US Court Rejects Nigeria’s Sovereign Immunity Defence in $70m Arbitration Award To Chinese Firm 

The US Court of Appeals in Washington, DC, has rejected Nigeria’s claim to sovereign immunity in a legal battle over a $70 million arbitration award won by Zhongshan Fucheng Industrial Investment Co. Ltd., a Chinese firm involved in developing a free trade zone in Ogun State, Nigeria. On August 9, 2024, the court upheld a lower court ruling that the arbitration award is enforceable under the New York Convention, stripping Nigeria of its sovereign immunity in this case. This decision is the latest in a series of legal setbacks for Nigeria, which has also faced similar rulings in the UK and France.

The dispute began with a 2010 agreement where Zhongshan acquired rights to develop the Ogun Free Trade Zone. However, the relationship between Zhongshan and the Ogun State government deteriorated in 2016, leading to an arbitration case. The arbitrators found that Nigeria breached its obligations under the bilateral investment treaty with China, awarding Zhongshan $70 million in compensation. Despite Nigeria’s efforts to contest the ruling, the US court’s decision marks a significant victory for the Chinese firm.

Following this legal defeat, the situation escalated further when, in March and August 2024, the Judicial Court of Paris issued ex parte orders for the seizure of three Nigerian presidential aircraft undergoing routine maintenance in France and Switzerland. These orders were part of Zhongshan’s efforts to enforce the arbitration award. The aircraft, including a newly acquired Airbus A330, were seized despite Nigerian government objections that they were sovereign assets protected by diplomatic immunity.

Earlier on Thursday, Nigeria announced that it has initiated both legal and diplomatic measures to secure the release of the seized aircraft, arguing that the dispute involved only the Ogun State government and should not affect federal assets. The Nigerian government accused Zhongshan of misleading the Paris court and emphasised that the aircraft were immune from attachment due to their status as sovereign assets used exclusively for government purposes. Despite these efforts, Zhongshan remains confident in the arbitral panel’s decision, which has been upheld by courts in multiple countries.

The Nigerian government continues to resist the enforcement of the arbitration award, maintaining that the seizure of its assets is inappropriate and unlawful. However, Zhongshan has expressed a willingness to engage in negotiations with the Nigerian government to resolve the matter amicably, while also standing firm in its right to enforce the arbitral award under international law.

NNEOMA UDENSI

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