Permission has been granted by an appellate court in the United States to Zhongshan, a Chinese company, to proceed with its efforts to confiscate Nigeria’s assets abroad. This decision came after Nigeria’s sovereign immunity argument was rejected.
On August 9, 2024, judges at the U.S. Court of Appeals for the District of Columbia in Washington ruled that Nigeria had violated the fundamental and commercial rights of executives at a Chinese firm that had engaged in a trade zone agreement with Nigeria.
Recent reports suggest that this development has escalated a crisis that the Nigerian government has been struggling to contain in Europe and prevent from spreading to other jurisdictions.
Prior to this ruling, a French court had already authorized the seizure of three presidential jets due to an ongoing dispute between Zhongshan and the Ogun State government.
Employees of Zhongshan, a Chinese company, took their case to a US court to enforce an arbitration award for breach of contract, following their initial victory in the United Kingdom in 2021.
The UK court had awarded them $55.6 million in compensation from Nigeria, along with additional amounts for moral damages, interest, and legal fees. The evidence presented by the Chinese company was deemed satisfactory by the UK court, resulting in the substantial award.
Despite Nigeria’s argument that its sovereign immunity should prevent the case from being heard in a US court, a federal judge dismissed this claim, citing Nigeria’s adherence to the New York Convention, which allows arbitration involving sovereign entities.
In an appeal filed on April 22, 2024, two of the three judges concluded that Nigeria had forfeited its immunity by breaching the contractual agreement along with Ogun State. The court held Nigeria accountable for violating the agreement with the Chinese company, considering Ogun State as a part of Nigeria.
The majority opinion stated, “The Final Award arose from a legal relationship that is considered commercial between persons.” The judges also noted that Nigeria had legal obligations to Zhongshan under the Investment Treaty, signed between Nigeria and China in 2001.
While there was a dissenting opinion that Nigeria should retain its immunity since the assets in question fall under the country’s sovereignty, the case will now progress in the lower court.
In response to the Chinese company’s seizure of three Nigerian presidential jets, the Presidency denounced the actions as fraudulent. The Special Adviser to the President on Information and Strategy, Bayo Onanuga, clarified that the Federal Government has no contractual obligations with the company. He emphasized that the legal dispute with Zhongshan, attempting to seize the country’s offshore assets, pertains to the Ogun State Government.