Key points

• Nigeria LNG Limited must pay $380 million in compensation.

• The UK Appeal Court dismissed NLNG’s non-liability claim.

• NLNG failed to deliver gas cargoes, causing financial losses for Taleveras.

Nigeria LNG Limited (NLNG) lost its appeal in the UK, which means it must pay $380 million in compensation to oil trading firm Taleveras.

The appeal court dismissed NLNG’s claim that it was not liable to indemnify Taleveras over a botched gas supply deal.

This ruling follows the earlier decision by the Business and Property Courts of England and Wales, which affirmed the lower court’s judgment that NLNG must compensate Taleveras.

The dispute stems from a 2020 sales contract between NLNG and Taleveras, where NLNG failed to deliver 19 gas cargoes between 2020 and 2021 as agreed.

This failure caused Taleveras, as well as Vitol SA and Glencore Energy UK, to miss out on significant profits when the price of gas surged in 2022 after Russia invaded Ukraine.

Taleveras had pre-sold these cargoes to Vitol and Glencore, so the delivery failure led to substantial financial losses for these parties.

The legal battle and arbitration rulings

In January 2023, a UN Commission on International Trade Law (UNCITRAL) arbitral tribunal awarded Taleveras $24 million for the lost profits.

The tribunal also ruled that NLNG must indemnify Taleveras for the payments Taleveras owed in separate arbitrations with Vitol and Glencore.

Later, the Vitol Arbitration panel awarded $233.3 million against Taleveras, prompting NLNG to take legal action, challenging the indemnity.

At the heart of the dispute was the interpretation of paragraph 607 of the arbitration award, which stipulated that the indemnity was subject to the endorsement of the Vitol and Glencore arbitrations.

However, NLNG argued that the indemnity could not be enforced until the Vitol panel approved it. The court, however, found that the indemnity was clear and not contingent on further approval.

The Appeal Court’s ruling

The UK Appeal Court, led by Lord Justice Phillips, ruled that NLNG’s claim lacked merit. Phillips described the interpretation of the arbitration award by NLNG as flawed, noting that the final dispositive section of the award clearly addressed the indemnity.

He explained that the “further orders” mentioned in paragraph 607 did not undermine the clarity of the award’s dispositive section. Consequently, the appeal was dismissed, and the lower court’s ruling stood.

This decision requires NLNG to honor the indemnity and pay Taleveras the $380 million as part of the ongoing enforcement of the award.