The legal dispute between Nigeria and the Chinese firm, Zhongshan Fucheng Industrial Investment Co. Ltd, has taken a significant turn as a U.S. Court of Appeals has upheld the enforcement of a $70 million arbitration award against the Nigerian government. This ruling permits Zhongshan Fucheng to obtain final charging orders over two residential properties owned by Nigeria in the United States.
The recent majority ruling from the U.S. Court of Appeals for the District of Columbia affirmed the judgment of a lower court, which found that the arbitration award was enforceable under the New York Convention. This ruling comes amidst Nigeria’s ongoing efforts to manage the escalating crisis and prevent similar outcomes in other jurisdictions.
The dispute traces back to 2010 when Zhongshan Fucheng, through its parent company Zhuhai Zhongfu Industrial Group Co. Ltd, secured rights to develop a free trade zone in Ogun State, Nigeria. In 2011, Zhongshan established Zhongfu International Investment (NIG) FZE to manage the project with the approval of the Ogun State government. However, in 2016, Zhongshan accused the Ogun State government of attempting to terminate its management role and install a new manager for the free trade zone.
This led Zhongshan to initiate an investment treaty arbitration against Nigeria under the bilateral investment treaty between China and Nigeria (China-Nigeria BIT). The arbitration panel ruled in favor of Zhongshan, awarding the company approximately $70 million in compensation.
In January 2022, Zhongshan sought to enforce the arbitration award in the U.S. courts. Nigeria argued for state immunity, but this claim was rejected by the presiding judge of the U.S. District Court, who noted that the court had jurisdiction under the FSIA’s arbitration exception. This decision was upheld by the U.S. Court of Appeals.
“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 majority judgment reads. “The district court therefore has jurisdiction over this case under the FSIA’s arbitration exception. The judgment of the district court is affirmed.”
However, in a dissenting opinion, Judge Gregory Katsas argued that when the New York Convention was drafted, the term “persons” did not include sovereign nations. He contended that the actions of the Ogun State government could not be attributed to Nigeria and that the arbitration award “arises solely out of Nigeria’s sovereign acts governed by public international law.”
This ruling complicates Nigeria’s efforts to manage the crisis. Previously, a French court had authorized the seizure of three Nigerian presidential jets due to the ongoing dispute. The Nigerian government has expressed concerns over Zhongshan’s attempts to seize its offshore assets through what it described as “subterfuge.”
As the situation develops, Nigeria faces increasing pressure to resolve the dispute and protect its assets in various jurisdictions.
