States“; and (4) whether the request is “unduly intrusive or burdensome.”
Id. (quoting Intel, 542 U.S. at 264-65).
B. Statutory Analysis
The first and third statutory requirements are easily met here. As to the first, the six Respondents are undisputedly located in this District, where the application for discovery was made. See Application 14-15; Mees, 793 F.3d at 297. And as to the third, Respondents do not dispute that Applicants, Nigeria and its Attorney Generаl, qualify as “a foreign or international tribunal or . . . any interested person.”
Respondents, however, argue that the Application fails the second requirement: that the discovery be “for use” in a foreign proceeding. See Mees, 793 F.3d at 297. Applicants have represented that the discovery they seek is for use in the criminal investigations and proceedings pending in Nigeria with respect to persons and entities that participated in or benefitted from P&ID‘s alleged fraud and bribery in procuring the GSPA. Application at 15. But Respondents contend that Nigeria‘s actual intention is to use such discovery in its separate efforts in London to undermine the $6.6 billion arbitrаl Award secured by P&ID. Respondents note that when the same Applicants sought U.S. discovery in their earlier
Had Applicants’
The pending English arbitral-enforcement proceeding appears to be of a similar post-judgment character. And Applicants, tellingly, have not made any showing as to why their attempt in that forum to void or undermine enforcement of that Award makes that proceeding “adjudicative in nature.” Applicants therefore have not met their burden to show that the use of the documents in the English proceeding would be a permitted use under
Confronted with this argument and the fact of their earlier use of U.S. discovery gained via
Section 1782 does not prevent an applicant who lawfully has obtained discovery under the statute with respect to one foreign proceeding frоm using the discovery elsewhere unless the district court orders otherwise.“). In contrast, an Applicant whose concealed purpose was to use the discovery for purposes outside
This is a factual question, and one the Court views as close. There are strong indications, including the nature of some of the discovery demands in Applicants’ requested subpoenas, that Applicants intend again to use some of the evidence they seek to attack the Award. However, the Court is prepared to assume arguendo that the second statutory prong is satisfied. The record is convincing that a criminal investigation in Nigeria into P&ID‘s conduct is underway. And Respondents, while suggesting that that investigation is
The Court thus either finds (as to the first and third statutory requirements) or assumes arguendo (as to the second) that the
C. Discretionary Analysis: The Intel Factors
Even where the statutory factors are met, the Court “is not required to grant a
1. First Intel Factor
The first Intel factor inquires whether “the person from whom discovery is sought is a participant in the foreign proceeding.” Id. If so, “the need for
In a strictly literal sense, this factor favors the Application, because VR and its affiliates are not parties to the criminal proceedings in Nigeria, the type of proceeding which, on the record before the Court, presents a valid use under
Respondents, however, make a persuasive argument why this factor does not, other than in form, favor ordering discovery from them. As they note, the discovery sought from the VR entities derives overwhelmingly from, and thus also ought to be available from, P&ID, which is a party to the criminal proceedings in Nigeria. VR Reply at 9. VR, Respondents note, acquired its stake in P&ID in 2018, and was not a рarticipant in Nigeria‘s granting of the GSPA in 2010 to P&ID. Thus, to the extent that documents bearing on those events—which are among those the Application seeks—are today held by VR and its affiliates, these likely came from P&ID. See, e.g., Application at 3 (request for documents concerning VA‘s due diligence preceding that acquisition). The Application also seeks documents relating to the arbitral Award won by P&ID in connection with Nigeria‘s breach of the GSPA, and to P&ID‘s attempts to enforce that Award. See id. (requesting discovery of “(1) documents regarding the acquisition of P&ID by VR Respondents and Lismore Capital;
In response, the Applicants make two arguments—one legal, one factual. As to the first, they argue that In re Republic of Kazakhstan, 110 F. Supp. 3d 512 (S.D.N.Y. 2015), supports their use of
Applicants’ factual argument is that P&ID‘s corporate records stored in Nigeria were destroyed in or around January 2017, and thus can no longer be obtained from P&ID. Application at 13. Accordingly, Applicants argue, notwithstanding P&ID‘s status as a party in the Nigerian criminal proceedings, the Court should exercise its discretion to allow them to seek such documents from P&ID part-owner VR and its affiliates. This argument is problematic, however. Applicants do not explain why it is reasonable to assume that VA, which acquired its interest in P&ID in 2018, is likely to have received copies of P&ID records that the Applicants claim were destroyed in early 2017, before VR‘s due diligence began. And to the extent that the Applicants seek documents later obtained by the RA entities from P&ID, “the real party from whom documents are sought” is P&ID, and because P&ID is “involved in [the] foreign proceedings,” “the first Intel factor counsels against granting a Section 1782 petition seeking [those] documents.” Kiobel by Samkalden v. Cravath, Swaine & Moore LLP, 895 F.3d 238, 245 (2d Cir. 2018).
The Court finds this factor only nominally to favor аllowing U.S. discovery under
2. The Second Intel Factor
The second Intel factor examines “the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance.” Intel, 542 U.S. at 264. The Applicants represent that the EFCC and other Nigerian criminal investigative commissions are receptive to receiving the disсovery sought here. Application at 18. Respondents do not dispute this or argue that this factor favors denying discovery. The Court accordingly treats this factor as consistent with exercising discretion in favor of the requested application.
3. The Third Intel Factor
The third Intel factor asks “whether the
The
To be sure, there is no principle of law compelling a foreign nation seeking evidence in this country for use in a criminal case to proceed first via an MLAT. But there are sound reasons for generally channeling such discovery applications through the MLAT process. Doing so promotes comity and consistent outcomes as to such requests, adds protection for the domestic entities from whom discovery is sought by foreign prosecutors and criminal investigators, and assures that the U.S. government‘s expertise and analytic rigor is applied to the application, including to assure that the discovery is not sought for ulterior (non-prosecutive) ends. See, e.g., Peter Swire & Justin D. Hemmings, Mutual Legal Assistance in an Era of Globalized Communications: The Analogy to the Visa Waiver Program, 71 N.Y.U. Ann. Surv. Am. L. 687, 699 (2017) (explaining that, under MLATs, the U.S. government must “review[] the request and deem[] it appropriate” before filing a discovery request with the federal district court).
The United States and the Federal Republic of Nigeria have such a treaty. See
The U.S.-Nigeria MLAT thus puts in place a regular procedure for Nigeria to request assistance from the United States for discovery in Nigerian criminal cases. It places the initial burden on the DOJ to assess which discovery requests accord with the MLAT and satisfy the requirements of due process before Nigeria‘s requests, as modified and pruned by DOJ, are submitted to a district court for its discretionary review. Similar MLATs are widely in place between thе United States and other nations. And, based on the authorities the parties have mustered, other foreign prosecutors appear to have consistently pursued discovery via the governing MLAT rather than proceeding in the first instance to a district court under
Applicants have not provided a good reason for bypassing the MLAT process. Pressed at argument, the Applicants’ counsel stated that they did not make any effort to pursue discovery via the MLAT, but instead filed this
Unable to justify avoiding the MLAT process, the Applicants instead argue that the Court may not properly consider their failure to pursue it. That, Applicants argue, is because the Court lacks “subject matter jurisdiction to consider the Nigeria MLAT, even as a discretionary factor,” because the Respondents do not have “standing” to complaint about Nigeria‘s decision to bypass the Nigeria MLAT. App. Opp‘n at 10. That argument is meritless. As the Second Circuit has made clear, even where the statutory requirements of
Nor can Applicants claim surprise that their decision to bypass MLAT processes might be viewed as a basis to deny their
Respondents assign a specific motive to Applicants’ decision not to subject their bid for U.S. discovery to DOJ review. They note that the integrity and reliability of Nigeria‘s criminal investigations and prosecutorial determinations is currently an issue in the proceedings before the English Court. There, they note, P&ID has disputed Nigeria‘s claim that P&ID corruptly secured the GSPA. P&ID there has depicted the Nigerian criminal proceedings as politically motivated and inconsistent with due process. Respondents theorize that Nigeria, by seeking discovery from U.S. entities and citizens in a manner that bypasses MLAT review, seeks to avoid scrutiny by U.S. authorities into the integrity of their criminal proceedings, and to avoid scrutiny into whether Nigeria is seeking discovery from the VR entities for the improper purpose of attempting to undermine the arbitral Award issued against it. VR Mem. at 10-12; see Intel, 542 U.S. at 264-65 (third discretionary factor aims to assure compliance with “foreign proof-gathering restrictions” and “other policies of a foreign country or the United States“).
Respondents’ theory is plausible. But the limited record on this application does not permit the Court to reliably assess whether a desire to avoid uncomfortable or fatal DOJ scrutiny prompted Applicants to skip the MLAT process. One data point supports Respondents’ concern. In the immediately prior
For the above reasons, the third Intel factor powerfully supports exercising the Court‘s discretion to deny the instant
4. The Fourth Intel Factor
Respondents give modest attention to the fourth Intel factor, which inquires whether the discovery sought is “unduly intrusive or burdensome.” They term Applicants’ 56 discovery requests “overly broad” and indicative of a “fishing expedition.” VR Reply at 8, 10. And they point to the subpoena requests for documents and communications concerning the enforcement of the arbitral Award, which they contend are unrelated to the criminal proceedings in Nigeria. See VR Mem. at 12-13 (quoting subpoenas); Arg. Tr. at 18. Respondents theorize that the Applicants, by seeking information from P&ID part-owner VR and its affiliates, improperly seek insights into their adversaries’ litigation strategy in seeking to enforce the Award. Arg. Tr. at 19. See, e.g., Subpoenas at 5-6 (subpoena requests for “[a]ll documents and communications between VR Advisory and Lismore Capital concerning the acquisition of Process & Industrial Developments or any of its assets, including without limitation the GSPA or any award granted in the Arbitration in connection with the GSPA“; “[a]ll documents and communications concerning the enforcement of any award granted in the Arbitration in connection with the GSPA“; and “[a]ll documents concerning any transactions between VR Advisory and any person or entity in Nigeriа regarding the Arbitration, or the GSPA“). Applicants counter that, much as the GSPA allegedly resulted from bribery, P&ID may have engaged in bribery or corruption in procuring the Award, and that the subpoena requests relating to the arbitration are justified as a means of probing continuing illegality. App. Opp‘n at 4-5, 8
Even accepting Applicants’ representation that bribery in connection with procuring the Award is within the scope of Nigeria‘s criminal investigation, various document requests in the subpoena appear to sweep well beyond that subject. The above requests would require VA and its affiliates broadly to produce all records relating to the arbitration—and to the ongoing process of enforcing the Award against Nigeria. At a minimum, therefore, were the
The
5. Overall Assessment of Discretionary Factors
For the reasons above, even assuming that the statutory factors are satisfied, the Intel factors, considered in combination, compellingly favor denying the present application under
895 F.3d at 245 (Intel factors “are not to be applied mechanically.“). Assessing the Application flexibly and holistically, the Court finds that the discretionary factors clearly require its denial.
CONCLUSION
For foregoing reasons, the Court grants Respondents’ motion and vacates its grant of discоvery pursuant to
SO ORDERED.
Paul A. Engelmayer
United States District Judge
Dated: November 6, 2020
New York, New York