An appellate court in the United States authorised Zhongshan, a Chinese company, to proceed with its efforts to confiscate Nigeria’s assets abroad after it rejected Nigeria’s sovereign immunity argument.
The decision made August 9, 2024, came after judges at the U.S. Court of Appeals for the District of Columbia in Washington found that Nigeria had violated both the fundamental and commercial rights of executives at a Chinese firm that had entered into a trade zone agreement with Nigeria.
The latest development worsens a crisis that the Nigerian government has been attempting to manage in Europe and prevent from spilling to other jurisdictions.
A French court had earlier authorised the seizure of the three presidential jets due to the ongoing dispute between Zhongshan and the Ogun State government.
The Chinese workers of Zhongshan proceeded to the US court to retrieve an outstanding arbitration award for breach of contract after initially winning their case in the United Kingdom in 2021.
They were awarded $55.6 million in compensation from Nigeria and $75,000 in moral damages, along with interest and legal and arbitration fees, court filings said. The UK court said it was satisfied with the evidence submitted by the Chinese before awarding them nearly $60 million.
However, Nigeria argued before the United States District Court for the District of Columbia in Washington that its sovereign immunity forbade the matter from being entertained in a US court.
But the federal judge denied Nigeria’s argument, saying the country is a signatory to the New York Convention that allows arbitration between persons, which may include a sovereign entity.
Nigeria subsequently filed an interlocutory appeal in the matter on April 22, 2024, and two of the three-man panel decided that the matter should proceed because Nigeria had lost its immunity grounds when it joined Ogun in violating the contractual agreement.
The court stated that Nigeria can be held liable for the breach against the Chinese since Ogun is a federating unit of Nigeria.
“Whether the arbitration exception applies in this case therefore turns on whether a treaty—specifically, the New York Convention—governs the Final Award,” the majority, Patricia Millett and Michelle Childs, said. “We hold that it does because the Final Award arose from (1) a legal relationship, (2) that is considered as commercial, and (3) is between persons.”
The judges also concluded that “Zhongshan and Nigeria shared a legal relationship because Nigeria owed Zhongshan legal duties under the Investment Treaty.”
