A US court has recently rejected Nigeria’s jurisdictional objections to the enforcement of a US$70 million investment treaty award won by a Chinese investor, Zhongshan. The award was issued in connection with an investment dispute concerning a joint venture to develop a free trade zone. The court dismissed the state’s arguments based on sovereign immunity. In this blog post, we will be discussing the details of this decision and why it is significant for foreign investors in Nigeria.
Background of Dispute
This case began when Zhongshan invested in a joint venture with the Nigerian government to develop a free trade zone in Nigeria. When the joint venture fell apart, Zhongshan brought an arbitration claim against Nigeria under the China-Nigeria bilateral Investment Treaty (BIT). An arbitral tribunal ruled in favor of Zhongshan and awarded it more than $70 million in damages.
Zhongshan then filed an action in the United States District Court for the District of Columbia seeking enforcement of the award. Nigeria made several objections based on jurisdictional grounds and asserting sovereign immunity as a defense to its claims. Specifically, Nigeria argued that since it was not “present” or “subservient” within US borders, it could not be sued there, and its assets should not be subject to attachment by a foreign court.
The court rejected these arguments and held that jurisdiction over Nigeria was established according to international law principles which allow for foreign states to be sued where they have property located or are engaged in business activity. The court further noted that Nigeria had consented to jurisdiction by agreeing to arbitrate any disputes arising out of BIT before an international tribunal which would have its award enforced by courts around the world. Furthermore, anything less than full recognition of arbitral awards would render such agreements meaningless as states would simply refuse enforcement on jurisdictional grounds whenever they were unhappy with their outcome.
This ruling is significant because it reinforces that foreign investors can seek remedies against host states if their investments are wrongfully expropriated or otherwise damaged due to wrongful acts committed by those states. It also serves as an important reminder that countries entering into BITs should take care when specifying terms regarding consent to jurisdiction and enforcement procedures as this could affect their ability to protect their interests from investment disputes down the road. By rejecting Nigeria’s jurisdictional objections, this ruling sets an important precedent for other countries who may find themselves similarly situated going forward.