New York, USA – A US appeal court has authorized Zhongshan Fucheng Industrial Investment Co. Ltd. to enforce a $70 million arbitration award against Nigeria. In a 2-1 ruling delivered on August 9, the court affirmed the lower district court’s judgment that the award, issued in the UK, is enforceable under the New York Convention.
In January 2023, Judge Beryl Howell of the US District Court for the District of Columbia rejected Nigeria’s argument of sovereign immunity, ruling that the court had jurisdiction because the UK, where the award was issued, is a signatory to the New York Convention.
Background of the Dispute
In 2010, Zhongshan, through its Chinese parent company Zhuhai Zhongfu Industrial Group Co. Ltd., obtained rights to develop a free trade zone in Ogun State, Nigeria. The following year, Zhongshan established Zhongfu International Investment (NIG) FZE to manage the project.
However, by July 2016, disputes arose as the Ogun State government moved to terminate Zhongfu’s appointment and replace it with a new manager. Zhongfu then initiated an investment treaty arbitration under the China-Nigeria Bilateral Investment Treaty (BIT). The arbitrators ruled that Nigeria breached its obligations under the BIT and awarded Zhongshan approximately $70 million.
In January 2022, Zhongshan sought to enforce the arbitration award, leading to Nigeria’s plea for state immunity, which was dismissed by the UK High Court. The case was subsequently brought before the US courts.
US Appeal Court Ruling
The US appeal court majority, comprised of Patricia Millett and Julianna Childs, ruled that the arbitration award is enforceable under the New York Convention due to the legal commercial relationship between the parties. The court found that Nigeria’s sovereign immunity was stripped by the Foreign Sovereign Immunities Act (FSIA) arbitration exception.
In dissent, Judge Gregory Katsas argued that the term “persons” in the New York Convention did not include sovereign nations and that the arbitration award stemmed from Nigeria’s sovereign acts.
Recent Developments
Following the US appeal court’s judgment, a Paris court in France ordered the seizure of three Nigerian government jets over the dispute. Additionally, a UK court of appeal has ruled that Nigeria is liable for the $70 million arbitration award. This series of judgments reflects Nigeria’s ongoing legal battles with Zhongshan Fucheng across multiple jurisdictions.
The Nigerian government has accused Zhongshan of using deceptive practices to acquire Nigerian offshore assets.
