Court Finds That Enron's Fraud Does Not Void Contract Entered Into With Enron Subsidiary

A federal appellate court has upheld a district court order enforcing an arbitration award by the ICC against the Republic of Nigeria in favor of Enron Nigeria Power Holdings, Ltd. ("ENPH"), a former subsidiary of Enron International Corporation ("Enron"), for breach of a contract. Nigeria claimed that enforcing the contract was against public policy due to that fraud that became apparent when Enron collapsed in 2001. However, the court rejected this argument, noting that Enron was not a party to or mentioned in this contract.

The operative contract, agreed to in 1999, contemplated ENPH engaging in three phases of construction, but the dispute was limited to the second phase under which ENPH was to have built a power plant in Nigeria. ENPH made various efforts through 2005 to get Nigeria to move forward with the second phase of the contract, but Nigeria refused to do so, leading ENPH to take the matter to arbitration with the ICC.