INTRODUCTION
In our last publication, we outlined a timeline of events leading to the dispute and noted that the English Court of Appeal rejected Nigeria’s defence of state immunity, on the basis that Nigeria had exceeded the time limit to set aside the Enforcement Order of the United States District Court for the District of Columbia. We will now conclude on the said timeline of events, and also answer the questions which flow from this discourse.
Timeline of Events Leading to the Dispute (Contd.)
- On 16 June 2023 and 18 August 2023, the English Commercial Court granted interim charging orders in favour of Zhongshan, in respect of two properties belonging to Nigeria in the United Kingdom. Both properties were estimated as likely to be worth between £1.3 and £1.7 million. Nigeria argued that the two properties were used for consular services and as residences for Nigerian officials, thus granting them immunity from seizure.
However, the court dismissed this claim, finding that the properties had not been used for diplomatic purposes in over 34 years. On 14 June 2024, the Court granted a final charging order over the two properties in the United Kingdom. - It is also noteworthy that Zhongshan took steps to have the Final Award recognised in Quebec and, on 25 January 2023, the Canadian Superior Court in the Province of Quebec granted an order permitting Zhongshan to seize a Bombardier 6000 Jet which belonged to Nigeria.
- Despite being notified on 19 April 2023 of the legal action to recognise the Final Award in Quebec, Nigeria failed to submit its response within the time limit set by the Code of Civil Procedure and the Court (due to Zhongshan’s application for a default judgement), set a hearing date of 16 February 2024, for the default judgement application.
- Nigeria only submitted a response in Quebec on 11 January 2024 (i.e., about nine months after being notified of Zhongshan’s request to have the arbitral award recognised in Quebec) and also submitted its request to be relieved from its failure to respond in time on 15 February 2024 (i.e., the day before the scheduled hearing).
The Court dismissed Nigeria’s request to be relieved from its default of responding in time, and ordered that the case should proceed to a full hearing on the merits, where the issue of state immunity (along with other potential defences) could be thoroughly examined. - In any event, on 9 August 2024, the United States Court of Appeals for the District of Columbia Circuit affirmed the decision of the English Court of Appeal, on the enforceability of the Final Award.
- Finally, on 14 August 2024, a Paris Judicial Tribunal ordered the seizure (by Zhongshan) of three presidential jets owned by the Federal Republic of Nigeria, towards the enforcement of the Final Award. It is alleged that, at the time of seizure, the jets were receiving routine maintenance in Paris.
How did Zhongshan get to investment treaty arbitration?
Disputes are often referred to arbitration due to the perceived advantages of arbitration over traditional litigation, hence arbitration is widely considered as more effective and time saving, especially in commercial or investment disputes involving huge monetary sums.
Indeed, under Article 9(3) of the BIT, disputes between the investors of one Contracting State and the other Contracting State could be referred to arbitration, where negotiations to resolve the dispute fails. However [as mentioned earlier under Article 9(2) and (3) of the BIT], the concerned investor would be unable to refer the dispute to arbitration if he had submitted the dispute to the competent court to the Contracting State accepting the investment.
Hence, Zhongshan initiated an ad hoc arbitration under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.
Why did Zhongshan commence arbitral proceedings against the Federal Government of Nigeria rather than the Ogun State Government?
The arbitral proceedings were commenced by Zhongshan against Nigeria on the basis that the OSG, the Nigeria Police and NEPZA are all entities whose actions are attributable to Nigeria under international law. In opposition, Nigeria contended inter alia that Zhongshan’s complaints were principally against the conduct of the OSG, rather than Nigeria, hence Zhongshan had no claim against Nigeria.
In resolving this issue, the Arbitral Tribunal accepted that Zhongshan’s case was primarily based on the actions of the OSG as well as those of the Nigeria Police and NEPZA – all of which have an independent existence under Nigeria’s municipal law. Nevertheless, relying on the principles of customary international law and the provisions of the Articles on Responsibility of States for Internationally Wrongful Acts (“the Responsibility of States Articles”), the Arbitral Tribunal held that the claim was validly brought against Nigeria.
Why was Zhongshan able to commence enforcement proceedings in various jurisdictions against Nigeria?
The New York Convention provides for the recognition and enforcement of foreign arbitral awards and it has been ratified by over 170 countries (including Nigeria), making it one of the most widely-accepted treaties in international law. Hence, due to the standardised legal framework for the recognition and enforcement of arbitral awards across its signatory states, an arbitral award issued in one member state can be recognised and enforced in any other member state, provided certain conditions are met. For instance, in Nigeria, those conditions are as follows:
- The party seeking to enforce the award will apply to the Court (i.e., the High Court of a State, or the High Court of the Federal Capital Territory or the Federal High Court) within the jurisdiction where it wishes to enforce for recognition and enforcement of the award.
- The other party must be notified.
- The application must include the original or a certified true copy of the arbitration agreement and the award.
- If the award or arbitration agreement is not in English, a certified translation into English must also be provided.
- Zhongshan thereby sought to enforce the Final Award in various jurisdictions such as Quebec, the United Kingdom and Paris.
Why was Nigeria’s defence of sovereign immunity rejected?
The enforcement of foreign arbitral awards against States or State entities parties can be challenging, especially where such States raise the defence of sovereign immunity – a principle of international law that affords protection to a sovereign State from lawsuits including, in some cases, enforcement proceedings. As mentioned earlier, the defence of sovereign immunity also suggests that one sovereign State cannot be sued before the courts of another sovereign State without its consent. Indeed, the defence of sovereign immunity was raised by Nigeria in the case of Process & Industrial Developments Ltd (P&ID) v. Federal Republic of Nigeria (2019) EWHC 2241 (Comm).
In any event, as referenced above in the factual background of this article, Zhongshan had argued that Nigeria was not entitled to the defence of sovereign immunity on the basis that the Foreign Sovereign Immunities Act’s arbitration exception applied, since the court proceedings sought to recognise and enforce a foreign arbitral award governed by the New York Convention. The English Court of Appeal agreed with this position and held that, in any event, Nigeria had exceeded the time limit to set aside the Enforcement Order.
Conclusion
It is, perhaps, quite clear that time is an essential factor in the resolution of disputes via arbitration. In any event, while we remain interested in the development of the issues arising from this dispute, it is noteworthy that on 16 August 2024, a spokesperson for Zhongshan announced that Zhongshan had lifted the seizure of one of the Nigerian presidential jets – the Airbus A330 – to show that Zhongshan has “consistently sought to act reasonably and fairly in the course of a legal dispute” that was not of its making. The said jet was released for the President of the Federal Republic of Nigeria to travel to a scheduled meeting with President Macron of France, while the other two presidential jets remain seized.
Adedapo Tunde-Olowu, SAN heads our Dispute Resolution Practice Group where Adeyemi Gomes and Esther Siyaidon who are Senior Associate and Associate respectively, represent clients on complex commercial disputes before various courts of record in Nigeria and in Arbitration.
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