U.S. appeals court has upheld a $70 million arbitration award in favour of Zhongshan Fucheng Industrial Investment Co. Ltd. a Chinese company, against the Nigerian government.
This decision permits Zhongshan to enforce charging orders over two residential properties owned by Nigeria in the United States as part of its effort to recover the award.
The ruling, delivered on August 9, affirms an earlier decision by the U.S. District Court for the District of Columbia, which declared the arbitration award enforceable. The case stems from a long-standing dispute between Zhongshan and the Ogun State government over a free trade zone development project.
The dispute began in 2010 when Zhongshan’s parent company, Zhuhai Zhongfu Industrial Group Co. Ltd, acquired rights to develop a free trade zone in Ogun State, Nigeria. In 2011, Zhongshan established Zhongfu International Investment (NIG) FZE to manage the project.
However, by July 2016, tensions escalated when Zhongshan accused the Ogun State government of attempting to terminate its involvement in the project and replace it with a new manager.
In response, Zhongshan initiated an investment treaty arbitration against Nigeria under the bilateral investment treaty between China and Nigeria. The arbitration tribunal ruled in favour of Zhongshan, awarding the company approximately $70 million in compensation.
Nigeria sought to dismiss the enforcement of the arbitration award, arguing state immunity. However, this claim was rejected by the courts. In January 2023, U.S. District Court Judge Beryl Howell ruled that the court had jurisdiction over the case, as the United Kingdom, where the arbitration award was issued, is a signatory to the New York Convention, which governs the enforcement of foreign arbitral awards.
The recent majority decision by the U.S. appeals court, led by Judges Patricia Millett and Julianna Childs, affirmed this ruling, holding that the award is enforceable under the New York Convention. The court determined that the Foreign Sovereign Immunities Act (FSIA) arbitration exception applies in this case, thereby stripping Nigeria of its claim to sovereign immunity.
The ruling reads: “For the foregoing reasons, we hold that the final award is enforceable under the New York convention because it arose out of differences between ‘persons’ that share a legal, commercial relationship. The district court therefore has jurisdiction over this case under the FSIA’s arbitration exception. The judgment of the district court is affirmed.”
However, Judge Gregory Katsas dissented, arguing that the term “persons” in the New York Convention does not include sovereign nations and contended that the Ogun State government’s actions could not be attributed to the Nigerian federal government.
The ruling adds to Nigeria’s growing legal challenges in international courts, with the government already facing asset seizures in Europe linked to the ongoing dispute. The Nigerian Presidency has responded by accusing Zhongshan of attempting to seize the country’s offshore assets through dubious means.
