A commercial court in London, United Kingdom (UK), has granted Zhongshan Fucheng Industrial Investment Co. Ltd final charging orders over two residential properties owned by Nigeria in the UK.
Lisa Sullivan, a master at the court, granted the final
charging orders to the Chinese firm following Nigeria’s prior opposition to the
orders’ jurisdiction.
ZHONGSHAN FUCHENG VS NIGERIA
The Chinese firm seeks to enforce a $70 million investment treaty award against Nigeria.
In 2010, Zhongshan, through Zhuhai Zhongfu Industrial Group
Co. Ltd (Zhuhai), its Chinese parent company, acquired rights to develop a free
trade zone in Ogun state.
A year later, Zhongshan set up Zhongfu International
Investment (NIG) FZE (Zhongfu), a Nigerian entity, to manage the project under
the permission of the Ogun state government.
Things took a different turn in July 2016 when the company
accused the state government of abruptly moving to terminate its appointment
while attempting to install a new manager for the free trade zone.
Subsequently, Zhongfu initiated an investment treaty
arbitration against Nigeria under the bilateral investment treaty between the
People’s Republic of China and Nigeria (the China-Nigeria BIT).
The arbitrators had ruled that Nigeria was in breach of its
obligations under the China-Nigeria BIT and awarded Zhongshan compensation of
around $70 million.
In January 2022, the Chinese company initiated a case to
seek enforcement of the arbitration award.
Nigeria pleaded state immunity but was turned away by Sara
Cockerill, a high court judge, who said the country abused the time frame for
appealing arbitral awards.
In July 2023, a court of appeal in the UK ruled that Nigeria is liable for
a $70 million arbitration award in favour of Zhongshan Fucheng.
The Chinese company obtained interim charging orders in June
and August last year over the two properties in Liverpool, owned by the
Nigerian government.
Nigeria opposed the charging orders being made final,
arguing the properties benefited from sovereign immunity.
The country said this is because they are “available to
serve as… premises for providing consular services to Nigerians in the
Northwest of England” as well as residences for Nigerian officials or citizens
or diplomatic events.
While the properties have been rented out, Nigeria said this
was for “below market rent” and that the proceeds were not used for commercial
purposes.
COURT RULES IN FAVOUR OF CHINESE FIRM
In her judgement, Sullivan held that the properties are leased
to residential tenants and that no “consular activities are actually taking
place on the premises”.
She cited evidence regarding the “dilapidated” state of one
property, including “large electrical home appliances strewn across the front
lawn”.
Sullivan said they had not been used for diplomatic reasons
for the previous 34 years, based on the balance of probabilities.
She also dismissed Nigeria’s arguments that it had not been
properly served with the interim charging order applications under the State
Immunity Act and that Zhongshan had not provided full and frank disclosure when
seeking them.
On its part, Nigeria argued that Zhongshan was bringing a
“multiplicity of enforcement actions” and that it
was impossible to determine with certainty how much
money it would ultimately be able to recover
in relation to the same award.
However, Sullivan said parties are “entitled to bring as
many types of enforcement action as they see fit to recover their debt”.
She said Nigeria had not yet paid any of the award and that
the value of the properties represented a “small proportion of it”.
Timi Balogun of Squire Patton Boggs, counsel to Nigeria,
disagreed with the Master’s decision, which “we believe somewhat brushes over
complex public international law issues, including with respect to state
immunity and the right of a foreign state’s High Commission to own and manage
portfolios of fixed assets in England and Wales”.
Balogun said such issues need to be weighed very carefully
and there are plans to appeal the decision so that higher courts can consider
“these complex and important issues”.
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