The candidate of the Social Democratic Party (SDP) in the 2023 presidential election, Prince Adewole Adebayo, has discussed the implications of the breakdown in the contractual agreement between Ogun State and a Chinese private firm, which led to the seizure of Nigeria’s presidential jets.
What went wrong in the contractual agreement between the Ogun State Government and the Chinese firm that led to the seizure of Nigeria’s presidential jet?
Several things went wrong, and this became evident when the company and the state government, who were supposed to be partners, became opponents and started litigating. Sometimes, these business dealings outlive the tenure of the incumbent governor, and the successor might not understand the seriousness of the matter, leading to the contract being terminated. However, internationally, when you engage investors and sign contracts, you’re not only entering into commercial agreements but also treaties in some cases. If a dispute arises between the government and the investor, the investor may choose to sue in a regular court, or the matter may go to arbitration, including state treaty arbitration.
In this case, as a Nigerian doing business in China, there is an international agreement to which both Nigeria and China are signatories. This agreement allows for arbitration through the treaty mechanism if a citizen of one country is doing business in the other. The key issue to understand is that the dispute was originally an obligation of Ogun State, not the Federal Government.
However, under public international law, subdivisions, subsidiaries, and sub-national entities are not recognized internationally. Therefore, if one of Nigeria’s 36 states incurs an international obligation, it is Nigeria as a whole that will be held accountable. This is where Nigeria becomes implicated. It’s important to note that this is not a loan; Nigeria did not borrow money and use any national assets as collateral. It was a business agreement between the Ogun State Government and a Chinese private firm, which went to arbitration, alleging that the Ogun State Government breached the contract by hindering progress and causing losses, leading both parties to arbitration.
The second issue is that, when you go to arbitration and the award is against you, for the sake of your reputation, you should make efforts to pay. However, there are occasions when the state entity involved may be advised by their lawyers that the arbitrators made a mistake, misconducted themselves, or acted beyond their jurisdiction. In such cases, the matter may go into litigation, or there might be a lack of political will to resolve the issue, leading to a casual approach in dealing with it.
In all of this, what do you think is the worst-case scenario for Nigeria in terms of payment in this ongoing case?
The worst-case scenario is that Nigeria might have to pay the arbitration award or a portion of it. As a lawyer, it is challenging to second guess when you are not handling the matter directly because you would assume that the lawyers for the Federal Government and the Ogun State Government are aware of the intricacies involved in international arbitration.
However, based on my experience, if I were to advise the government, I would caution them to be mindful of their commercial reputation. Nigeria is running a neo-liberal government, and many of its macroeconomic policies depend on attracting foreign direct investment and foreign portfolio investment. In such a scenario, it is crucial not to be perceived as difficult to do business with.
Nigeria has very competent lawyers and is known for being highly litigious, a reputation that has existed for many years. For instance, Paul Danny of England once made negative remarks about Nigeria’s attitude towards meeting its obligations. Nigeria is notorious for being a tough customer, often resisting payment and dragging out legal battles to the very end.
In some cases, Nigeria’s approach has been justified, such as in the case of P & ID, where paying the enormous sum demanded without scrutiny would have been detrimental to the country. The scrutiny saved the nation a significant amount of wealth and protected millions of people from plunging into poverty due to a potential $13 billion payment.
However, challenging arbitration decisions can sometimes lead to difficult situations and temporary embarrassment. I believe that in the upcoming proceedings, these aircraft will be released, but that does not mean that the obligation to pay any judgment debt will be extinguished. It simply means that Nigeria can breathe easier and focus on negotiating a resolution.
Moreover, the Attorney-General should be cautious in advising on international obligations, recognizing the implications of agreeing to arbitration clauses. It is likely that the Attorney-General of Nigeria should have advised the Ogun State Government on how to resolve this matter, given that none of Nigeria’s 36 states are recognized internationally. We must establish a system that convinces the international community of our seriousness, ensuring that one governor’s decisions are not overturned by a successor due to politics or other unrelated issues.
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Many Nigerians and international investors have suffered losses due to abrupt changes in governance. Personally, I have been a victim of this, where I brought investors into the country, and after initial success and praise, a new government came in and, due to inattention, politics, or malice, disrupted the investment, leading to conflict.
The most important lesson here is to strengthen our courts to be fair and respected so that investors and partners feel confident in litigating within Nigeria. The current perception is that Nigeria’s court system is too slow and unreliable, leading to widespread insistence on including international arbitration clauses in agreements, which costs us money, reputation, and opportunities to resolve issues domestically.
The Chinese firm is threatening to take the legal battle to other countries like the UK. How difficult could this be for Ogun State and Nigeria, legally speaking?
For Ogun State, Nigeria is the guarantor and will be held accountable internationally, as no one recognizes Ogun State as a separate entity on the global stage. I doubt Ogun State has any international assets that could be seized. The most that could happen is that the Federal Government might deduct the owed amount from Ogun State’s allocation from the FAAC (Federation Account Allocation Committee). These are pressure tactics, and it doesn’t necessarily mean that taking the case to the UK or the US will result in asset seizures, as sovereign assets enjoy strong protection under international law.
It’s challenging to attach the assets of a sovereign state in the UK or the US. Even with a court judgment, Nigeria’s assets might still retain their immune status. The main goal of these tactics is to put pressure on Nigeria by keeping it in the negative spotlight, which could affect its reputation when raising bonds or negotiating with investors. If Nigeria’s international ratings are impacted, it could make it more difficult to secure investment.
Nigeria is notoriously tough when it comes to litigation, and recovering debts from the country is a long and costly process. In my experience, recovering from Nigeria is far more challenging than from other countries, where a little effort often leads to negotiations. Nigeria, however, will fight tooth and nail.
The Ogun State governor should focus on promoting Ogun State as a business-friendly environment rather than getting bogged down in legal arguments. It’s crucial to continue reassuring investors that the state is a good place to do business.
As a lawyer and a Nigerian aspiring to be president, I am loyal and patriotic. However, as a professional, if an international business asks me where to invest, I am bound by ethics to warn them that Nigeria can be a difficult environment and that litigation might lead to lengthy delays and complications. This isn’t about not defending the country, but about balancing our reputation and ensuring we don’t lose credibility.
Overall, there’s no need to panic. This situation is not unusual. The judgment creditor is simply applying pressure by pursuing action in multiple countries. While they may not recover anything, they aim to keep Nigeria in the spotlight and force attention to their claims. China is a powerful partner, and it’s important not to strain that relationship, especially given our numerous connections with them.
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