P&ID Arbitration Nearly Crippled Nigeria, Fagbemi Tells UN Forum

Nigeria has called for sweeping reforms of the international investor-state arbitration system, warning that disputes between foreign investors and sovereign states must not be allowed to undermine national sovereignty or expose taxpayers to unpredictable financial liabilities.

Attorney General of the Federation and Minister of Justice, Prince Lateef Fagbemi (SAN), made the call on Thursday at the Heads of Delegations Roundtable of the Chief Legal Advisors Forum (CLAF) 2026 in Singapore.

Fagbemi cited Nigeria’s experience in the controversial case involving Process and Industrial Developments Ltd. (P&ID), saying the damages awarded in the dispute could have had a crippling impact on the Nigerian economy.

According to him, the case demonstrated the need for greater clarity and transparency in the calculation of damages in investor-state dispute settlement (ISDS) proceedings.

“States consistently express concern about the opacity of arbitral proceedings and the unpredictability of awards,” Fagbemi said.

“Nigeria continues to support reforms that enhance transparency of proceedings, consistency in arbitral reasoning, and predictability in outcomes. These elements are essential for investor confidence and state trust alike.”

He added that Nigeria had become a strong advocate of clearer rules on the calculation of damages following its experience with P&ID.

Fagbemi said the damages in the case were calculated using compound interest, which, he noted, could have imposed liabilities running into billions of dollars on Nigeria.

He argued that leaving the determination of damages largely to individual arbitrators or tribunals created uncertainty for governments and taxpayers.

The AGF said Nigeria was therefore urging the United Nations and the wider international community to develop reforms that would protect national sovereignty while maintaining confidence in international investment protection.

He called for an ISDS framework that would reinforce, rather than bypass, domestic courts and judicial institutions.

According to him, the reforms should address existing inadequacies and imbalances in the international legal framework while protecting both legitimate investments and the interests of taxpayers in host countries.

Fagbemi, who commended the Singapore Ministry of Law for convening the forum, said the changing nature of global investment flows and the development challenges facing states had made the creation of a modern, balanced and credible dispute-settlement system increasingly urgent.

He disclosed that since assuming office, he had taken steps to address challenges surrounding Nigeria’s investment treaties by constituting a committee of experts to review the country’s bilateral treaties and commitments under multilateral treaties and conventions.

The objective, he said, was to ensure that Nigeria’s international investment obligations adequately promoted and protected investments without compromising the country’s interests.

The minister also pointed to Nigeria’s recent reforms to its arbitration framework, saying the country had amended its Arbitration Act to strengthen transparency.

“It is with this belief that Nigeria reformed its Arbitration Act to reflect the importance of transparency. There is growing openness to fresh approaches beyond traditional arbitration,” he said.

Fagbemi said there was now broad recognition among states that reform of ISDS was no longer optional but necessary to preserve the legitimacy of the international investment regime.

“Nigeria sees this consensus as a positive development: it signals that the global community understands the need for recalibration to ensure fairness, predictability, and development alignment,” he said.

He argued that incremental changes would not be sufficient to address what he described as structural imbalances in the existing system.

Instead, he advocated systemic reforms involving clearer treaty standards, stronger procedural safeguards, improved accountability mechanisms and a better balance between the rights and obligations of investors and states.

According to him, such reforms would help create a dispute-settlement system capable of responding to future economic and development challenges.

Fagbemi also highlighted the importance of alternative mechanisms for resolving investment disputes, particularly approaches capable of reducing costs, preventing disputes from escalating and encouraging cooperative solutions.

He stressed that strengthening domestic judicial institutions should remain central to the reform agenda.

“Strengthening national judicial institutions is central to building long-term rule-of-law capacity and reducing over-reliance on external arbitration,” the minister said.

He further urged the international investment regime to give greater consideration to public interest, saying investment agreements must take account of contemporary global priorities.

These, he said, included climate action, environmental protection, human-rights obligations, community welfare and sustainable development.

“Nigeria strongly supports reforms that ensure investment protections do not undermine legitimate public-interest regulation,” Fagbemi said.

He noted that this principle was reflected in Nigeria’s 2016 Model Bilateral Investment Treaty, which is currently under review after a decade of implementation.

The minister said Nigeria’s position was informed by the need to ensure that investment protection did not prevent governments from regulating in the public interest or pursuing legitimate development objectives.

He said the challenges confronting the international investment arbitration system were shared by both capital-importing and capital-exporting countries.

“There is a growing recognition that the challenges are shared, solutions must be collective, and reform must balance the needs of capital-importing and capital-exporting countries,” Fagbemi said.

The Nigerian government’s position comes amid continuing international debate over the future of investor-state dispute settlement, particularly concerns over the transparency of proceedings, the consistency of arbitral decisions, the size of awards and the potential impact of investment disputes on governments’ ability to regulate in the public interest.