China: A Choke Hold on Nigeria’s Jugular?
The history of Nigeria’s indebtedness to Chinese business entities, is as complex and convoluted as the borrowers, guarantors and projects for which the loans were taken. Today, the nation’s sovereign assets are at serious risk from shylock Chinese companies who have done, and are doing businesses in Nigeria. Most are into infrastructure development across the country, with massive ongoing projects, either for the Federal or State Governments. But, with hurriedly-baked contracts, often less than transparent agreements, allegedly mostly not properly scrutinised and vetted by Nigeria, the nation has suddenly found out that her national and sovereign assets are coming under the Chinese hammer, with court orders authorising seizures across the globe, from Nigeria’s presidential jets in France and guest houses in Ireland, and others about to be axed in Canada and the United States. Apparently, it does appear that Nigeria didn’t see the warning signs, or pretended to be ignorant of what the Chinese had done to other African countries over debts owed to Chinese companies. In this Discourse, Daniel Philips Kip, Francis Gozie Moneke and Ed Malik analyse the unfolding embarrassing incidents of seizures of Nigerian assets by Chinese company, Zhongshan Fulcheng Industrial Investment Co Ltd on court orders following an Arbitration Award for breach of contract, and suggest ways out of the conundrum
Chinese Company’s Seizure of Nigeria’s Presidential Jets: A National Embarrassment
Daniel Philips Kip
Introduction
Three Presidential Jets were seized in France, another Jet seized in Montreal Canada (Bombardier 6000 type BD-00-1A10), and property taken possession of in the United Kingdom by Chinese Company Zhongshan Fulcheng Industrial Investment Co Ltd in a recent blitz of seizures pursuant to an arbitral award entered on 26th day of March, 2021. The P&ID saga is still fresh in our memories, with the English Court (High Court) setting aside an $11 billion Arbitral award against Nigeria on the 23rd day of October, 2023. We were saved from the P&ID (Process and Industrial Development Ltd) imbroglio, because of elements of fraud and corruption. It also took some emergency legal reactions to upend P&ID’s enthusiastic attempts at enforcement. As if lessons were not learnt, it is déjà vu all over again. Are our sovereign assets at risk? Do the Chinese have the right to this? How do we forestall future incidents? Is there an alternative diplomatic route out of this ordeal?
The Puzzling Question!
Shakespeare in Hamlet asked; To be or not to be? That is the question? Permit me to unenthusiastically rephrase this line by declaring; To contend or not to contend to protect Nigeria’s Sovereign Assets against embarrassing enforcement measures? This is the question! The very question that threatens to trample upon the labours of our Heroes past and concomitantly spit on the faces of Nigerians, by embarrassing and undermining her very sovereignty within the international community. Do these Chinese “Dragon Lords” have the right to execute the Arbitral award in this manner? What does international law say? How do we save face?
The Case in Brief: Zhongshan Fulcheng Industrial Investment Co Ltd vs The Federal Republic of Nigeria
The cause of action crystallised when the Ogun State Government unilaterally terminated a Joint Venture Agreement (JVA) entered into between the State and the Zhongshan Fulcheng Industrial Investment Co Ltd through her Nigerian subsidiary, Zhongshan International Investment (Nig) FZE. The JVA created and executed in 2013 had lasted for three years (till 2016) with evidence of Zhongshan investing millions of Dollars within the period, undergoing several hardships to bring to fruition the Ogun Guongdon Free Trade Zone in Ogun State which is the subject-matter of the JVA. The foundation of the contractual relationship between the OSG and Zhongshan, is the Bilateral Investment Treaty (BIT) entered into between the Peoples Republic of China and the Federal Republic of Nigeria sometime in 2001. To seek redress Zhongshan commenced arbitration on 30 August, 2018, on the grounds of breach of contract citing Articles 2,3,4 and 9 of the BIT referred to above between China and Nigeria.
Nigeria’s Defence in the Arbitration
Nigeria submitted to the arbitration, but contended that Ogun State, as well as other agents involved in literally driving the Chinese Company out of Nigeria (NPF and NEPZA) jointly complicit in the termination of the JVA, acted independent of the Nigerian Federation with holistic independent power within Nigerian municipal law. The arbitral tribunal did not fault this logic, but decided the matter on other principles undergirding State responsibility under international law.
The Verdict
Relying on fundamental principles of customary international law, and also relying on articles 2 & 4 of the International Law Commission Articles on State Responsibility for Internationally Wrongful Acts adopted under the auspices of the ILC in 2001, the tribunal held emphatically that Nigeria had breached the JVA and liable in damages and compensation to Zhongshan. Although other sections of the ILC Articles were relied upon by the tribunal, the nail on Nigeria’s arbitration coffin was most likely Article 4.1 which states inter alia that:
“the conduct of any State Organ shall be considered an act of that State under International Law, whether the organ exercises legislative, executive, judicial or any other functions, whatever position it holds in the organisation of the State, and whatever it’s character as an organ of the Central Government or of a territorial unit of the State”.
The Panel, made up of Rotimi Oguneso, SAN (Nigeria’s pick), Mathew Gearing KC (Zhongshan pick) and Lord Neuberger of Abbottsbury (Chairman), found for the Chinese company awarding Compensation of $55,675,000 moral damages of $75,000, costs of £2,864,445 and interest of $9, 400,000. It is the total of the award and other additions, especially accrued interest that runs over to about $70 million dollars.
Post Award Events and Instances of Legal Rascality from Nigeria’s Legal Team
As a diligent Judgement Creditor, Zhongshan immediately sought to enforce the award against Nigeria, pursuant to the Convention on the Enforcement of Foreign Arbitral Awards of 1958 which Nigeria is not just a signatory or high contracting party to, but also ratified same as just one of over 170 other States. Article III of the Convention shortened as the New York Convention, imposes an obligation on every contracting party or State that has signed the Convention to recognise arbitral awards as binding and facilitating their enforcement. The implication of Article III is that any of the over 170 signatories to the Convention serve as a proper forum for enforcement, because these nations are duty bound to obey the award and facilitate its enforcement. Unfortunately, Nigeria had ample time and opportunity to remove her head from the proverbial hang man’s noose, but failed to do so for multiple reasons only the legal team can explain. Some of those instances are listed below:-
a)Article V (i) (e) of the Convention on Recognition of Foreign Arbitral Awards of 1958 inter alia provides that the proper forum for applying to set aside an arbitral award is the seat of arbitration or the precise country which served as the locus of arbitration. Nigeria actually applied to have the award set aside, among other things, standing on the provisions of Section 67 of the English Arbitration Act 1996 which allows for applying to set aside the award on grounds of lack of substantive jurisdiction. Nigeria later did not argue this ground, leaving a porous application doomed to fail.
b)After Zhongshan applied for and obtained an ex-parte enforcement order against Nigerian assets around December 2021, Nigeria had a 74-day window to contest the order after being served, but failed to utilise it and only reacted after the deadline in a very sloppy manner. As expected, opposing the ex-parte enforcement order was an exercise in futility, so it failed.
c)The consequential application for leave to appeal to the English Court of Appeal was rejected, for lack of cogent grounds to uphold the appeal. This was around July 2023.
d)Empowered by Article III of the New York Convention Zhongshan went on to apply for enforcement orders in Belgium, France, Quebec, USA and Virgin Islands where asset tracing revealed Nigerian owned properties in those jurisdictions. In all these jurisdictions Zhongshan succeeded due to Nigeria’s delay in response (Quebec), flawed defence (USA) and general lack of robust case strategy. In USA, Nigeria’s legal team relied on the Foreign Sovereign Immunities Act of 1976 (FSIA) (US) to argue that, due to sovereign immunity, the award could not be enforced in the U.S; however, this argument did not succeed. In the US case of Maritime International Nominees Establishment v Republic of Guinea, the US court upheld a plea of sovereign immunity by Guinea to the execution of an award against its property, on the ground that such property was held for sovereign purposes. Perhaps, Nigeria sought to benefit from this precedent, but it did not work. In France, the Paris Tribunal granted the order against the two aircrafts, which has led to this present imbroglio.
Applicable Legal Framework
From the above submission, it is clear that the following instruments have direct relevance to the dispute:
1.Bilateral Investment Treaty between China and Nigeria 2001
2.Convention on the Recognition and Enforcement of Arbitral Awards of 1958 (New York Convention)
3.Joint Venture Agreement between Ogun State and Zhongshan International Investment (Nig) FZE
4.International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts adopted by the ILC in August 2001
5.English Arbitration Act 1996
To answer the questions posited at the beginning of this piece:
Does the Chinese Company Zhongshan have the right to enforce anywhere?
Pursuant to the Convention on the Recognition and Enforcement of Arbitral Awards of 1958 (New York Convention), they can enforce in any other over 170 signatory countries, pursuant to the obligations embedded in the Convention, especially in Article III.
Are our Sovereign Assets at Risk?
Yes, in every jurisdiction that is a high contracting party to the New York Convention.
How Do We Forestall Future Incidents?
Conclusion
a)The Attorney-General of the Federation is duty-bound, as the Chief Legal Officer, to ensure all pending cases whether in arbitration or litigation, whether based on contract or tort, whether entered into by the Federal or State government, must be taken inventory of immediately.
b)A case strategy designed by a team of Lawyers from both the public and private sector for each case pending in foreign courts, must be prepared immediately. This means that a robust team should be assembled, with Lawyers from both pools, public and private.
c)The Ministry of Justice must ensure that there is continuity and consistency, in representation of the Federation in foreign courts and tribunals. This calls for a deliberate liaison between the Ministry of Justice and the Ministry of Foreign Affairs, and other High Commissions or Embassies of the nation on the one hand. On the other hand, the MOJ must prioritise cross- border collaboration with Ministries of Justice or similar type agencies in other countries, whether there is prior bilateral judicial assistance arrangements or not. There are model extradition treaties and judicial assistance treaties, that can be adopted specifically for this. If there is none existing with particular nations, then it is high time we make that happen.
d)Proactive collaboration with competent Attorneys, in other jurisdictions where cases are pending against Nigeria. There is no shame in having a foreign firm represent us, especially if we are expected to respond to court processes at short notice.
e)The P&ID and Zhongshan Cases showcase a level of what I would call litigious rascality on the part of the Nigerian Federation, taking on a laissez faire attitude to responding to summons and orders from arbitration panels and foreign courts. Not being a part of the nation’s legal team I cannot say whose fault it is, but someone needs to be held accountable for these lapses.
Is this a National Embarrassment?
It is a monumental embarrassment. In a nation of thousands of qualified Lawyers at home and abroad with glowing advances made across the world, it is shocking to see how we are being made a mockery of in law related issues like this. This is unacceptable, but not a totally hopeless situation. I strongly suggest that Nigeria bypasses panic reactions, and approach the Chinese National Government in Beijing diplomatically for negotiations. Only the Chinese National Government led by President Xi Jinping, can call off Zhongshan hounds of enforcement. Once this is done, negotiations should be commenced, not to challenge the award, but to set-off the award somehow, either by a monetary arrangement or some other way including possibly re-establishing the JVA between Ogun State and Zhongshan, if the free trade zone has not been built yet. At this point, having slept through our rights to act timeously, let wisdom prevail in averting a national disaster rather than going out daggers drawn against Zhongshan, who like a roaring lion, will not stop enforcement across various jurisdictions until final settlement of the award sum.
Daniel Philips Kip, Assistant General Secretary of the Nigerian Bar Association
Zhongshan Case: Taming the Shrew of Executive Impunity and Tardiness in Nigeria
Gozie Francis Moneke
Background
For several days now, Nigerians have been agitated by the puzzling narrative or news of how the Federal Government was more or less overawed and humiliated by a Chinese company, which successfully levied execution against various Nigerian assets including a fleet of presidential jets, pursuant to foreign court orders obtained in the enforcement of an arbitration award against Nigerian government. Without belabouring the depressing story, which has managed to escape fully into the public domain anyway, the objective of this contribution is to interrogate the issues of executive impunity and tardiness, which are perceived by this writer as the main reasons why we got to this point of international opprobrium in the first place.
The Ogun State Government was the primary culprit, by reneging on a 2013 Free Trade Zone JVA with Zhongfu Nig. FZE, a subsidiary of Zhongshan Ltd of China – a breach that was abysmally handled with executive high-handedness, and without recourse to legal due process in deference to the rule of law. The matter therefore, boomeranged and the Federal Government got entangled in the melee and became liable thereto, by virtue of the 2001 Bilateral Investment Treaty with China and by a dint of basic principles of customary International Law and particularly the Articles on Responsibility of States for Internationally Wrongful Acts adopted by the ILC in August, 2001.
Lack of Accountability
The bane of democracy in Nigeria, is the rampant abuse of power and lack of accountability by executive office holders and state agents, especially the law enforcement agencies. The rule of law is wielded only when it suits the whims of those in power, and jettisoned when it is fails to serve their utmost convenience. Thus, court orders are wantonly disregarded and disrespected. Things keep going from bad to worse in Nigeria, because of zero accountability and responsibility. One of the aircrafts seized by Zhongshan is a brand new aircraft acquired by President Tinubu, at a time when the nation’s economy is in its worst state since independence, when millions of Nigerians are languishing under intense human suffering and starvation as a result of terrible administrative and economic policies of his administration, when we are talking about N70,000 as minimum wage in a country where a bag of rice sells at N95,000 and fuel is N1,000 per litre, what else can you call this if not gross lack of accountability and arrant political irresponsibility.
The President, prior to his assumption of office, was already alleged to be a billionaire, and the First Lady was sometime reported as acknowledging that the first family was already wealthy and did not seek the Presidency for the goodies of office, that they were actuated by the desire to serve. What manner of service is the voting of N150 billion for a new presidential jet, N6.9billion for a fleet of presidential vehicles, N5billion for presidential yacht and N1.5billion for vehicles for an unconstitutional “Office of the First Lady.” All this, while millions of citizens are ululating in lamentations of penury and unprecedented economic quagmire. In saner societies, we had seen accountable and responsible government officials abnegate even their basic salaries as gestures of good faith, in their quest to checkmate their country’s economic downtown. But, our ugly situation in Nigeria, sadly, is that we are saddled with political money bags who struggle to grab power just to amass even more wealth, by looting the scarce resources of the State for their singular pleasure, without a smattering or modicum of compunction for the plight of the masses.
Up until our leaders learn to wear the shoes of the ordinary citizens out there, our story will never change, and our economic woes will only amplify to the peril of a crest fallen citizenry. The era of medical trips abroad, children’s education in foreign schools etc, must be proscribed for those in elective positions, as long as they remain in office. Any foreign trip or vacation by government officials and political office holders, other than important official trips, must be strictly at the person’s personal cost. The Legislature, both the National Assembly and State Houses of Assembly, which are largely becoming executive rubber stamps as they match in tandem in the frenzy of looting the commonwealth, must transition into part time service that is remunerated only by actual sitting allowances. The give and take of accord and satisfaction, as it were, between the Legislature and Executive reeks of malodorous corruption that has kept Nigeria in perpetual economic jeopardy, which will ultimately lead to the collapse of the Nigerian State if left unchecked.
When Lawlessness is Capped With Tardiness
It is this penchant for executive lawlessness, that brought us to this unfortunate scenario of the country’s assets being confiscated by a Chinese company. The arbitrariness that is the order of the day in our daily experience with government in Nigeria, was meted out by Ogun State Government to a Chinese company and its directors, in violation of the Ogun Guangdong Free Trade Joint Venture Agreement and without advertence to and respect for the tenets of the Bilateral Investment Treaty between China and Nigeria. The Chinese company could only have a tenable recourse to the arbitration clause in the BIT, for redress against Nigeria.
Curiously, but not surprisingly, given the usual tardiness of Nigerian Government in responding to critical State matters, there were no timeous challenges against various applications for recognition and enforcement of the $74.5 million Award filed by Zhongshan in US, Canada, UK and France leading to the dismissal of the various belated responses filed by Nigeria. Nigeria’s defence of sovereign immunity was similarly discountenanced, for want of diligence or tardiness in filing same. In any event, the defence of sovereign immunity would have failed woefully, had it been entertained and ruled on its merit by the various courts. This is because a major exception to the sovereign immunity defence, is that a foreign State waives its immunity when it agrees in writing to submit a dispute to arbitration. In this case, Nigeria waived its sovereign immunity by virtue of the Bilateral Investment Treaty, under which it agreed to submit any dispute with China to arbitration. A tenable defence would have been to robustly challenge the competence of the arbitration proceedings or the Final Award itself, on the basis of Article 9 (3) of the BIT ,which precludes an investor of one of the contracting States from resorting to arbitration after initiation of court proceedings sequel to a dispute. But, surprisingly, Nigeria having brought an application on this ground, quickly withdrew same after Zhongshan filed a counter or reply requesting Nigeria to deposit security for the Final Award and security for costs before it’s application to challenge the Final Award could be entertained.
After all said and done, the coast was clear for Zhongshan Ltd to locate and seize any Nigerian asset in any of the countries where the final award had been recognised and enforcement order thereof granted, hence, the seizure of the Nigerian houses in the United Kingdom valued at about $3 million, and fleet of three presidential aircrafts parked in France. The arm twisting that transpired behind closed doors that compelled the Chinese company to release the new aircraft to the President for his recent trip to France, remains a mystery to us. Most of us do not buy the story of good faith credited to Zhongshan, in releasing the aircraft. It would seem though, that the value of the other aircrafts and the Nigerian UK properties will suffice to fully offset the Final Award debt. The fact that the release of the new aircraft was speedily negotiated, speaks eloquently to the vanity behind the acquisition of that lavishly luxurious and prohibitively pricy aircraft. So, when it comes to regaling their vanities at the expense of Nigerians, the Nigerian Government would quickly abandon its proclivity for tardiness and become extremely expeditious. Tardiness is why we take a gingerly step forward, only to take twenty resolute steps backwards in our unique style of governance in Nigeria. Tardiness is why fighting corruption in Nigeria has become not just difficult and dangerous, but a mission impossible.
Conclusion
The tripod cultures of impunity, corruption and tardiness, are the bane of good governance in Nigeria. They comprise the evil wind that has brought disorder, poverty, insecurity, hardship and human suffering in its gale. That tripod Nigerian
evil wind was extrapolated to the Zhongshan saga, sadly, to our national embarrassment and international excoriation. Fortunately, there remains some semblance of order in the international legal space, and Nigeria cannot hide under the doctrine of sovereign immunity to shield itself from acts of lawlessness in transacting on that broad international space, and in relating with agents or citizens of foreign nations. Cases such as the Zhongshan experience continue to paint Nigeria in very dark and insipid hue, making it an uninspiring and unattractive destination for foreign investors, which gnaw deeply at our national growth and economic development.
The Federal and State Governments must show clearly, their seriousness and determination to change this ugly narrative by embracing the good governance tenets of accountability and transparency in all of their endeavours. Government at all levels must eschew impunity, and wholeheartedly embrace the rule of law. Tardiness must be jettisoned in all cadres and tiers of Government, by promptly tackling and finding solutions to problems than constantly promising respites that perpetually remain in abeyance, leaving citizens to languish in unmitigated suffering while those in the corridors of power revel in wanton squander-mania of the common wealth.
Gozie Francis Moneke, Executive Director, Human Rights & Empowerment Project Ltd/Gte
Seizing Nigerian Assets is China’s Debt Diplomacy in Plain View
Ed Malik
Background
The trending news that some Chinese investors have taken over Nigeria’s guest houses in Liverpool, advertising them for sale on eBay for $2.2 million, taken together with the recent seizure of Nigeria’s presidential jets in France, is a sore embarrassment beyond belief, to say the least.
A Chinese company called Zhongshang Fucheng had a bad investment deal with Ogun State Government during the tenure of Senator Ibikunle Amosun, which made them approach the International Court of Arbitration. With the verdict in their favour, the Chinese company has intensified efforts on the international frontiers to seize Nigeria’s assets in Europe and North America, in order to collect up to $70 million from a 2021 judgement.
Putting it into Perspective
In a way, let’s put this whole matter in perspective. Personally, I’m sure, in the coming days, China will go after more Nigerian assets. Don’t forget, the Buhari administration took so many loans from China using national assets like the refineries, I’m told, as collateral.
Unarguably, those loans will never perform, as they were channelled into corporate vanities of our leaders and government officials. I recall Rotimi Amaechi defended such the gambits, which everyone knows were not carefully scrutinised. Even when the House of Representatives, during a hearing, termed the Chinese loans as dangerous, in a Channels Television report of July 30, 2020, Amaechi defended the decision to borrow from China, saying “There is nothing wrong with ceding sovereignty to China”. Can you imagine that level of thinking?!
What you must know is that the Chinese Communist Party led government is very vicious in recovery efforts for loans, which were designed as definite entrapment for clueless and corrupt African leaders. China has cleverly hoodwinked African nations into a sort of debt diplomacy, where natural assets of African countries are used to indemnify loans, which were programmed to fail, ab nitio. This is the major threat to the sovereignty of the countries, who fall into the Chinese trap.
The terms of this Chinese loans are usually unsustainable and constrictive in the line-by-line articles of understanding, which, in any case, our mindlessly corrupt politicians do not painstakingly scrutinise with the help of professional investment advisers and language consultants.
Some African countries, have been sucked into this evil net. Zambia and Djibouti are now slaves to China, because of their inability to meet their debt obligation leading to seceding or seizing their maritime ecosystem and infrastructures fully into the hands of Chinese. Look at Djibouti for instance. It is a tiny country with a population around one million, sits on the Bab al-Mandeb Strait, the biggest and most strategic shipping corridor between Asia and Europe, but can no longer appropriate the benefits from such geographic location because it has debts to pay to China. I understand there are also significant attempts by Chinese companies, to seize some government assets in Kenya and Angola. China
What many African leaders fail to realise is that China is very strategic about the countries they are offering easy loans, as they usually target the natural endowments and economic infrastructure available to seize when there’s default in repayment. In fact, Chinese military personnel are on ground Djibouti and Zambia presently, to ensure compliance to the recovery efforts. Chinese loans have come under increased scrutiny in recent years as more governments have signed deals with China, reported Africa Daily.
The critical aspect which should engage our minds is, why is China in a hurry to give loans or invest or partner with African countries and companies, in recent times? There must be a catch there. According to records, between 2000 and 2020 alone, China lent a total of USD 59.87 billion to African countries and has become the largest creditor to Angola (USD 42.6 billion), Ethiopia (USD 13.7 billion), Zambia (USD 9.8 billion) and Kenya (USD 9.2 billion), which are now struggling to meet their debt obligations, reported Africa Daily.
Well, let me just narrow the matter home here. It’s bad press and bad image for Nigeria that a corporate entity is going after its assets globally, because a Governor of a State compromised on his contractual obligations. Perhaps, this will teach us one of two things as a nation. One being that, China does not know friendship when it comes to business. And, two; that the terms of a contract (no matter how fine the prints are), are meant to be obeyed. You cannot breach the terms of a contract, like one involving international individuals or corporations, and think you can hide under sovereign immunity for protection. Under international arbitration processes, it has long been settled that a Sovereign that goes to the market must be prepared to abide by the ordinary rules of the market, as they apply to everyone operating in that marketplace.
Instead of showing remorse and canonical quietude, I understand that Senator Amosun, who is responsible for this national opprobrium, has been grandstanding all over the place, waving the matter off as mere misunderstanding. This is even the crux of the matter.
It is alleged that most of the Chinese contracts and MOUs are written in Mandarin without English version, and our politicians and government officials with their eyes only on the pecuniary benefit, usually sign off on the deals without due diligence. If this is true, it is troubling to say the least.
Conclusion
It is a very sad development, indeed. I hope this will be an eye opener for our leaders, who are quick to run to China for project financing without paying attention to details. Then, of course, some drastic measures should be taken to hold Amosun and suchlike to full accountability. It is regrettable that the action of one State has created a global quagmire for the whole country, and we have not heard of sanctions or official inquisition to the origins and details of the unfortunate saga.
Ed Malik, Journalist and Public Affairs Commentator
