A U.S. appellate court has dismissed Nigeria’s claim to sovereign immunity, permitting a Chinese consortium to advance its plan to seize Nigeria’s international assets. This development adds pressure to the crisis that President Bola Tinubu has been striving to contain in Europe and to keep from expanding to other regions.
On August 9, 2024, a ruling was issued following the determination by judges at the U.S. Court of Appeals for the District of Columbia in Washington that Nigeria had egregiously breached the fundamental and commercial rights of executives from a Chinese company involved in a trade zone agreement with Nigeria.
Chinese workers from Zhongshan turned to the U.S. judicial system to enforce an arbitration award for contract breach, following their initial victory in the United Kingdom in 2021. According to court documents, the Chinese expatriates were granted $55.6 million in compensation from Nigeria, as well as $75,000 for moral damages, including interest, legal expenses, and arbitration costs.
The proceedings originated from a contract dispute between Zhongshan and the Ogun State government, which had entered into an agreement with the Chinese expatriates in 2007 to establish a free trade zone. Court documents alleged that after years of project development, former Governor Ibikunle Amosun unilaterally terminated the contract and employed unscrupulous methods to evade adhering to the terms outlined in the original agreement signed by all parties involved.
The Chinese also reported being arrested, held, and detained for weeks without charges, during which time they were subjected to mistreatment by uncivilized Nigerian police officers while in custody. The UK court expressed satisfaction with the evidence presented by the Chinese prior to granting them nearly $60 million.
When the Chinese attempted to enforce the judgment in the United States, Nigeria contended before the United States District Court for the District of Columbia in Washington that its sovereign immunity precluded the issue from being addressed in a U.S. court.
Nonetheless, the federal judge dismissed Nigeria’s argument, stating that as a signatory to the New York Convention, the country accepts arbitration between parties, including sovereign entities.
On April 22, 2024, Nigeria lodged an interlocutory appeal in the case. Two judges from the three-member panel concluded that the proceedings should continue, as Nigeria had forfeited its immunity by collaborating with Ogun in breaching the contractual agreement.
The court stated that Ogun, as a component state of the Nigerian federation, renders the country accountable for the breach involving the Chinese.
“The applicability of the arbitration exception in this case hinges on whether the New York Convention, as a treaty, governs the Final Award,” explained the majority, comprised of Patricia Millett and Michelle Childs. “We assert that it does, as the Final Award is derived from (1) a legal relationship, (2) classified as commercial, and (3) involving individuals.”
The judges further determined that a legal relationship existed between Zhongshan and Nigeria, stemming from Nigeria’s legal obligations to Zhongshan under the Investment Treaty. This treaty, signed between Nigeria and China in 2001, facilitated the creation of free trade zones to advance the commercial interests of both nations.
Judge Greg Katsas, in dissent, argued that Nigeria should retain its immunity because the assets in question fall under the nation’s sovereign protection.
The case can now advance in the lower court, which has previously indicated its intent to permit the Chinese to target Nigeria’s assets in the U.S. Nigeria holds fixed assets throughout the U.S. and has deposited earnings from crude oil with financial giant JP Morgan.
The decision followed several days after Chinese investors secured court orders in France to target Nigeria’s European assets. They promptly commenced efforts to confiscate Nigeria’s private jets in various European jurisdictions.
In distinct yet analogous statements, both the federal government and Ogun State accused the Chinese of fraudulence, drawing parallels to the notorious P&ID case, and announced that steps had been initiated to challenge the judgment in France.
Neither authority immediately confirmed whether they were aware of the developments in the U.S., nor did they indicate if they would appeal the decision to the U.S. Supreme Court, which may or may not agree to review the case.
