US Appeals Court upholds $70m arbitration award against Nigeria, allowing seizure of properties

An appeals court in the United States has granted Zhongshan Fucheng Industrial Investment Co. Ltd, a Chinese firm, final charging orders over two residential properties owned by Nigeria.

This ruling is a significant development in the firm’s efforts to enforce a $70 million arbitration award against the Nigerian government.

The majority opinion of the court, delivered on August 9, supported an earlier judgment by the US District Court for the District of Columbia, confirming the enforceability of the arbitration award.

This decision adds to the mounting legal challenges faced by the Nigerian government, which has been struggling to manage the situation and prevent further complications in other jurisdictions.

The legal dispute stems from a conflict between Zhongshan Fucheng, through its parent company Zhuhai Zhongfu Industrial Group Co. Ltd., and the Ogun State government. In 2010, the Chinese firm acquired development rights for a free trade zone in Ogun State.

However, disagreements with the state government led Zhongshan to initiate arbitration under the China-Nigeria Bilateral Investment Treaty, which resulted in a $70 million award.

In January 2023, Beryl Howell, the presiding judge at the lower court, rejected Nigeria’s claim of sovereign immunity, ruling that the court had jurisdiction under the New York Convention due to the UK’s status as a signatory. This paved the way for Zhongshan to pursue enforcement of the award in various jurisdictions.

Earlier, a French court had authorized the seizure of three presidential jets in connection with the same dispute, which has intensified Nigeria’s legal troubles abroad. The Nigerian Presidency has strongly criticized Zhongshan, accusing the company of attempting to clandestinely seize the country’s offshore assets.

Despite Nigeria’s plea for state immunity, High Court Judge Sara Cockerill had earlier ruled against it, citing Nigeria’s misuse of appeal timelines. The U.S. appeals court, in a majority opinion by judges Patricia Millett and Julianna Childs, affirmed that the arbitration award is enforceable under the New York Convention.

The court ruled that the Foreign Sovereign Immunities Act’s arbitration exception applied, effectively removing Nigeria’s sovereign immunity in this case.

However, dissenting judge Gregory Katsas argued that the term “persons” in the New York Convention did not include sovereign nations, contending that the dispute arose from Nigeria’s sovereign actions. Despite this dissent, the majority opinion upheld the district court’s judgment, concluding that the arbitration award is valid and enforceable.

This ruling represents a significant legal and financial setback for Nigeria as it continues to grapple with the implications of the arbitration award and its enforcement in international courts.

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