Nigeria Risks Major Losses in Malabu Recovery Deal

Nigeria’s Ministry of Justice has been asked to weigh in on a secret deal between two Lagos-based solicitors (Johnson and Johnson) and an offshoot of Drumcliffe Partners—an American litigation funding firm. The deal focuses on monies recovered from the OPL 245 oil scandal, after rampant misuse by Dan Etete. If the secret deal stands, as much as 35% of all recovered awards might then find their way to the US funder rather than the Nigerian people.

All Africa details that asset recoveries like this one often expensive, time-consuming, and full of complexity. While it is not unusual for litigation funders to support asset recovery, government policy in Nigeria dictates that a maximum of 5% of recovered assets may be taken by third parties. That makes the alleged 35% a huge departure from the law, and the reason some have suggested the possibility of a conspiracy between the ministry of justice and the recovery agents. The agreement reveals that Drumcliffe would provide up to $2.75 million for recovery efforts in exchange for twice their money back, plus a further 35% of any recovered proceeds.

Obviously, litigation funders have an obligation to observe the laws in any jurisdiction in which they practice. However, the 35% number isn’t as outlandish as critics would have us believe. Remember that Litigation Finance is a non-recourse system, which means if recovery is pursued but not successful, funders get nothing. It’s the acceptance of this risk that makes the steep numbers acceptable.

The question in this instance is whether the government knew it was breaking its own laws by entering the deal. The Ministry of Justice has been made aware of the funding agreement, which led to the presumption that they would decry it. This has not occurred, leaving Nigerian citizens to wonder why.