JP Morgan Chase Bank, N.A. v The Federal Republic of Nigeria, 6 May 2021.

In the latest instalment in the litigation between Nigeria and JP Morgan, the English Commercial Court has ordered the disclosure of internal documents from JP Morgan’s US compliance department.

Nigeria’s claim relates to payments of over US$ 8 billion in 2011-2013 from its JP Morgan account to Malabu Oil and Gas Limited, in furtherance of an alleged fraudulent scheme.

There is no allegation that JP Morgan was involved in the fraud, but Nigeria says that

JP Morgan acted in breach of its duty to take reasonable care in executing payment instructions: specifically the duty not to comply with a payment instruction if, and for so long as, the circumstances were such that a reasonable and honest banker would consider that there was a real possibility that the instruction was an attempt to misappropriate the funds of the customer (the “Quincecare Duty”).

A key issue in the litigation is therefore what JP Morgan knew, and when it knew it. Nigeria sought discovery in relation to “Interdiction and Watchlist Recommendations” which it said were material to both to what JP Morgan knew about Malabu’s reported connection to the alleged Nigerian corruption scheme and what JP Morgan did (i.e. allegedly making late and ineffective recommendations).

The Watchlist recommendation was submitted by the JP Morgan US Global Financial Crimes Compliance team. However, up until Nigeria’s discovery motion JP Morgan had only searched its EMEA database and not its US database and so any US specific compliance concerns of the type discussed might very well not have surfaced.

JP Morgan argued that although discovery was being sought from the US compliance team, the relevant Nigerian account was held at JP Morgan’s London branch, and by far the majority of the personnel with material day-to-day involvement in the management and administration of the account were based in London or Nigeria.

However other documents showed that the US compliance and AML team had been actively following the money and carrying out transactional reviews and the UK compliance team actively contacted the US compliance team and shared information.

Nigeria argued that it was grossly negligent of JP Morgan to make payments to Malabu at a time when the US compliance team was pointing out the dangers of doing so.

JP Morgan disputed the relevance of the discovery on the grounds that there was a “manual” watch on the account in any event so this would have made no difference, but Nigeria countered (and the Court agreed) that it was entitled to test this assertion: for example, if the US compliance team had placed a block on payments out of the account, the UK team would have had to contact the US team in order to make a payment out of the account. There would then be a sharing of knowledge between the US and the UK.

This case is an interesting test of the new English discovery rules introduced in 2019. Much emphasis is placed on proportionality in those rules, and proportionality was one of the grounds which JP Morgan relied on to oppose Nigeria’s motion. In this case the Court found that the discovery sought was proportionate: it would add a further £270,000 to JP Morgan’s discovery spend of £2.9m, in a US$ 875 million claim. It all seems to add up until you realise that JP Morgan had spent £290,000 resisting Nigeria’s motion.