An Arbitration Court presided over by retired Supreme Court Justice Uche Omo has ruled that the Nigerian National Petroleum Corporation (NNPC) wrongly terminated the contract it had with a shipping company, Lutin Investment Limited, in 1992 and the company is entitled to damages which must be paid by the NNPC.

The court has, therefore, awarded a sum of $59.9 million to be paid to Lutin Investment Limited by the corporation for loss of profits, reimbursable and wasted expenditures.
In an agreement dated December 23, 1992, Lutin Investment was to undertake the supply of vessels on a Volume Charter basis to serve as storage for clean and dirty petroleum products totaling one million metric tons for an initial period of three years commencing December 23, 1992 for use by the NNPC as a Strategic Tank Farm to supplement domestic supplies.

By a letter dated February 18, 1993 however, the NNPC requested the shipping company to suspend further action on the provisions of additional vessels. By another letter dated July 9, 1993, the NNPC gave notice of the termination of the agreement to the shipping company after negotiations to resolve differences between the parties had failed. Following the termination and revocation of the agreement by the corporation and the inability of the parties to settle amicably, the dispute was referred to Arbitrator by the parties.

Lutin Investment Limited in its claim asked for a declaration that the termination of the agreement between it and the NNPC by the letter dated July 9, 1993 was unlawful and amounted to a breach of contract and it (Lutin Investment) is, therefore, entitled to damages. The corporation in its response argued that the shipping company failed to fulfill its obligations under the contract entered into while it (NNPC) consistently paid to it the maximum amount payable for the maximum capacity of one million metric tons. NNPC further argued that the agreement between the parties was invalid and unenforceable, the time was of the essence of the contract and Lutin Investment did not perfect within time. It further asserted that Lutin Investment did not exist in law.

Both parties formulated issues for determination and called witnesses at the hearing of the case.
The Arbitrator, Justice Uche Omo, in his final award dated May 2, 2007 said: “The arbitration lasted 13 years because of the determined effort to frustrate it by Solomon Asemota (SAN) acting on his own or on the instruction of the NNPC.” 

He further held that from the evidence and documents before the court, “the respondent entered into the agreement with the claimant knowing what it is and believing that it can deliver the goods. No issue of misrepresentation therefore arises. Contrary to the submissions of respondent’s counsel, the respondent dealt with Alfa Marine Services as a distinct entity in the implementation of this contract. The contract between the claimant and the respondent, is in my finding, enforceable.”
 
He held that Lutin Investment Limited did not breach any fundamental clause of the agreement, and that no breach, if any, justified the termination of the agreement.
According to him, “the effort at settlement after the suspension and termination suggests very strongly that the respondent believed that its termination of the agreement was unlawful and had incurred damages against it. The respondent’s contention is that the claimant is not entitled to any claim in damages because it had breached fundamental terms of the agreement and, therefore, the termination of the agreement is in order. I have already held that there was no such breach to justify the termination. Various items in the claimant’s particulars of damages are also neither challenged as either not recoverable or too much. In my findings, the claimant is entitled to damages.”