In a significant legal setback for Nigeria, an appellate court in the United States has dismissed the country’s claims to sovereign immunity, paving the way for a Chinese consortium to seize Nigerian assets overseas.
This development further intensifies a crisis that President Bola Tinubu has been struggling to contain in Europe, and which now threatens to escalate across multiple international jurisdictions.
On August 9, 2024, the U.S. Court of Appeals for the District of Columbia ruled against Nigeria, finding that the country had grossly violated both the fundamental and commercial rights of executives from a Chinese firm, Zhongshan, that had entered into a trade zone agreement with the Ogun State government.
The Chinese expatriates had previously secured a favorable arbitration award in the United Kingdom in 2021, which included $55.6 million in compensation, $75,000 in moral damages, as well as accrued interest and legal fees.
The dispute originated from a 2007 agreement between Zhongshan and Ogun State to develop a free trade zone. However, the deal fell apart after the then-Governor Ibikunle Amosun allegedly terminated the contract unilaterally, resorting to coercive measures to avoid honoring the agreement.
The Chinese executives claimed they were wrongfully arrested and tortured by Nigerian police, allegations that were substantiated by the UK court.
In their pursuit of justice, the Chinese investors turned to the U.S. judicial system to enforce the UK arbitration award. Nigeria, in response, argued that its sovereign immunity shielded it from such enforcement actions.
However, the U.S. federal court rejected this defense, citing Nigeria’s commitment to the New York Convention, which permits arbitration involving sovereign entities.
Nigeria’s attempt to overturn this decision through an interlocutory appeal was similarly unsuccessful.
A two-to-one ruling by the appellate court confirmed that Nigeria had forfeited its immunity by engaging in actions that breached its contractual obligations under the Investment Treaty with China, signed in 2001.
The court emphasized that since Ogun State is a federating unit of Nigeria, the federal government could be held accountable for the violations against Zhongshan.
The dissenting judge, Greg Katsas, argued that Nigeria’s sovereign immunity should be preserved, especially concerning assets that fall under the state’s sovereign protection.
Nonetheless, the majority opinion prevailed, allowing the case to proceed in a lower court where the Chinese consortium can now pursue Nigerian assets in the United States. Among these assets are fixed properties and substantial deposits from crude oil earnings held by financial giant JP Morgan.
This U.S. ruling follows a similar move by Chinese investors in France, where court orders have been obtained to seize Nigerian assets, including private jets stationed across various European locations. Both the Nigerian federal government and Ogun State have responded by labeling the Chinese claims as fraudulent, drawing parallels to the controversial P&ID case.
They have also signaled their intention to challenge the French court’s decision but have yet to comment on whether they will appeal the U.S. court ruling to the Supreme Court.