From Laide Raheem, Abeokuta
The current storm in Ogun State Free Trade Zone is clearly envy-induced. The two Chinese firms involved are not in any time soon ready to yield grounds. It has a relatively long history behind it.
In 2001, China and Nigeria entered into a Bilateral Investment Treaty (BIT) to encourage investment between the two countries. Each country agreed to treat each other’s investors fairly and to protect each other’s investments. BIT also afforded the investors of either country the right to arbitrate any dispute with the other country.
In 2003 the Ogun State Government took a step further. It entered into a Joint Venture Agreement (JVA) with Messrs China Africa Investment FXE and subsequently with Zhongfu International Investment (NIG) FZE (Zhongfu), a subsidiary of Zhongshan Fucheng Industrial Investment to develop the Ogun Guangdong Free Trade Zone (OGFTZ).
Then crisis arose between the two Chinese companies. It degenerated into an attempt to appropriate Nigeria’s sovereign assets. China Africa and Zhongfu laid claims to management rights over OGFTZ. The dispute and rivalry became fierce, grounded business activities and threatened public peace and safety within the zone and neighboring communities.
There were claims and counter claims as to who between the two was the lawful representative of the original joint venturer, Guangdong Province, China had the right to manage the zone.
Zhongfu was said to have volunteered damaging information about zone managers, China Africa. Subsequently, on March 15, 2012, the administration of Senator Ibikunle Amosun appointed Zhongfu as Interim Zone Manager pending further evaluation. The administration explained: “It was to ensure that someone was in charge and thereby prevent unwholesome and untoward development in the zone pending the completion of our fact finding exercise.
“It was later discovered that the information and claims volunteered by Zhongfu against China Africa were tissues of lies. Zhongfu merely sought to de-market China Africa and to surreptitiously covert the state-owned assets of Guangdong Province in China together with the zone ownership and management rights of their business rival.”
On March 11, 2016, China, confirmed to the state government that China Africa was the rightful investor. Government consequently terminated Zhongfu’s appointment on 27 May, 2016.
Zhongfu approached Nigerian courts in different jurisdictions to ventilate its legal and business rights. It lost all the four cases. Not satisfied, petitioned the Presidency, Minister of Trade and Investment, Attorney General and Minister of Justice, Inspector General of Police, EFCC and the National Assembly among others.
Ogun State defended its actions and these organs of government agreed with its position. It also denied sending the police or any security agent to harass, intimidate, or beat any member of staff of Zhongfu.
Still aggrieved, Zhongshan commenced arbitration proceedings against Nigeria on August 30, 2018 alleging a breach of Articles 2, 3, and 4 of the China-Nigeria BIT and seeking compensation under Article 9 of the Treaty went to international arbitration and brought the treaty claim against Nigeria on grounds that OGSG, the Nigeria Police and NEPZA were used to chase them out of the zone and that these agencies are all entities whose actions are attributable to Nigeria in international law.
Opposing the claim, Nigeria contended inter alia that Zhongshan’s complaints were not about the conduct of the Federal Republic of Nigeria (but principally those of Ogun State) and therefore Zhongshan had no claim against Nigeria.
Surprisingly, Nigeria withdrew the Section 67 challenge a few days to the hearing. The tribunal, after accepting that Zhongshan’s case was primarily based on the actions of Ogun State as well as those of the Nigeria Police and NEPZA, all
of which have an independent existence under Nigeria’s municipal law, nevertheless relied on the principles of customary international law and in particular the provisions of he Articles on Responsibility of States for Internationally Wrongful Acts adopted by the International Law Commission (ILC) in August 2001 and held that the claim was validly brought against Nigeria.
On March 36, 2021, the arbitral awarded Zhongshan $55,675,000 as compensation, $75,000 for moral damages plus interest of $9,400,000 and costs of £2,864,445. In view of Nigeria’s withdrawal of her Section 67 challenge, Zhongshan approached the English Commercial Court for the enforcement of the award on an ex parte basis.
In December 2021, Mrs. Justice Cockerill granted the ex-parte enforcement order but
granted Nigeria the right to challenge the order within 74 days of being served. Nigeria was served with the enforcement order on May 30, 2022, to expire in August 2022. It was only in September 2022 that Nigeria applied for extension of time to challenge the order. Even then, Nigeria missed a further filing deadline in reply to Zhongshan’s response and was forced to request another extension.
In December 2022, Cockerill refused to grant the extension requests and found that
Nigeria had given “no good reason” for the delay. Thereafter, Nigeria applied for permission to appeal. This was also refused. Nigeria then appealed to the English Court of Appeal. On 20 July 20, 2023, the court refused to allow Nigeria to challenge the enforcement order on the basis that the grounds of appeal that Nigeria proposed to raise were hopeless.
On 16 June 2023 and 18 August 2023, the English Commercial Court made interim charging orders in respect of two properties belonging to Nigeria in the United Kingdom, 15 Aigburth Hall Road, Liverpool (“Aigburth”) and Beech Lodge, 49 Calderstones Road, Liverpool (“Beech Lodge”). Zhongshan estimated that both properties are likely to worth between £1.3 and £1.7 million. On 14 June 2024, the court granted a final charging order over the two properties.
Earlier in 2019, the Arbitral Panel awarded over $60 million against the Federal Government, a co-defendant, when all what Zhongshan did was to build a perimeter fence around the free-trade zone.
According to the present state administration, based on legal advice, it resolved to resist the enforcement of the award. The resistance was successful in eight different jurisdictions: “Currently, there are pending appeals against recognition orders issued in both the US and UK.”
The state also engaged Zhongshan in settlement discussions on reasonable terms. Zhongshan’s initial readiness to consider the offer was surprisingly reversed, with an insistence on the payment of the full debt. This led to a breakdown of the mediation, with parties agreeing to meet again in the first quarter of this year.
Since then, Zhongshan has been evasive and instead embarked on a series of enforcement proceedings, which the legal team appointed by the Federal Government and Ogun State have successfully opposed. In cases similar to the present one where Zhongshan obtained an ex-parte order, Ogun State has successfully set aside the orders.