US Court Upholds $70 Million Arbitration Award Against Nigeria for Chinese Firm
A US appellate court has endorsed Zhongshan Fucheng Industrial Investment Co. Ltd.’s $70 million arbitration award against Nigeria. On August 9, the court delivered a 2-1 decision affirming the lower court’s judgment, which deemed the arbitration award enforceable.
In January 2023, Judge Beryl Howell of the US District Court for the District of Columbia dismissed Nigeria’s claim that the court lacked jurisdiction due to the country’s sovereign status. Howell concluded that jurisdiction was valid because the UK, where the arbitration award was issued, is a signatory to the New York Convention.
**Case Background**
In 2010, Zhongshan, through its Chinese parent company Zhuhai Zhongfu Industrial Group Co. Ltd., acquired the rights to develop a free trade zone in Ogun State, Nigeria. By 2011, Zhongshan established Zhongfu International Investment (NIG) FZE to manage the project with the Ogun State government’s authorization.
However, in July 2016, the Ogun State government moved to terminate Zhongfu’s appointment and appoint a new manager for the free trade zone. This led Zhongfu to initiate investment treaty arbitration under the bilateral investment treaty between China and Nigeria (China-Nigeria BIT). The arbitrators found Nigeria in breach of its obligations under the treaty and awarded Zhongshan approximately $70 million in damages.
In January 2022, Zhongshan sought to enforce the arbitration award. Nigeria’s attempt to invoke state immunity was rejected by UK High Court Judge Sara Cockerill, who ruled that Nigeria had exceeded the allowed timeframe for appealing arbitral awards.
**US Appeal Court Ruling**
The US appellate court’s majority opinion held that the arbitration award is enforceable under the New York Convention, as the dispute involved “persons” with a legal commercial relationship. The court determined that the Foreign Sovereign Immunities Act (FSIA) arbitration exception negated Nigeria’s sovereign immunity in this case.
“The final award is enforceable under the New York Convention because it arises from disputes between ‘persons’ with a legal commercial relationship,” the majority opinion stated. “Thus, the district court has jurisdiction under the FSIA’s arbitration exception. The lower court’s decision is affirmed.”
Judges Patricia Millett and Julianna Childs issued the majority opinion, while Judge Gregory Katsas dissented. Katsas argued that the term “persons” in the New York Convention did not originally include sovereign nations and that the dispute arose from Nigeria’s sovereign actions governed by public international law.
**Wider Implications**
Just days after the US ruling, a Paris court ordered the seizure of three Nigerian government jets over the same arbitration dispute. Additionally, a UK court of appeal had earlier ruled that Nigeria must pay the $70 million arbitration award. Consequently, Nigeria has now faced losses in arbitration cases related to the Chinese firm across France, the US, and the UK.
The Nigerian government has accused Zhongshan of using underhanded tactics to secure the country’s offshore assets.
