A recent ruling by a U.S. appellate court has allowed Zhongshan, a Chinese company, to move forward with efforts to seize Nigerian assets abroad, following a dispute over a trade zone agreement. On August 9, 2024, the U.S. Court of Appeals for the District of Columbia rejected Nigeria’s claim of sovereign immunity, which the country argued should protect it from such actions.
The court’s decision exacerbates an ongoing crisis for the Nigerian government, which has been trying to manage the situation, particularly in Europe, to prevent it from escalating further. This ruling comes on the heels of a French court permitting the seizure of three presidential jets as part of the dispute between Zhongshan and the Ogun State government.
Zhongshan’s legal battle stems from an outstanding arbitration award related to a breach of contract. In 2021, a UK court awarded the company approximately $55.6 million in compensation, along with $75,000 in moral damages, due to Nigeria’s failure to uphold its contractual obligations. The Nigerian government contested this in the U.S. court, asserting that its sovereign immunity should prevent the case from being adjudicated in the U.S. However, the federal judge ruled against Nigeria, citing the country’s participation in the New York Convention, which allows for arbitration involving sovereign entities.
On April 22, 2024, Nigeria filed an interlocutory appeal, but the appellate court concluded that Nigeria lost its immunity in this case due to its involvement in the breach of contract through Ogun State. The court emphasized that Nigeria had legal obligations to Zhongshan under an investment treaty signed between Nigeria and China in 2001, which facilitated the establishment of free trade zones.
While one judge dissented, arguing that Nigeria should retain its immunity, the majority opinion allows the case to proceed in lower courts. In response to the ruling, the Nigerian Presidency has labeled Zhongshan’s actions as fraudulent, asserting that the federal government does not have any contractual obligations with the company and that the dispute is strictly between Zhongshan and Ogun State.
Bayo Onanuga, Special Adviser to the President on Information and Strategy, reiterated the government’s stance, emphasizing that the attempts to seize Nigeria’s offshore assets are unwarranted and unorthodox. The situation continues to develop as Nigeria seeks to navigate the legal challenges posed by this ruling.
