“It must also be noted that the firm has further instituted legal proceedings against Nigeria in about eighty other jurisdictions globally—Belgium, Canada, France, Singapore, and the British Virgin Islands.”
The recent French court judgement against the Nigerian government sparked intense debate about the limits of “sovereign immunity of nations.” Legally, sovereign immunity is a legal principle that protects states and their assets from being sued or prosecuted in foreign courts. However, the French court’s decision to hold Nigeria liable for debt owed to a Chinese firm has raised questions about the extent of this immunity.
In this case, a Chinese firm named Zhongshan Fucheng Industrial Investment Co. Limited (ZFIC) obtained an interim arbitration award against Nigeria, grounding three (3) presidential jets belonging to the FG in Europe, which the French court enforced. The company has initiated further plans to confiscate other Nigerian assets in the UK, the US, and six different countries, BDI learnt. It must also be noted that the firm has further instituted legal proceedings against Nigeria in about eighty other jurisdictions globally—Belgium, Canada, France, Singapore, and the British Virgin Islands. Even though the Nigerian government maintained that it was protected by the clause of sovereign immunity, the court maintained its stand of forfeiture, citing exceptions to immunity for commercial transactions.
There has been serious apprehension and angst in the land following the breaking of the report that ZFIC got a judgement of asset forfeiture. So, let’s waltz into the discourse, shall we?
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The Case
In 2001, China and Nigeria signed a bilateral investment treaty to boost commercial investment between the two countries. A significant development under this agreement was the establishment of the Ogun Guangdong Free Trade Zone (OGFTZ) in 2007, a joint venture involving the Ogun State Government, a Chinese company, and another firm. The Nigeria Export Processing Zones Authority delegated the management of the zone to the joint venture company. In 2010, the company contracted Zhongshan’s parent company to develop and manage an industrial park within the zone. However, the partnership between Ogun State and the Chinese entities deteriorated, leading to the termination of the agreement in 2016. This prompted Zhongshan to pursue legal action in Nigerian courts, seeking to reinstate its contractual rights, although these efforts were discontinued by 2018.
The dispute escalated internationally, with a French court recently authorising the seizure of three Nigerian presidential jets as compensation for Zhongshan, due to an arbitral tribunal awarding the Chinese firm $74.5 million. This ruling highlighted significant tensions between Nigeria and its foreign investment partners, with the court prohibiting Nigeria from selling or moving the jets until the compensation was paid. The situation was further complicated by claims that the Chinese company attempted to seize a jet previously owned by Dan Etete, a former Nigerian petroleum minister, linked to the notorious Malabu oil deal. Meanwhile, Zhongshan continues to seek enforcement of the arbitral award across multiple jurisdictions globally, including the USA, UK, Belgium, Canada, France, and the British Virgin Islands.
The legal battle intensified as Zhongshan filed a lawsuit in the United States District Court for the District of Columbia, alleging that Nigeria violated the bilateral investment treaty by failing to provide fair and equitable treatment, engaging in unreasonable discrimination, and wrongfully expropriating investments without compensation. The company argued that it had invested significantly in developing the industrial park, including infrastructure and essential services, only for Ogun State to terminate the agreement in 2016. The arbitral tribunal found in favour of Zhongshan, awarding them substantial compensation for Nigeria’s breach of the investment treaty, but the enforcement of this award remains ongoing, with the Chinese firm yet to recover any funds.
The French Court Ruling
The French court (Court of Cassation), all serious and judicial, ruled that Nigeria’s assets in France can be seized by Zhongshan Co. Ltd. to satisfy a $70 million foreign seated arbitral award, starting with a lien on the three presidential jets domiciled in France.
The decision by the French court has drawn significant attention in legal and diplomatic circles. The case in point involving the dispute over Nigeria’s financial obligations beamed focus on whether these obligations fall within the exceptions to sovereign immunity. The court’s ruling, which appears to limit Nigeria’s claim to immunity, has been seen by some as a departure from the conventional understanding of the doctrine.
The case is particularly significant because it could set a legal precedent that impacts not only Nigeria but also other nations facing similar disputes in foreign courts. The ruling suggests that under certain conditions, foreign courts might be willing to challenge the immunity of a sovereign state, particularly when it comes to enforcing financial obligations.
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Implications for Nigeria and Beyond
The legal implications of the French court’s ruling to authorise the seizure of Nigerian presidential jets in favour of Zhongshan are significant, particularly concerning Nigeria’s sovereign immunity, international arbitration enforcement, and diplomatic relations. The court’s decision raises several important questions: Does this ruling represent a broader trend towards limiting sovereign immunity? Could this precedent encourage other courts to take a similar stance in cases involving Nigeria or other countries? And what might be the implications for international diplomacy and state sovereignty?
After the Paris court ordered the seizure of Nigeria’s presidential jets, the Nigerian government asserted that these jets, as sovereign assets, are protected by diplomatic immunity and should not be subject to seizure over a contractual dispute. The presidency argued that the nature and use of the jets as assets of a sovereign state grant them protection under international diplomatic immunity, preventing foreign courts from issuing orders against them.
This situation is reminiscent of the Commisimpex versus the Republic of Congo case, where a Paris court allowed the seizure of a Congolese presidential jet as security for unpaid arbitral awards. Despite Congo’s argument that the jet was protected by diplomatic immunity and had received diplomatic clearance from French authorities, the court ruled that diplomatic immunity in France only covered assets directly used by the Congolese embassy. Since the jet was used for non-diplomatic purposes, it was not immune from seizure.
Given this legal precedent, the three Nigerian jets might not enjoy immunity from seizure if they were not being used by Nigeria’s embassy in France. This raises concerns about how sovereign assets are treated under international law when involved in commercial disputes.
For Nigeria, the ruling could have significant financial and legal consequences, potentially exposing the country to more litigation in foreign jurisdictions. This could also influence how Nigeria and other states approach international agreements and contracts, particularly those involving financial obligations.
Overall, the case underscores the complex intersection of international law, sovereign rights, and the enforcement of arbitral awards, potentially leading to broader implications for how states negotiate and manage international investment agreements.
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The Encore
There have been instances where Nigerian state assets were targeted for seizure following international arbitration rulings, though such cases typically involve commercial disputes rather than direct enforcement against sovereign assets like presidential jets. The P&ID case is a notable example of a company that wanted to build a gas processing plant but ended up in a legal tango instead. A British court eventually authorised the seizure of Nigerian assets following the failed gas processing deal, though the enforcement faced significant legal challenges, which Nigeria eventually won in 2023.
The French court’s ruling could thus be seen as part of a growing trend in the global legal landscape where states are increasingly held accountable for their commercial obligations, with less protection under sovereign immunity doctrines. This may prompt Nigeria to reassess its legal strategies in international investments and arbitration agreements to better protect its sovereign assets from such risks in the future.
Muhammad is a senior research and data analyst at BusinessDay Intelligence. He has close to a decade of quality analytical experience on issues related to the economy, finance, and human capital development.
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