A lengthy legal battle between a Chinese company and the Nigerian government has taken a significant turn in favour of the Chinese firm. A London court has granted Zhongshan Fucheng Industrial Investment Co. Ltd (Zhongshan) the right to seize two residential properties owned by Nigeria in the UK. This decision comes after years of disputes stemming from a failed free trade zone development project in Nigeria.
The story begins in 2010, when Zhongshan, through its parent company Zhuhai Zhongfu Industrial Group Co. Ltd (Zhuhai), secured the rights to develop a free trade zone in Ogun state, Nigeria. A subsidiary, Zhongfu International Investment (NIG) FZE (Zhongfu), was established the following year to manage the project under the approval of the Ogun state government.
However, things went awry in July 2016. Zhongfu accused the Ogun state government of abruptly terminating its involvement in the project and attempting to appoint a new manager for the free trade zone. This turn of events led Zhongfu to initiate arbitration proceedings against Nigeria under the China-Nigeria Bilateral Investment Treaty (BIT).
The arbitration process concluded with a ruling in favour of Zhongshan. The arbitrators determined that Nigeria had violated its obligations under the BIT and awarded Zhongshan a substantial sum of $70 million in compensation.
With the arbitration award in hand, Zhongshan set its sights on enforcing it. In January 2022, the Chinese company filed a case in a UK court to have the arbitration award recognized and enforced. Nigeria attempted to shield itself from the claim using the concept of state immunity, a legal principle that generally protects a sovereign state from lawsuits in foreign courts.
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Nigeria’s claim of state immunity was ultimately unsuccessful. A high court judge, Sara Cockerill, ruled that Nigeria had misused the legal framework for appealing arbitration awards, effectively waiving its right to state immunity in this case. This paved the way for further enforcement actions.
Having exhausted the state immunity defence, Nigeria faced a new challenge. Zhongshan obtained interim charging orders in June and August of 2022, essentially freezing the sale of two residential properties owned by the Nigerian government in Liverpool. Nigeria contested these orders, arguing that the properties were protected by sovereign immunity due to their potential use for consular services and housing Nigerian officials.
The court delved into the details surrounding the properties. Judge Sullivan, presiding over the case, found that the properties were leased to residential tenants and that there was no evidence of actual consular activity taking place. She even cited evidence regarding the dilapidated state of one property, suggesting it was unlikely to be suitable for diplomatic purposes.
Nigeria’s arguments regarding improper service of the charging order applications and incomplete disclosure by Zhongshan were also dismissed by Judge Sullivan. She emphasized the right of parties to pursue various enforcement actions to recover debts and noted that Nigeria had not yet made any payments towards the arbitration award.
While this decision represents a significant victory for Zhongshan, the saga may not be over. Nigeria’s legal counsel, Timi Balogun, expressed plans to appeal the decision. The appeal is likely to focus on the complex legal issues surrounding state immunity and the rights of foreign missions to own and manage property in the UK. This case raises critical questions about the balance between protecting foreign investments and upholding the legal principles of state sovereignty.
