Contract dispute: We’re ready to negotiate with Nigeria - says Chinese firm
An appeal court in the United States (US) has authorised Zhongshan Fucheng Industrial Investment Co. Ltd. to enforce the $70 million arbitration award against Nigeria.
In a 2-1 verdict delivered on August 9, the majority ruling affirmed the judgment of the US district court for the district of Columbia that held that the arbitration award is enforceable.
In January 2023, Beryl Howell, the presiding judge of the lower court, dismissed Nigeria’s argument that the court did not have jurisdiction over the case since the country is a sovereign entity.
Howell held that the court has jurisdiction since the United Kingdom (UK), where the $70 million arbitration award was issued against Nigeria, is a signatory to the New York Convention.
ZHONGSHAN FUCHENG VS NIGERIA
In 2010, Zhongshan, through Zhuhai Zhongfu Industrial Group Co. Ltd. (Zhuhai), its Chinese parent company, acquired rights to develop a free trade zone in Ogun state.
A year later, Zhongshan set up Zhongfu International Investment (NIG) FZE (Zhongfu), a Nigerian entity, to manage the project under the permission of the Ogun state government.
However, things took a different turn in July 2016 when the investor accused the state government of abruptly moving to terminate its appointment while attempting to install a new manager for the free trade zone.
Subsequently, Zhongfu initiated an investment treaty arbitration against Nigeria under the bilateral investment treaty between the People’s Republic of China and Nigeria (the China-Nigeria BIT).
The arbitrators had ruled that Nigeria was in breach of its obligations under the China-Nigeria BIT and awarded Zhongshan compensation of around $70 million.
In January 2022, the Chinese company initiated a case to seek enforcement of the arbitration award.
Nigeria pleaded state immunity but was turned away by Sara Cockerill, a high court judge in the UK, who said the country abused the time frame for appealing arbitral awards.
THE US APPEAL COURT JUDGMENT
In the majority judgment, the US appellant court held that the final arbitration award is enforceable under the New York convention since the dispute is between “persons” that share a legal commercial relationship.
The court ruled that the Foreign Sovereign Immunities Act (FSIA) arbitration exception stripped Nigeria of the sovereign immunity in the arbitration award case.
“For the foregoing reasons, we hold that the final award is enforceable under the New York convention because it arose out of differences between ‘persons’ that share a legal, commercial relationship,” the majority judgment reads.
“The district court therefore has jurisdiction over this case under the FSIA’s arbitration exception. The judgment of the district court is affirmed.”
The majority judgment was issued by Patricia Millett and Julianna Childs.
In the dissenting judgment, Gregory Katsas, the third judge, argued that when the New York convention was drafted, the word “persons” did not include a sovereign nation.
Katsas held that the action of Ogun state cannot be attributed to Nigeria, adding that the arbitration award “arises solely out of Nigeria’s sovereign acts governed by public international law”.
“Text, legal context, and drafting history all indicate that the word ‘persons,’ as used in the New York Convention, does not include signatory nations acting as sovereigns. I respectfully dissent,” Katsas said.
NIGERIA LOSING CASE AGAINST CHINESE FIRMS IN MULTIPLE JURISDICTIONS
Barely three days after the judgment of the US appeal court, a Paris court in France ordered the seizure of three jets belonging to the Nigerian government over the dispute involving the arbitration award to the Chinese firms.
In 2023, a court of appeal in the UK ruled that Nigeria is liable for a $70 million arbitration award in favour of the Chinese firm.
The development means that Nigeria has lost arbitration award cases against the Chinese firm in France, the US, and the UK.
The Nigerian government has accused the Chinese firm of attempting to use deceptive means to acquire the country’s offshore assets.
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