In France and Canada by Chinese Company – National embarrassment or not?
By Daniel K. Kip
Introduction
Three presidential Jets were seized in France,[i] another Jet seized in Montreal Canada[ii] (Bombardier 6000 type BD-00-1A10) and property taken possession of in the United Kingdom[iii] 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[iv] saga is still fresh in our memories with the English Court (High Court) setting aside an $11 billion dollars Arbitral award against Nigeria on the 23rd day of October 2023.[v] 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 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 Heros 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 crystallized when the Ogun State Government unilaterally terminated a Joint Ventura 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[vi] 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 organization 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 Judgment Creditor, Zhongshan immediately sought to enforce the award against Nigeria pursuant to the Convention on the Enforcement of Foreign Arbitral Awards of 1958[vii] 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 recognize 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
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[viii] 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.
After Zhongshan applied for and obtained ex parte enforcement order against Nigerian assets around December 2021 Nigeria had a 74 days window to contest the order after being served but failed to utilize 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.
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.
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 the USA Nigeria’s legal team relied on the Foreign Sovereign Immunities Act of 1976 (FSIA) (US)[ix] 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[x] 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:
Bilateral Investment Treaty between China and Nigeria 2001
Convention on the Recognition and Enforcement of Arbitral Awards of 1958 (New York Convention)
Joint Venture Agreement between Ogun State and Zhongshan International Investment (Nig) FZE
International Law Commission Articles on Responsibility of States for Internationally Wrongful acts adopted by the ILC in August 2001
English Arbitration Act 1996
To answer the questions posited at the beginning of this piece:
Do 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
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.
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.
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 if Foreign Affairs and other High Commissions or Embassies of the nation on the one hand. On the other hand the MOJ must prioritize 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.
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 on short notice.
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 millions of qualified lawyers 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 Nigeria bypass 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.
[i] THE VANGUARD, ‘Nigeria’s Presidential Jets Seizure will be lifeted next court hearing, says SDP’s Adebayo’ (August 21, 2024) <https://www.vanguardngr.com/2024/08/nigerias-presidential-jets-seizurell-be-lifted-next-court-hearing-says-sdps-adebayo/amp/ > accessed 22 August 2024
[ii]LawblogNG, ‘Chinese Investors Seize another $ 57 Million Private Jet Nigeria Stored in Canada, Originally From Fugitive Dan Etete’ (August 22, 2024) <https://lawblogng-investor-seize-another-57-million-private-jet-nigeria-stored-in-canada-originally-confiscated-from-fugitive-dan-etete/> accessed 22 August 2024
[iii] TheConclaveng, ‘Chinese Firm Seizes, prepares to sell Nigerian UK assets’ <https://www.theconclaveng.com/chinese-firm-seizes-prepares-to-sell-nigerian-uk-assets/> accessed 22 August 2024
[iv] Process Industrial Developments Ltd (PID) V Federal Republic of Nigeria (2019) EWHC 2241
[v] Adewale Take and Orji Agwu Uka, ‘French Court Authorizes Chinese Firm to seize three Nigerian Presidential Aircraft – Unpacking the Who, Where, and Why! (Templars Thought Lab, 16 August 2024) 6
[vi] International Law Commission Articles on State Responsibility for Internationally wrongful acts adopted under the auspices of the ILC in 2001
[vii] Convention on the Enforcement of Foreign Arbitral Awards of 1958
[viii] English Arbitration Act 1996
[ix] Foreign Sovereign Immunities Act of 1976
[x] Maritime International Nominees Establishment v Republic of Guinea 1981 693 F2D 1094; 75 AJIL 963
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