Counsel explains LADOL, Samsung legal dispute over equity holding in SHI MCI 

Fidelis Oditah, counsel to LADOL and LADOL Free Zone, has explained why Samsung Heavy Industry (SHI) recently took its dispute with the Lagos Deep Offshore Logistics (LADOL) Base, its local content partner in the Egina Floating, Production, Supply and Offloading (FPSO), project for the Total Upstream Nigeria Limited, to the court.

BusinessDay understands that there are three aspects to the dispute between Samsung and LADOL. First is the ownership of SHI MCI Free Zone Enterprise (FZE), a joint venture set up by both companies for the execution of Egina FPSO contract.

Second is SHI MCI FZE’s sublease agreement with a LADOL affiliate, Global Resources Management Limited (GRML) while third is the SHI MCI’s operating licence as a free zone enterprise within the LADOL free zone.

Oditah, who gave insight into the dispute, told newsmen last weekend that LADOL on 5 September 2018, issued proceedings at the Federal High Court Lagos (FHC/L/CS/1459/2018) seeking to set aside a 2014 settlement agreement it entered into with Samsung over alleged fraud, and to restore the parties to their pre-2014 settlement ownership of SHI MCI FZE, which consist of 80 percent for LADOL and 20 percent for Samsung.

He said LADOL issued an interlocutory application for injunction to restrain Samsung from parading itself as the owner of 70 percent of SHI MCI FZE, adding that the injunction also restrain Samsung from selling or disposing of the shares in SHI MCI FZE pending the hearing and determination of the substantive proceedings.

According to him, “LADOL and Samsung successfully bided and were awarded the Egina FPSO EPC contract in the sum of over $3.1 billion which, unknown at that time to LADOL, included a sum of $214 million for the construction of the upgrade of the fabrication and integration facilities at LADOL.

He alleged: “After winning the contract, Samsung took every step to exclude LADOL from the local content elements of the contract in order to appropriate to itself, the upgrade and ownership of the fabrication and integration facility at LADOL. Samsung unilaterally fixed the EPC costs of upgrading of the facility at LADOL at $300 million, refused to have the upgrade project financed, insisted on providing corporate finance on its own terms and asked LADOL to provide $240 million as debt and equity to pay for its 80 percent ownership of SHI MCI FZE and the facility.”

Oditah claimed that on 23 December 2013, Samsung purported to terminate all its agreements with LADOL for the upgrade of the facilities, and went further to demand that LADOL should pay it $18 million for the design of facility.

“To defend local content and itself, on 24 January 2014, LADOL issued proceedings at the Lagos Federal High Court seeking 19 declaratory and other reliefs against Samsung, Total, Nigerian Content Development and Monitoring Board (NCDMB) and the Minister of Petroleum Resources.

Oditah disclosed that both parties reached an agreement that forced LADOL to surrender its 80 percent equity in SHI MCI FZE, gave Samsung 50 percent and accepted 30 percent equity, for which it paid Samsung and SHI MCI FZE $40.5 million, to enable the Egina project push through.

“This was on the basis of Samsung’s deliberate misrepresentation and fraud (upon which LADOL relied) that no money was provided in the Egina FPSO contract for the upgrade of the LADOL fabrication and integration facilities.

Contrarily, Oditah said that as the Senate Ad Hoc Committee investigated the local content elements of the Egina project, it emerged that the upgrade of the facilities at LADOL was indeed included in the Egina FPSO contract, and that Total had paid Samsung at least $214 million for the upgrade.

According to him, Samsung committed at least three frauds and misrepresentations in connection with the June 2014 Settlement Agreement in order to induce LADOL to surrender its 80 percent equity ownership of SHI MCI FZE.

On sublease, he said that LADOL terminated SHI MCI FZE’s sublease on 5 September 2018 for material breaches of sublease covenant; denial of its landlord’s title by asking the Nigerian Ports Authority (NPA), the head lessor, to carve out a portion of GRML’s leased land, and grant a direct lease in favour of SHI MCI FZE, as well as breach of the sublease agreement.

 On the operating licence, Oditah stated that SHI MCI FZE did not satisfy the condition of regulation 41 of the LADOL Free zone regulations 2016, which stipulates among other things payment of licence fee; provision of all information, document and returns required by zone management; payment of all outstanding amounts and fees due to Zone management.

On the contempt charges filed against directors in LADOL by Samsung, the counsel said the affected directors have applied for the contempt proceeding to be set aside from being grossly irregular and consequently invalid. “The position remains that Samsung has no operating licence.

Uzoamaka Anagor-Ewuzie