New Telegraph
27th August, 2024
By ANAYO EZUGWU

Nigeria should audit her Bilateral Investment Treaties –Owonikoko

Abiodun Owonikoko is the Managing Partner of Synergy Attorneys and a Senior Advocate of Nigeria (SAN). In this interview monitored on Arise Television, he speaks on the seizure of Nigeria’s presidential jets by a Chinese firm, options before the country, and why President Bola Tinubu should use diplomatic means to resolve the dispute, ANAYO EZUGWU brings the excerpts

What is your take on the belief that the Chinese company should not seize Nigeria’s presidential jets because they are not meant for commercial purposes?

The truth is that people are confusing the right to enforce judgement with a target of enforcement. Under the Sovereign Immunity Principle, certain acts are acts of the state. That is just the simple explanation.

An act of state is an act conducted for running governance because there is a principle of equality of state and each state must be treated with the same respect and dignity.

Where a government, especially Nigeria in the 1970s up until 2000 was running a command economy, a lot of our businesses got entangled with the government involvement. So, certain assets of the government were classified as commercial assets even though owned by the government.

The unfortunate thing is that the leading case in this matter was generated out of the controversy between foreign investors and Nigeria in the 70s during the Armada Cement crisis, and the UK court stated that principle that where the government dabbles into commercial transaction in such a way that it impliedly decided to engage in business, it cannot be immune from the consequences of breaching the contract.

In a situation involving the Chinese firm, people have forgotten that Nigeria and China have a Bilateral Investment Treaty (BIT), which was signed in 2001 and came into force in 2010.

Under that agreement, foreign investors from China can make use of that treaty as a form of protection. And if there is a dispute, there is a provision that they either go to Nigeria court or they result to arbitration. In this particular instance, the Chinese company decided to go to arbitration. Usually, it is safer for foreign entities when they want to protest their investments.

The assets reportedly attached in France are Federal Government public presidential jets used for running government business. But if it was a Central Bank of Nigeria (CBN) private jet being used for commercial transactions, it probably would not be as protected as the presidential jet. So, I see the issues involving the jets as not a matter of enforcement of judgement but a diplomatic issue.

If they didn’t take the jets, what other choice do they have, would they have been able to come into Ogun State to seize assets for the breach of the contract?

That is why I reference the BIT. Any foreign investor in Nigeria that decides to take advantage of the BIT would be entitled to go after the Federal Government for any investment decision that prejudices its interest in Nigeria so long as it is covered under the BIT.

The BIT Nigeria has with China covers a broad spectrum of businesses and that is why I’m worried about the fact that we have a proliferation of Export Processing Zones and we have about 30 of them. Some of them are in Kano, Kogi and Kaduna states and you wonder what we are exporting.

Under the Nigeria Export Processing Zones Authority (NEPZA), one per cent of businesses covered is agriculture and this is not the only thing Nigeria can export.

So, a lot of businesses that are coming into those zones are protected by the BIT and most likely, in an era where companies are exiting because they are not comfortable with our business environment, those that will remain are those who are protected in those zones.

And they are likely to initiate dispute resolution through arbitration, so that they can go after the Federal Government for all kinds of liabilities that may arise. It is not only state versus state but even liabilities that may arise between them and co-Nigerian investors.

Nigeria has gotten to a situation where we have to enact a law and that law is what will enable us to negotiate the terms of our various Bilateral Investment Treaties

Is it time to review the bi-lateral trade treaty we had because at first, it gives them the upper hand against us, and what is your take on all forms of written agreements the state governors enter into with foreign investors. Again, is it time for the Attorney General of the Federation to review the books of the states?

That’s a very valid point. After the P&ID judgement, we escaped a big bullet in that matter and the Nigerian way of doing things is that once we escape one problem, we don’t draw the right lessons.

I advocated then that there should be an audit of all the foreign-related commercial transactions in which sub-nationals in Nigeria are involved, so we can anticipate these possible areas of dispute. And the ones we know are bad; we can negotiate our way out of them before they become enforceable judgements.

To be fair to the Attorney General of the Federation; one of the committees he set up upon assumption of office was one where they were to review our entire BIT and then come up with a form of standard agreement, which states that want to contract with external investors would have to at least adopt to an extent.

I believe if they already have that standard agreement now, they should use that to input into our BIT because the BIT have provision for constant review.

You request from the other side that you want to review based on either changes in your legislation or the economic realities and then you can negotiate yourself out of some of the clauses of those agreements. The problem I have is that Nigeria’s subnational because of our economic realities the easiest way for them to access free money is this so-called foreign investment.

You can easily determine what comes to them by way of federal allocation, and you can determine what is generated internally but you cannot determine how much funds may come by way of Foreign Direct Investment (FDI), which can be misapplied. So, in this situation, we have spent our past, we are borrowing into the future against the interest of the incoming generation.

This is the time for the Federal Government to intervene because you can’t contract a foreign loan without the involvement of the Federal Government. So, there is a need for more than ordinary policy, there should a legislation that will regulate the involvement of state enterprises with foreign investment.

I’m talking about a state entity in Nigeria’s entry into a foreign direct investment arrangement with a foreign entity with which Nigeria has a BIT, which means we must protect that investment and we should give them equal treatment.

One thing that worries me about this particular award is the $70 million award. I wouldn’t know how they came about it, and I don’t know how Ogun State defended it but I’m wondering what the currency of the transaction was. If it was about losing investment opportunity in Nigeria, it should be cost in naira.

What the BIT guarantees you is the convertibility of any of your returns and gains, not for you to claim that you have lost $70 million in Nigeria because there is no business generating dollars in Nigeria.

They should have made their claims in naira and when the award is made in naira, they can then be entitled to free convertibility to remit but it looks like they went ahead and claimed the money in dollars in the first place.

Is that not to protect their investment because of the continuous depreciation of naira?

I’m happy you are saying that but there is something called foreign exchange risk management and if you know that Nigeria’s environment does not allow you to cost in dollars.

You have provisions in the BIT or your contract to say when you now make your claim, you have to justify that the loss you have recorded in dollar value, this is what it comes to.

But you can test it by knowing the business opportunities you lost in Nigeria to amount to $70 million. For example, if they had awarded them N20 billion, it would have been fairly referable to our laws.

And because we thought we escaped with the P&ID in terms of the amount of money that was awarded, we thought that was always the basics for us to resist but that should have been a defiance to set up when the arbitration was going on to challenge the basics of their claim.

Even if you are liable, you can challenge the volume and the amount of damages they are entitled to. I’m not too sure how that went. Look at $70 million today given what we are saying compared to maybe three years ago, it is almost three times what it was on the books of the state.

You said when states enter into such an agreement they must seek guidance from the Federal Government. Would that not be encroaching on the sovereignty of states in terms of the federalism of Nigeria?

I think we should be careful because there is already a resolution of the dispute by the arbitration body. The question is not whether you are liable or not and you cannot appeal an arbitrary award, you can only resist enforcement.

What they are referencing is the judicial procedure for enforcement which is arbitration proceeds but post-award proceeds and it is a litigation thing. So, if you are seeking to enforce an award, you also must make an open disclosure of all the relevant facts.

I don’t know how they represented those jets that enabled the court to give the order it made. It’s possible they suggested that those jets were being used for commercial purposes.

But on the real issue that you raise, a country has only one sovereign, sub-nationals are not sovereign. Under the constitution of Nigeria, foreign sovereign, foreign commerce and foreign debts are all matters in the Exclusive Legislative List.

So, if the leverage granted to states is being abused by incurring liability on the entire federation, nothing is stopping the Federal Government from legislating to regulate that.

And I will tell you why; even in the US, the Foreign Immunities Act was enacted in 1976. Before then, it was a matter for the State Department to decide whether they would allow a state to raise immunity as a defense to a suit in the US.

When they saw that things were becoming unpredictable and uncertain, they had to enact what is called restrictive immunity. So, Nigeria has gotten to a situation where we have to enact a law and that law is what will enable us to negotiate the terms of our various BITs.

Is there any merit in the jurisdiction point made by some other lawyers?

In terms of jurisdiction, what people don’t know is that it is not only arbitrary awards. If you have a judgement against the Nigerian government, and I have been involved in one, you can assign that judgement to a foreign entity to enable it to enforce it outside of Nigeria. I have been involved in one as far back as 2001 and it was enforced.

Ex-Governor Ibikunle Amosun said he is ready to work with the Federal Government to prove that the Chinese company is a fraud. Will that help in the case?

It is already too late because an award has been granted. The challenge of an arbitration award is time-bound as against enforcing the existing enforcement. In the P&ID case, they asked for an extension which is not usually granted.

Can we get an extension on this matter?

It is possible but what I’m saying is that for now, the President should tell everybody not to talk but because people want to justify themselves, nobody seems to think that there is a greater national interest at stake.

What options for Nigeria; do you think we have case even though you don’t sound optimistic?

I don’t know the full facts but so far the limited window to challenge an award is either exercise of jurisdiction or public policy.

On public policy, I’m not sure what these people are saying because they have already conceded that it was their own mistake both from the sitting governor then, the subsequent governor, I also saw something I do not understand because the Minister of Foreign Affairs said it was a mistake because the case did not pass through them.

For the minister to say that the mistake came from the governors not passing through the relevant federal authorities before they committed, I wouldn’t know how that happened but in this case, I would suggest that this is a matter that should be approached from two angles. I think the government is doing that already, on the diplomatic side and the legal side.

There are things we don’t do here; if a Chinese entity has a claim against you in Nigeria, the Chinese government already supports them even if they need evidence of fraud, they will assist them to get that evidence because they are very mindful of corruption in China. Things that you go to court here and get away, they will execute you in China as a government official.

Should President Bola Tinubu go to China to sort out this issue diplomatically?

I think there are too many things that are involved in the Office of the President that I can’t tell what his decision would be.
I’m not sure he should physically go to China because there are levels of diplomatic arrangements that have to be involved in a state visit.

The Minister of Foreign Affairs and probably the Attorney General of the Federation, I’m sure, are doing something about that now. But it is not something to wait for.

Beyond that, Nigeria needs to do an audit of all her BITs, review and introduce clauses that would at least prevent the government as a whole from being embarrassed and from windfall arbitrary awards.