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It is in the news that there is a case in the UK High Court regarding a contract between Process & Industrial Developments (P&ID) and the Nigerian state. It involved gas extraction, but the project fell through and there are credible allegations of corruption. For example Grace Taiga, the petroleum ministry’s former head lawyer and instrumental in drafting the contract now stands to gain substantially from the case and has said that she now saw herself as “part of the family” that is P&ID.

What is the threshold for enforcing a corruptly negotiated contract? What are the facts that are relevant, and what is the standard of evidence required? Does it vary depending on if it is a nation state or a private individual involved in the contract?

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Corruption does not, of itself, cause a contract to be unenforceable

A contract for an illegal purpose is void an initio.

So a contract where one of the primary obligations is a corrupt act is void but a contract that is ‘infected’ by corruption is not simply because of the corruption.

However, the nature of the corrupt act may make the contract unenforceable for other reasons.

Agency

A contract between a company and a government must have been negotiated by agents. A principal can disavow a contract where an agent has exceeded their authority and the other party knows or should reasonably believe this is the case.

For example, if the Foreign Minister of Nigeria corruptly solicited a bribe and P&ID should reasonably have known that this was not condoned by the Nigerian government, Nigeria could disavow the actions of their Foreign Minister and not be bound by the contract.

However, if the bribery happened without the knowledge of P&ID (who would need to demonstrate that they had performed all reasonable due diligence to prevent and detect bribery), then the government can’t walk away from the contract. For example, if P&ID were required to pay a fee ostensibly to the Nigerian government but unknown to them going straight to the foreign minister.

Misrepresentation

It is common in such agreements for the contractor to make a statement that the contract was not obtained through corruption. If this is not true, then this can make the contract void if the misrepresentation was fraudulent (i.e. P&ID knew there was corruption) or negligent (i.e. a reasonable company in P&ID’s position should have discovered the corruption).

Illegality

The courts may refuse to enforce the contract to the extent that it is unjust for a party to benefit from their own illegal acts.

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