More Trouble as U.S. Appeals Court Authorizes Chinese Consortium to Seize Nigeria’s Overseas Assets

An appellate court in the United States has dealt a significant blow to Nigeria, rejecting its claim of sovereign immunity and permitting a Chinese consortium to proceed with confiscating Nigerian assets abroad. This ruling intensifies the crisis that President Bola Tinubu has been attempting to manage in Europe and prevent from escalating globally.

On August 9, 2024, judges at the U.S. Court of Appeals for the District of Columbia ruled that Nigeria had severely violated the fundamental and commercial rights of executives at Zhongshan, a Chinese firm involved in a trade zone agreement with Nigeria. This decision followed an initial arbitration award from a U.K. court in 2021, which mandated Nigeria to pay $55.6 million in compensation and $75,000 in moral damages, along with interest and legal fees.

The dispute originated from a 2007 contract between Zhongshan and Ogun State to develop a free trade zone. According to court documents, former Governor Ibikunle Amosun abruptly terminated the agreement, disregarding the initial terms agreed upon. The Chinese consortium also alleged mistreatment, including unlawful detention and torture by Nigerian police.

Nigeria’s appeal to the United States District Court, invoking sovereign immunity, was dismissed based on the New York Convention, which facilitates arbitration involving sovereign entities. The appellate court further denied Nigeria’s interlocutory appeal, with two out of three judges affirming that Nigeria’s actions nullified its immunity due to the contractual violations committed by Ogun State, a federating unit of Nigeria.

Judges Patricia Millett and Michelle Childs stated, “Whether the arbitration exception applies in this case depends on whether the New York Convention governs the Final Award. We hold that it does because the Final Award arose from a legal, commercial relationship between persons.” They emphasized that the 2001 Investment Treaty between Nigeria and China, promoting free trade zones, established this legal relationship.

In dissent, Judge Greg Katsas argued against stripping Nigeria of its immunity, citing the sovereign nature of the targeted assets.

The ruling allows the lower court to proceed with permitting the Chinese consortium to target Nigerian assets in the U.S., including fixed assets and JP Morgan deposits from oil revenues. This development follows recent French court orders enabling the seizure of Nigeria’s European assets, including private jets.

In response, both the Nigerian federal government and Ogun State have criticized the Chinese consortium as fraudulent, likening the case to the notorious P&ID incident, and indicating plans to challenge the French judgment. However, there has been no immediate indication of an appeal to the U.S. Supreme Court from the Nigerian authorities.