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    Monday, September 28, 2020

    Samsung’s Litigation & Arbitration, Another P&ID Waiting to Hatch

    Rather than a good corporate citizen, Samsung Heavy Industries Nigeria Limited, SHIN, is now known in Nigeria for litigations and aggressive fight with government. 

    It is alleged that despite earning more from Nigeria than several other countries, Samsung appears to have no respect for the Nigerian President, the government and the laws of the land: It is in court on several fronts challenging the president, the government, fellow corporate entities and the laws of the land. Outside the court, it is also tackling its benefactor company, Total Upstream Nigeria Limited.

    Observers fear that SHIN’s penchant for litigations could be another P&ID waiting to hatch.

    Like the UK company, P&ID, which obtained a US$9.98 billion award in arbitration against Nigeria, SHIN is in various courts and had sought several claims and reliefs in Nigeria. Just as the P&ID original arbitration had undergone twists and turns, leading to other court cases, SHIN’s litigations have seen arbitration, court cases and counter cases.

    P&ID has proven to be predatory in its multi-billion dollar claim on Nigeria, so SHIN equally appears in its demand for funds in court cases in Nigeria and arbitration in London.

    For instance, the company demanded variations on the Total Nigeria-operated Egina FPSO vessel as construction was still ongoing in South Korea. The variations represent 47 percent increase on the original contract value, from $2.99 billion to $4.4 billion, making a mess of the tender process.

    The contract for construction of the Egina FPSO was originally awarded for $2.99 billion. SHIN made two demands for variation, totaling $908.8 million. Both were approved.

    After building the Egina FPSO and while the vessel was still at the Samsung yard in Korea, even though the contractual fees including variations, had been paid, Samsung decided to hold Total to ransom, demanding payment of an extra $1.65 billion as a condition for the release of the FPSO vessel.

    Total refused to pay the extra cost, instead, paying $160 million before Samsung could allow the vessel to set sail for Nigerian waters.

    Following negotiations between both parties, Samsung reduced its ransom demand from $1.65 billion to $500 million. Total did not pay this money before the vessel left the Ladol yard in Lagos for the Egina field.

    Samsung only allowed the Egina FPSO to leave the Ladol yard because an executive director of the Nigerian National Petroleum Corporation, NNPC, threatened to ban the company from doing any more work in Nigeria for the next 10 years if they refused to let the vessel leave the Ladol yard for the Egina field.

    Up till now, Samsung is still demanding payment of $500 million ransom while Total has refused to pay.

    The company’s demand for variations and holding the Egina FPSO hostage in South Korea even after the original contract cost has been released to it does not show good faith on the part of Samsung.

    Oil and gas industry observers are wondering how Samsung came up with demands for more money at every turn of the project and where the figures were coming from.

    They are asking the National Assembly to conduct its oversight function on Samsung activities as it concerns demand for variation on the Egina project.

    Samsung’s earliest involvement with litigation involved an arbitration in London initiated by it against Ladol, its erstwhile partner on the Egina project. Both parties made claims and counter claims here. A court case in Nigeria, also involving the two entities, equally saw them making claims and counter claims.

    Details of Samsung’s other legal actions show that in April 2018, it issued notice of dispute against Total, requesting variation of US$1.6 billion and claiming financial losses of US$1 billion on the Egina project.

    Two months later, in June, it wrote to NAPIMS, the Nigerian National Petroleum Corporation, NNPC, subsidiary, requesting assistance in resolving dispute.

    On July 12, Samsung stopped work on the FPSO until US$500 million is paid. It also served Total notice of pre-suspension of work, in which it stated its intention to stop work unless Total agrees to pay the USD$500 million variation.

    On July 30, Samsung took Total to a High Court in Lagos State – SUIT NO: LD/2744GCM/18 – seeking an injunction to stop the Egina project promoter from terminating their contract and removing the FPSO from Ladol. The following day, the Lagos court ruled against Samsung and threw out the case against Total.

    Samsung again, on August 6, took Total to court, this time in Federal High Court -SUIT NO: FHC/L/CS/1323 – seeking an injunction to stop Total from terminating their contract and removing the Egina FPSO from Ladol, until after arbitration is completed on the demand for variation.

    NAPIMS/Total met with Samsung on August 21 and gave it until August 24, 2018 to launch the FPSO from Ladol or face termination of their contract and 10-year ban from working in Nigeria.

    The Samsung/Total case at the Federal High Court later came up on August 29 and the court threw out the case.

    On June 10, 2020, the Nigerian Ports Authority, NPA, terminated its purported lease to Samsung with the latter dragging NPA to court in an aggressive attempt to overturn the termination in Lagos State High Court Suit No. LD/6899/GCMW/2020. The NPA action was reportedly approved by both its supervising Ministry of Transportation and President Muhammadu Buhari, implying that in challenging the termination, Samsung was challenging the authority of the supervising Ministry and the President.

    On August 4, 2020, the Ministry of Justice joined court action against Samsung despite opposition by it.

    The Managing Director of Samsung Nigeria, Mr. Jelin Jeon, granted a media interview on August 14, accusing the Federal Government of Nigeria of expropriation.

    On August 19, the company filed a further court actions against the Federal Ministry of Justice challenging its authority in demanding to be joined in the suit between Samsung and the NPA.

    These are the various actions by Samsung Nigeria, which observers said, may be shaping up to become another P&ID.

    In its latest campaign, SHIN is out in what many describe as a futile effort to seize a Nigerian local content facility – the shipyard at the Ladol Free Zone in Lagos, built for the country to meet local content requirements and for use by the oil sector operators and maritime industry players.

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    Item Reviewed: Samsung’s Litigation & Arbitration, Another P&ID Waiting to Hatch Rating: 5 Reviewed By: BrandIconImage
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