Ọn Thursday, Nigerian government accused a Chinese company of mounting a campaign to seize its assets overseas, including presidential jets, a government spokesperson said on Thursday.
Presidential spokesperson Bayo Onanuga said Zhongshan Fucheng Industrial Investment Co. Ltd. is using “unorthodox means” to target Nigerian government property, despite having no contractual obligations with the federal government.
In report by Punch, Zhongshan Fucheng Industrial Investment Co. Limited, the Chinese firm that got a court injunction to ground three presidential jets belonging to the Federal Government in Europe, has initiated plans to seize other Nigerian assets in the United Kingdom, United States of America and in six other countries.
The PUNCH also learnt that the company had instituted legal proceedings in about eight jurisdictions globally, regarding the dispute.
The other countries include Belgium, Canada, France, Singapore and the British Virgin Islands, documents relating to the case.
The History
In 2001, China and Nigeria signed a bilateral investment treaty aimed at promoting commercial investment between the two countries.
The Zone was the subject of a Joint Venture Agreement entered into on 28th June 2007 (“the 2007 JVA”) between the Ogun State and Guangdong Xinguang International China-Africa Investment Ltd (also known as China-Africa Investment Ltd, and hereinafter “CAI”), and CCNC Group Ltd (“CCNC”). We know that CAI was a Chinese entity but, other than that, the Tribunal was told very little about it. Under the 2007 JVA, the development of the OGFTZ was to be carried out through Ogun Guangdong Free Trade Zone Company (“OGFTZ”), which was to be jointly owned by Ogun State, CCNC and (as to 60%) CAI, for a period of 99 years. The arrangement envisaged by the 2007 JVA involved CAI effectively carrying out the development, marketing and management of the Zone, albeit through OGFTZ. In practice, it appears likely that the management was carried out by CAI, and that OGFTZ was not constituted as envisaged by the 2007 JVA.
On 28 September 2007, Ogun State granted to OGFTZ a 99-year Certificate of Occupancy (“the 2007 Certificate”) over 2,000 hectares of land in the Zone. On 2 April 2008, the Nigeria Export Processing Zones Authority (“NEPZA”), which has a statutory duty to supervise and coordinate the organisations operating within Nigerian FTZs, signed an agreement granting OGFTZ exclusive concessions to construct, manage, and operate the Zone. On 3 June 2008, OGFTZ was registered as a free trade zone company.
Dr Han’s evidence was that, by 2010, only limited development had been carried out and CAI was running short of funds, and that, as a result, Zhuhai was introduced to Ogun State as a potential alternative or additional developer and manager. Following discussions, Ogun State and Zhuhai agreed that Zhuhai would effectively take over the development and management of Fucheng Industrial Park (“Fucheng Park”), an area of 224 hectares within the 2,000 hectares the subject of the 2007 Certificate, and enjoy some sort of priority rights over the rest of the Zone
On 29th June 2010, Zhuhai and OGFTZ entered into a “Framework Agreement on Establishment of Fucheng Industrial Park in the Zone” (“the 2010 Framework Agreement”). This Agreement (of which there was a Chinese version and an English version) gave Zhuhai the right to develop and operate Fucheng Park, within the Zone, which was described as “an area of 100 km2 constructed and managed [OGFTZ] which is located in the southeast of Ogun State, Nigeria”. CAI was not a party to the 2010 Framework Agreement.
The 2010 Framework Agreement included the following provisions:
a. Paragraph (A) of the preamble, which recorded that OGFTZ was formed by Ogun State and CAI “to establish and operate” the Zone and to “acquire the land use rights” over it “for a period of 99 years” from an unspecified date in 2008;
b. Paragraph (B) of the preamble, which recorded that Zhuhai “wishes to build up [the] Park”, and to develop on it “factories and an industrial park”;
c. Clause 2.2, which stated: “[t]he actual operation and management organ of [the] Park shall be [Zhuhai’s] wholly-owned subsidiary or a company under [its] control”;
d. Clause 2.6, which stipulated that “the 97-year land use rights regarding [the] Park shall be in the possession of Zhuhai, which was “entitled to exercise its full right for such industrial land’s occupancy, use, proceeds and disposal”;
e. Clause 3, which provided for a “97-year concession fee” payable by Zhuhai to OFGTZ as well as an “initial Concession Fee of Land Use Right”;
f. Clauses 4.1 and 4.2, which set out Zhuhai’s rights and obligations with regard to the development of Fucheng Park (and in particular the installation of infrastructure) and gave Zhuhai the right:
i. To charge a “Comprehensive Administrative Fee” (clause 4.1.1);
ii. To have “certain administrative right over enterprises in [the] Park” (clause 4.1.6);
iii. After it had completed its infrastructure obligations in relation to Fucheng Park, to have “priority to invest in and develop other areas in [the Zone] under the same conditions” (clause 4.1.7); and
g. Clause 5, which contained OGFTZ’s obligations which were effectively to be supportive of the development of Fucheng Park, and which included an obligation not to develop any other part of the Zone until 80% of Fucheng Park was developed (clause 5.2.7).
h. Clause 6, by which OGFTZ apparently agreed to transfer to Zhuhai the benefit of all existing contracts in respect of businesses already trading in Fucheng Park.
Some fifteen weeks after the 2010 Framework Agreement was entered into, another document dated 10th October 2010 (“the 2010 Deed”) was entered into by Zhuhai, OGFTZ and Zhongshan. This document, which is in Chinese, whose English translation is a little hard to understand, appears to have the effect of entitling Zhuhai to carry out its obligations under 2010 Framework Agreement through third parties. According to the testimony of Dr Han, the 2010 Deed was treated by Zhongshan and Zhuhai as having the practical effect of transferring Zhuhai’s rights and obligations under the 2010 Framework Agreement to Zhongshan (which, as we have mentioned, is a subsidiary of Zhuhai).
On 24th January 2011 Zhongfu (which, , is a subsidiary of Zhongshan) was registered by NEPZA as a Free Trade Zone Enterprise in the Zone.
A document (“the 2011 receipt”), which is dated 25th July 2011 and was signed on behalf of Zhongshan and OGFTZ, contains an acknowledgment by OGFTZ that Zhongshan had paid “the first instalment of the land use rights fees” under the 2010 Framework Agreement in the sum of RMB 5,455,129.50.
On 28th November 2011, Mr Taiwo Adeoluwa, who had recently become the Secretary to the Ogun State Government (“Ogun State”) (and remained so until 2019) wrote a letter (“the November 20111 letter) to CAI, referring to earlier correspondence and complaining of “wanton violation of the terms of the [2007 JVA]”, “the unsatisfactory share arrangements” (presumably with regard to OGFTZ), and “rampant smuggling”. The letter then went on to refer to the fact that “following …. extensive due diligence enquiries in both Nigeria and China”, CAI or its parent company, Guangdong Xinguang International Group Co Ltd, “is now officially bankrupt” and that “a top executive is alleged to be involved in criminal activity”. The letter invited CAI’s response to these allegations. If there was such a response, the Tribunal was not provided with it.
On 15th March 2012, Mr Adeoluwa wrote two letters on behalf of the Ogun State (“the March 2012 letters”). The first was to CAI. It referred to earlier correspondence, including the November 2011 letter, which had contained a number of complaints which Ogun State had made against CAI, based on its “incompetence and flagrant violation of the terms of the [2007 JVA]”. The letter then went on to state that Ogun State was “constrained to terminate forthwith your participation in the [Zone] in accordance with the terms of that Joint Venture Agreement”, on various grounds including “that the company has been adjudged bankrupt”, as well as illegality, fraudulent practices, failing to provide a business plan, a Master Plan, or a Phased Design Plan, and failure to contribute to the share capital of OGFTZ.
The second letter of the March 2012 letters was to the Managing Director of Zhongfu. It stated that Ogun State had decided to appoint Zhongfu “the interim Manager/Administrator” of the Zone (and not just Fucheng Park) for “an initial period” of three months, “subject to a renewal thereof upon satisfactory performance”. The role was briefly described in the letter as “attracting sufficient business to the Zone to boost economic activities” and “rejuvenating generally the Free Trade Zone”. It appears that the three months was extended either expressly or implicitly, until the arrangements were placed on a more permanent basis on 28th September 2013 as explained below.
The arrangements set out in the March 2012 letters had the approval of NEPZA. On 10th April 2012, it wrote to the General Manager of CAI “confirm[ing] the termination of your appointment as Manager and operator of the [Zone] by [Ogun State]”, and requiring CAI to “handover all assets and documentation which belongs to the Ogun Guangdong Free Trade Zone to the newly appointed Management company [Zhongfu]”. The following day, NEPZA wrote to Mr Wang Junxiang of Zhongfu “confirm[ing] the appointment of your organisation as the Managers and operators of [the Zone]”.
Meanwhile, on 15th January 2013, by a document (“the 2013 document”), which is in Chinese (and of which we were supplied with an English translation), Zhuhai assigned its interest in the 2010 Framework Agreement to Zhongfu. As we have mentioned, it appears that Zhongshan, the parent company of Zhongfu had already taken over Zhuhai’s rights and responsibilities under the 2010 Framework Agreement, at least in practical, if not in legal, terms, some thirty months earlier.
There is also a document (“the 2013 acknowledgement”) written in Chinese, dated 13th April 2013, which is signed on behalf of Zhongshan and Ogun State, and which (according to the English translation) is an acknowledgment by OGFTZ that Zhongshan had not only paid the sum referred to in the 2011 receipt, but also RMB 4,544,870.50 “to make up the deficiency of land use transfer fee that should be paid by Zhuhai”.
On 28th September 2013, Ogun State, Zhongfu and Zenith Global Merchant Limited (“Zenith”) entered into a “Joint Venture Agreement For the Development, Management and Operation” of the Zone (“the 2013 JVA”). The preamble to the 2013 JVA recorded, inter alia, that:
a. The “participation” of [CAI] in the Zone “has been terminated by [Ogun State] vide a letter dated 15th March 2012”; and
b. Zhongfu “has been appointed as the new manager of the [Zone] has invested in the infrastructure of the [Zone] and has proved its expertise to partner in the development, operation, management and administration of a free trade zone”.
Clause 3 of the 2013 JVA provided that OGFTZ would be the joint venture company, and that it would owned as to 60% by Zhongfu, and 20% each by Ogun State and Zenith. Clause 4 was concerned with the control and running of OGFTZ. Clauses 6 and 12 of the 2013 JVA contained a number of obligations on the parties. They included:
a. In clause 2.3, an obligation on Zhongfu to contribute to the share capital of OGFTZ, and an obligation on Ogun State to provide “10,000 hectares of land (in phases) to the [Zone]”, and it was recorded in a Schedule that the “parties try their best to locate maximum 7,000 hectares as a major land [sic] of the Zone” and the remaining 3,000 hectares could be “located in a different place if the cost to be spent in locating the 10,000 hectares in a place is too high for [Ogun State]”
b. In clause 6.1,
i. an obligation on Ogun State to grant OGFTZ a 99-year term in respect of 10,000 hectares;
ii. an obligation on Ogun State together with Zhongfu and Zenith to work to get all necessary licences to enable any contemplated development and occupation to take place;
iii. an obligation on Ogun State to make the 10,000 hectares available to OGFTZ to enable it to “conduct development and construction activities” during the 99 years;
c. In clause 6.2, a requirement that Zhongfu prepare a Master Plan, a Phased design Plan and a business plan, and also to begin construction within two months of getting the necessary licences;
d. In clause 12.1, a requirement that Zhongfu carry out development in accordance with the Master Plan;
e. In clause 12.3, an obligation on Zhongfu to instal infrastructure;
f. Elsewhere in clause 12, a number of obligations on Zhongshu with regard to development, managing and marketing;
g. In clause 15.1, the obligation on Ogun State to provide 10,000 hectares of land was effectively repeated, along with other obligations on Ogun State designed to assist the operations of Zhongfu, and in particular to “strictly observe the provisions of [the Treaty] … and provide adequate protection to the investment of [Zhongfu and Zenith] in OGFTZ and the Zone”.
Clause 18 of the 2013 JVA included provisions for early termination by one party if the other party was in breach, became insolvent, or ceased to carry on business. So far as early termination for breach was concerned, it could only be implemented if (i) the breach was material, (ii) a notice specifying the breach had been served; and (iii) the breach was not remedied within 60 days of receipt of the notice. And clause 27 provided that, in the event of any dispute arising under the 2017 JVA, it should first be the subject of an attempt to settle, and if that failed, either party could refer the dispute to arbitration under the UNCITRAL Rules in Singapore under the aegis of the Singapore International Arbitration Centre (“SIAC”).
The development of the Zone
From 2010, Zhuhai and Zhongfu carried out significant work on at Fucheng Park, and this work consisted of developing infrastructure, marketing and letting sites in Fucheng Park (“sites”) for development to potential occupiers, and managing Fucheng Park as it was developed and occupied. Evidence to this effect was given to us by:
a. Dr Han, who visited the Zone in early 2010 and then went there to work more or less full time as Chief Executive Officer and Joint Chief Operating Officer of OGFTZ from October 2012 until June 2016,
b. Mr Zheng Xue, who worked more or less full time at Zone, and principally at Fucheng Park as Joint Chief Operating Officer of OGFTZ from October 2012 until June 2016, and
c. Mr Wenxiao Zhao, who was Chief Financial Officer of OGFTZ from April 2012 until June 2016, and spent almost all his time there in that period.
The work carried out by Zhongfu, according to this evidence, included the erection of a perimeter fence round Fucheng Park, the installation or upgrading of roads, the upgrading of the sewerage system, and the upgrading of the power network in Fucheng Park. In addition, Zhongfu negotiated improved communication systems, and the opening of a bank, a supermarket, a hospital, and a hotel in order to assist to draw potential occupiers to Fucheng Park.
Dr Han, Mr Xue and Mr Zhao also said that, from 2010, efforts had been made to let out sites in Fucheng Park to occupiers for fixed terms, initially 90 years, but then normally between 10 and 50 years, most commonly 20 years. In 2011, there were, according to Mr Zhang, five occupiers of sites in Fucheng Park (and this is consistent with the documentary evidence, which suggests that agreements were entered into with seven potential occupiers that year). He also said that this increased to around 16 occupiers by early 2014, when much of the work just summarised had been completed. At that point, Zhongfu started to focus more sharply on finding occupiers of sites in Fucheng Park, and of Zenith who had been appointed to act for Ogun State as chief co-ordinator of the Zone, was distributed to occupiers of the Zone.
A letter dated 28th April 2014 in similar terms was sent by M.A. Banire and Associates (“Banires”), solicitors acting at that time for OGFTZ, to the Managing Director of Zhongfu, which stated that Ogun State has “long terminated the interest of [CAI in the Zone]” and referred to the letter to CAI of 15th March 2012. Banires’ letter went on to explain that Zhongfu had been appointed to replace CAI under the “able leadership of Dr Jason Han the Managing Director and Prof John Xue, the Chief Operating Officer”, and asked Zhongfu to disregard any communication from or on behalf of CAI “as they have no authority or approval of … Ogun State … to act or do anything in respect of the … Zone”.
Thereafter, at least until 2016, there appears to have been no further intervention in the Zone from CAI or NSG.
Meanwhile, Dr Han and Mr Xue were seeking out potential investors and partners for the development of the remainder of the Zone, travelling to China and the United States for this purpose. They were assisted by the fact that Zone was receiving a degree of international recognition. For instance, in April 2016, the Economist Intelligence Unit published a video entitled “Growth Crossings: Ogun Guangdong Free Trade Zone in Nigeria”.
On 18th May 2015, Mr Adeoluwa wrote to the Managing Director of Zhongfu making a number of complaints about Zhongfu’s operations, and stating that, while terminating the JVA was Ogun State’s “initial reaction”, it invited Zhongfu to attend a meeting to “clear the air” two days later. It does not seem that this meeting took place. It also appears that, although Zhongfu did not reply to the letter, Ogun State did not pursue the complaints any further.
On 20th January 2016, following discussions between Dr Han and a former MBA classmate, a Mr Li, who had 30 years’ experience in the pharmaceutical industry, Ogun State and OGFTZ entered into a memorandum of understanding (“the 2016 MoU”), which was written in Chinese and English) with an entity called Xi’an Industrial Delegation, and which related to the development of a pharmaceutical park (“the Pharmaceutical Park”) in the OFGTZ. It was expressed in very general terms, but it referred to “setting up a Xi ’an Hi-Tech Industrial Park with USD1 billion investment on 10 square kilometers of land over 10 years”. It referred to the “hope” that Ogun State would provide the requisite “information …, planning materials, personnel support, geographical data, … plans etc”. It also contained a statement that another company in the Xi’an group (“Xi’an”) was “willing to cooperate with [Ogun State] to improve the infrastructure”, including building bridges, roads and a port, for which it needed the “support” of Ogun State..
This was followed on 20th April 2016 by a “Framework Agreement” (“the 2016 Framework Agreement”) between OGFTZ and an entity called Xi’an Ogun Construction and Development Limited Company (which the second recital records as having been formed by the Xi’an Industrial Delegation to implement the 2016 MoU). It was signed when President Buhari of Nigeria was on an official visit to China in April 2016, and it set out in rather more detail how the Pharmaceutical Park would be managed and operated. Thus, it envisaged that OGFTZ would provide the infrastructure outside the park necessary to support the Pharmaceutical Park, and that Xi’an would carry out the development of the park. The 2016 Framework Agreement also provided for a slightly different arrangement from the Fucheng Park underleases so far as level of rents and allocation of administrative fees were concerned.
Dr Han and Mr Xue also had discussions with Professor Issa Baluch and Mr Jon Vandenheuvel, both of whom gave evidence to us. Professor Baluch is an experienced businessman with over 35 years involvement in FTZ world. He was one of the principal individuals responsible for the setting up and running of the Jebel Ali Free Zone in Dubai, which he said had been very successful and which he had then used as a model for other FTZ developments. Together with Mr Vanderheuvel, who is his partner in First Hectares Capital (“FHC”) and had a background in academia and government, he started advising Zhongfu in autumn 2015. On 30th March 2016, FHC entered into a formal agreement with OGFTZ under which it was to be paid USD 7,500 per month. Together with Dr Han and Mr Xue, FHC started to develop a proposal for raising USD 250m “to expand infrastructure across the Zone and the southwest region of Nigeria in order to attract new businesses to the Zone”, to quote from Mr Vandenheuvel’s evidence. This got as far as the production of a couple of brochures, but they were never finalised, let alone distributed or circulated.
The events of April to August 2016
The reason that the brochure was not circulated was that Ogun State was challenging Zhongfu’s right to any interest in the Zone through OGFTZ. This challenge appears to have been precipitated by a note verbale (“Note 1601”) dated 11th March 2016 from the Economic and Commercial Section of the Consulate of the PRC in Lagos (“the Consulate”) to Ogun State. Note 1601 stated that the Consulate had been “officially notified” by a PRC authority “about the replacement of shareholdings owner of [CAI] to Guangdong New South Group”, which, the Note said, “will legally lead to the replacement of the management rights of the OGFTZ which is now in the hands of [Zhongfu] to Guangdong New South Group”. A certificate dated 9th July 2013 from the Guangzhou Notary Public Office confirmed the fact that 51% of CAI had been acquired by NSG.
On 12th April 2016, Mr Adeoluwa wrote a letter (“the April 2016 letter”) to the Managing Director of OGFTZ. The letter stated in the first (unnumbered) paragraph, that the PRC government “through [the Consulate]” had directed that Ogun State “be notified of the transfer Shareholding interests of [CAI] in the OFGTZ to the New South Group” and that “[a]s a result of this development, the Consulate is requesting the Management Rights over the Zone be given to the new share owners”. Paragraph numbered 2 said that Ogun State had been provided with “what appears to be valid Share transfer documents”, and stated that “Ogun State was carrying out an investigation”. Paragraph numbered 3 requested that “you furnish this office with proof that your company, [Zhongfu], is legitimately entitled to the shares and management rights over the Zone”, and suggested that, “[w]ithout prejudging the outcome of the investigation”, “the implication” could be that the “agreement between [Ogun State] and Zhongfu was premised upon misrepresentation and concealment of facts, and, therefore cannot be allowed to stand.” Zhongfu was invited to “clarify the position and respond to the demand of” the PRC government.
OGFTZ responded to the April 2016 letter on 26th May, saying that Dr Han and Mr Xue were out of the country, and seeking a meeting. The following day, Mr Adeoluwa wrote a letter to the Managing Director of Zhongfu, referring to the April 2016 letter and saying that “[t]he allegation against you bothered [sic] on fraud and material misrepresentation” in that “you were alleged to have fraudulently converted State assets … and you misled Ogun State” and that “in the absence of new facts, we are obliged to accept the facts as presented by the Chinese government [in Note 1601] and act accordingly”. The letter then went on to suggest that OGFTZ’s letter of 26th May “deliberately did not address any of the issues, particularly the criminal allegations”, and ended by requiring Zhongfu “to hand over all OGFTZ assets in its possession to [Zenith] and to vacate the Zone within 30 days hereof”.
On 14th June 2016, Banires, who were by then acting for Zhongfu, responded in a letter apologising for the failure to deal with the issues raised in the April 2016 letter, and saying that the accusations in that letter and the “termination” in the May 2016 letter were “based on some erroneous facts as misrepresented to you by the Chinese Consular”. Banires’ letter then stated that the “issue on which your letter of termination is based is not just coming up for the first time”, that it had arisen “first in 2014” and that Zhongfu’s “response” at that time “eventually laid to rest that issue”, and that “it is now surprising that this issue is coming up again”. The letter than explained that CAI’s rights had been terminated by Ogun State by the first of the March 2012 letters, and Zhongfu had then been subsequently appointed and had entered into the 2013 JVA, and then stated that “the Chinese Consular misrepresented the facts to you” but that, if the Consulate wished to persist, CAI “should institute an action against [Zhongfu]”. The letter ended by “urg[ing] your restraint” and “plead[ing] for a convenient date for a meeting wherein this issue can be appropriately discussed”.
On 14th July 2016, Ogun State informed NEPZA that it should “withdraw recognition and stop all dealings with [Zhongfu] with regard to any matter relating or connected to the [Zone]”, and “implored … all agencies to step in and fully investigate the activities of [Zhongfu]”. Two days later, Mr Adeoluwa sent a text to Dr Han, which ended by saying that his advice to Dr Han “as a friend” was that he should “leave peacefully when there is opportunity to do so, and avoid forceful removal, complications and possible prosecution”. On 19th July, Dr Han said that he visited Mr Odega of the NEPZA who told him that Ogun .State would use security personnel to get Zhongfu out of Nigeria. Dr Han also said that Mr Onas informed him in a telephone call around the same time that if he did not hand over the Zone to Ogun State, his passport would be seized and he would be put in jail. Dr Han described himself as “very scared” by all this.
There was also indirect evidence from Dr Han that, on 21st July, Mr Onas visited Fucheng Park and informed the tenants that Zhongfu’s appointment had been terminated, and that a handover to the new manager had been scheduled for the following day. On 22nd July (again based on Dr Han’s indirect evidence), Mr Onas again attended at Fucheng Park, this time with a member of the Nigerian police (“the police”), and introduced NSG as the new manager, and according to Mr Zhao caused some of Zhongfu’s employees to be frightened.
There was other evidence about activities and statements made on behalf of Ogun State which are said by Zhongshan to amount to threats to individuals working for Zhongfu, with the apparent aim of getting Zhongfu to vacate the Zone, and its personnel to leave Nigeria. However, it is only appropriate to refer to one or two further aspects. First, on 27th July, NEPZA wrote to the Nigerian Immigration Service asking it to collect the original form of immigration papers (in particular, work permits known as CERPACs) from all foreign staff, who would not have been able to work in Nigeria without such papers. The letter stated that the staff should only be allowed to leave with copies of the immigration papers. Secondly, on 4th August 2016, warrants citing “criminal breach of trust” were issued, apparently at the request of the police, for the arrest of Dr Han and Mr Zhao. Thirdly, on 17th August, Mr Zhao was arrested at gunpoint, and was then deprived initially of food and water, intimidated, physically beaten, and detained for a total of ten days, by the police. During his detention he was shown a copy of his warrant. Mr Zhao’s evidence is that when in custody the police repeatedly asked him about the whereabouts of Dr Han. Mr Zhao was eventually freed on bail. He was initially required to deposit his passport with the police but after three visits to the relevant police station he was able to get the passport back and therefore he was able to leave Nigeria.
Dr Han was never arrested and was also able to leave Nigeria. Mr Zhao left Nigeria on 2 October 2016. Dr Han left on 11 October 2016. Neither has returned since.
On 18th August 2016, Zhongfu started proceedings (“the Federal court proceedings”) by way of a writ issued out of the Federal High Court in Abuja against NEPZA, the Attorney-General of Ogun State (“the A-G”) and Zenith seeking declaratory and injunctive relief, effectively seeking to be reinstated as manager of the Zone. Some three weeks later on 9th September 2016 it started proceedings (“the State court proceedings”) by way of a Statement of Claim issued out of Ogun State High Court against OGFTZ, Ogun State and the A-G of Ogun State, seeking possession of the Zone, an injunction, damages (in excess of USD 1 billion) and interest. On the same day, Mr Zhao issued proceedings (“Mr Zhao’s proceedings”) out of the Federal High Court in Abuja against the police, the Inspector General of Police, the Commissioner of Police for the Federal Capital Territory, Abuja and Wang Junxiong for damages in connection with his mistreatment.
The Federal court proceedings essentially relied on the proposition that there had been breaches of (i) Zhongfu’s contractual rights as a manager of the Zone appointed by the first of the March 2012 letters, as approved in NEPZA’s letter of 10th April 2012 confirming the termination of CAI’s rights, and (ii) Zhongfu’s rights under a “tenancy” of Fucheng Park under the 2010 Framework Agreement. In the State court proceedings, the claim was based on Zhongfu’s right to possession of Fucheng Park under the 2010 Framework Agreement. The only reference to the 2013 JVA in either proceedings was in paragraph 5 of the Statement of Claim in the State court proceedings, where it was stated that “[t]his action is filed by [Zhongfu] to recover possession of land based on documents existing prior to 2013 and without prejudice to any claims arising pursuant to agreements made by the parties to the [2013 JVA] which claims may be pursued in other proceedings”.
It appears that nothing happened in the Federal court proceedings or the State court proceedings (together “the Court proceedings”) or in Mr Zhao’s proceedings for a substantial period, and that deadlines imposed by court rules were not complied with by the defendants, apparently with impunity. In March and April 2018, these three proceedings were discontinued.
Meanwhile, Zhongfu began SIAC arbitration proceedings against Ogun State and Zenith pursuant to clause 27 of the 2013 JVC, but on 5th January 2017, Zenith applied in the Ogun State High Court for an anti-suit injunction restraining the arbitration. The application was heard by Justice Akinyemi, who gave judgment on 29th March 2017 granting the injunction sought on a permanent basis, essentially on the grounds that Nigeria (not Singapore) had a substantially closer connection to the arbitration and was therefore the seat of arbitration, and that the issue of the Federal court proceedings operated a waiver of the right to arbitrate or otherwise rendered the arbitration abusive or oppressive. On 23 June 2017, Zhongfu appealed this decision, but that appeal was were discontinued in 2018, together with the discontinuance of the Court proceedings.
The Treaty
The Treaty describes itself as an “Agreement Between the Governments of the PRC and Nigeria “for the Reciprocal Promotion and Protection of Investments”. Save where the contrary is stated, all references hereafter to articles are to articles of the Treaty.
Article 1(1) defines “investment” as “every kind of asset invested by investors of one Contracting Party in accordance with the laws and regulations of the other Contracting Party in the territory of the latter”, and it goes on to identify certain more specific items “in particularly [sic], but not exclusively”, including “(a) … any property rights … “, (b) shares …. and any other kind of participation in companies …., (c) claims to money or to any other performance with economic value …, (e) business concessions …”.
Article 2(2) provides that “Investments of the investors of either Contracting Party shall enjoy the continuous protection in the territory of the other Contracting Party”, and article 2(3) prohibits a Contracting Party “[s]ubject to its laws and regulations” from “tak[ing] any unreasonable or discriminatory measures against the management, use, enjoyment and disposal of the investments by the investors of the other Contracting Party”.
Article 3(1) requires each Contracting Party to accord “fair and equitable treatment” to the “[i]nvestments of investors of [the other] Contracting Party” in its territory.
Article 4(1) prohibits a Contracting Party “expropriate[ing] against the investments if investors of the other Contracting Party in its territory”, unless it is “for the public interests”, “under domestic legal procedure”, “without discrimination” and “against fair compensation”. Article 4(2) describes “fair compensation” as “the value of the expropriated investments immediately before the expropriation is proclaimed”. Article 4(2) also stipulates that such compensation is to be paid “without unreasonable delay”, and that it must “include interest at a normal commercial rate”.
Article 9 is concerned with the “Settlement of disputes between investors and one Contracting Party”. Article 9(1) provides for amicable settlement “as far as possible”. Article 9(2) states that, if amicable settlement is unachievable “through negotiations within six months, the [sic] either Party shall be entitled to submit the dispute to a competent court to [sic] the Contracting Party accepting the investment”. Article 9(3), first sentence, provides that if “a dispute cannot be settled within six months after resort to negotiations … it may be submitted at the request of either Party to an ad hoc tribunal”. The second sentence of Article 9(3) states that “[t]he provisions of this Paragraph shall not apply if the investor concerned has resorted to the procedure specified in paragraph 2 of this article”. Article 9(4) provides for the constitution of the ad hoc tribunal, with each party nominating an arbitrator, and the two party-appointed arbitrators appointing a “Chairman”. Article 9(5) stipulates that the tribunal “shall determine its own procedure”, although it goes on to provide that it may take guidance from ICSID’s Arbitration Rules. Article 9(6) states that the tribunal’s decisions are to be “by a majority of votes” and are to be “final and binding on both parties to the dispute”. Article 9(7) provides that the tribunal shall “adjudicate in accordance with the law of the Contracting Party to the dispute accepting the investment… as well as the generally recognized principles of international law…”. Article 9(8) deals with costs.
This arbitration
On 21st September 2017 Zhongshan sent to Nigeria a notice of dispute and request for negotiations (“the 2017 notice”), in which it expressed its willingness to discuss the dispute which had arisen as a result of the actions taken and statements made between April and August 2016 as described above. No response was received.
On 30th August 2018, Zhongshan served a Request for Arbitration (a “Request”) pursuant to article 9, setting out the history of Zhongfu’s involvement in the Zone, and contending that the actions taken between April and August 2016 were in breach of Nigeria’s obligations under the Treaty, nominating Mr Matthew Gearing QC as arbitrator, and claiming compensation, interest and costs.
On 7th November 2018, Zhongshan applied to the International Centre for Settlement of Investment Disputes (“ICSID”) for the appointment of an arbitrator for Nigeria pursuant to article 9(4). On 8th November, 2018, Nigeria nominated Mr Rotimi Oguneso SAN as its arbitrator, whereupon Zhongshan withdrew its application to ICSID.
By a Notice of Appointment dated 5th January 2018, Mr Gearing QC and Mr Oguneso SAN formally appointed Lord Neuberger of Abbotsbury as the Chairman, whereupon the Tribunal was formerly constituted.
The Tribunal had its first meeting on 15th January, 2019 via telephone conference. On 23rd February 2019, the Tribunal appointed the Permanent Court of Arbitration to provide support in managing the deposit and in connection with the hearing.
Following a series of discussions between the Tribunal and the parties conducted by email, Consolidated Terms of Appointment were agreed and circulated on 24th April 2019, and Procedural Order No 1 (“PO 1”) was made on 19th February 2019. PO 1 included a timetable (“the timetable”) which, inter alia, provided for Nigeria to make a request for bifurcation by 2 September 2019 and for a hearing starting on 15th June 2020.
On lst May2019, as prescribed in the timetable, Zhongshan served its Statement of Claim together with the witness statements of the witnesses on whose testimony it intended to rely, including evidence from an expert witness, Mr Matthews, an accountant, on the issue of quantum of compensation.
Nigeria requested an extension of time for the date in the timetable (2nd September 2019) for the service of its Statement of Defence and associated witness statements and its Request for Bifurcation, and, following discussions, a revised timetable was directed by the Tribunal on 30th September 2019.
In accordance with the revised timetable, Nigeria served (i) its Statement of Defence and associated witness statements, but no evidence from an expert witness, and (ii) Requests (a) for Bifurcation, (b) that the Tribunal determine the law applicable to the dispute, on 14th October 2019.
Zhongshan responded to the Request for Bifurcation and the Request for a determination of the applicable law on 28th October 2019. On 7th November 2019, we decided that (i) the proceedings should not be bifurcated, and (as amended by a subsequent email on the same day) (ii) it was premature to determine the applicable law. Pursuant to further representations from the parties, the Tribunal reconsidered its decision (ii) and on 14th November 2019 ruled that the governing law was “the law of Nigeria as supplemented by international law as provided by article 9.7 of the Treaty”.
Meanwhile, on 5th November 2019, Zhongshan made a Request for Production of Documents, to which Nigeria replied on 19th November 2019, which reply was answered by Zhongshan on 25th November 2019, and Nigeria made a brief further rejoinder on 27th November 2019. The Tribunal gave its ruling on the Request for Production on 29th November 2019. Nigeria thereafter failed to give production of any of the documents which the Tribunal ordered that it produce.
On 31st January 2020, in accordance with the revised timetable, Zhongshan served its Statement of Reply together with supporting witness statements. On 3rd February 2019, Nigeria sent corrected versions of a witness statement, and on 2nd March 2020, it served its Statement of Rejoinder, well in time.
On 15th May 2020, there was a pre-hearing conference, at which Nigeria applied for (i) an adjournment of the hearing due to start on 15th June 2020 and (ii) permission to amend its Statement of Defence, both of which were opposed by Zhongshan. On 18th May 2020,
a. The Tribunal ruled that, albeit only “on balance”, application (i) should be granted the start of the hearing would be moved to 9th November 2020, making it clear that “only very exceptional circumstances could possibly justify a further adjournment”;
b. The Tribunal also granted Nigeria permission to amend as sought;
c. The Tribunal gave certain other directions.
On 12th June 2020, Zhongshan served an amended version of its Statement of Reply to respond to the amendment to the Statement of Defence.
On 31st August and 2nd September 2020, Nigeria applied to serve a Further Statement of Rejoinder and to amend its Statement of Defence respectively, to which Zhongshan responded on 11 September 2020, and Nigeria answered on 17th September 2020. The Tribunal ruled on 21st September 2020 that the Defence could be amended but that the Further Rejoinder could not be served.
On 2nd October 2020, following submissions from the parties, the Tribunal directed that the hearing due to start on 9th November 2020 should proceed electronically owing to the problems which would be likely to be encountered by the parties’ respective representatives, counsel and witnesses in connection with travelling and meeting owing to the continuing Covid-19 emergency.
A case management conference took place electronically on 26th October 2020, at which Nigeria applied (i) for the hearing due to start on 9th November to be adjourned, and (ii) to adduce an expert report on the issue of quantum. In a ruling provided on 26th October 2020, the Tribunal rejected both applications on the grounds set out in the ruling, and in particular, that an adjournment of the hearing, which would occur if either application was granted, could not be justified, not least in the light of the fact that Nigeria had already been granted an adjournment over Zhongshan’s objection, and had been warned that the Tribunal would require exceptional circumstances before it would consider granting a further adjournment.
69.
The hearing took place electronically from and including 9th to 13th November 2020. Zhongshan was represented by Mr Christopher Harris QC, and Mr Hussein Haeri and Ms Emma Lindsay as advocates, Withers LLP, Asato & Co, and G Elias & Co acting, and they called Mr Xue, Dr Han, Mr Zhao, Professor Baluch and Mr Vandenheuvel as witnesses of fact, and Mr Noel Matthews as an expert witness. Nigeria was represented by Mr Chikwendu Madumere as advocate, supported by Chemezie Ojiabo, Dr Peter Oniemola, Z S Adeyanju, Mrs Maimuna Shiru, Philomena C Uwandu, and Ifeoluwa M Olaweye, and they called Mr Adeoluwa, Mr Akanni Akinosi, and Mr Olumide Aderemi as witnesses of fact.
