Nigeria’s sovereign immunity to China: Beyond the Hullabaloo

VIDEO: Nigeria’s Minister of Transport, Rotimi Amaechi explains why Nigeria waived her sovereign immunity in a Chinese contract.

https://www.facebook.com/elombah/posts/10158301503065734

Understanding Sovereign Immunity: By Dr. Ayodele Obi

“House (of Reps) Uncovers Clauses Conceding Nigeria’s Sovereignty to China”- Beyond the Hullabaloo, Meaning & Effects of Waiver of Sovereign Immunity!

Simply put, (inter alia) sovereign immunity is a legal doctrine giving immunity to a sovereign state (e.g. Nigeria) from any order, injunctive relief or other execution of any judgment or award against its assets even if made as a consequence of breach of a binding contract.

The effect of sovereign immunity, therefore, is that even if a country borrows/obtains Trillions of USD from foreign investors, DFI, other sovereigns & such an amount was used for massive infrastructural projects etc & such a country refuses to pay back or cancels contract(s)…
then even if you got judgment against the country, you can’t enforce same, even against such infrastructure or anything else.

In this case, a country will not see development or infrastructural growth. In the real sense, there will be no substantial investments or lending..
especially to countries with low credit ratings or high political risks, as where there was a breach there was not much, the investor/lender could do to enforce such rights in terms of enforcing judgement indebtedness or arbitral awards.

Hence, no lender/investor who is sane will be willing to lend funds to or invest in such country. This was more so, the case, with African countries & Nigeria in particular. Nigeria’s case was also peculiar because of its negative pledge with the The Bretton Woods Institutions.

READ ALSO Loan Agreement Concede Nigeria’s Sovereignty To China – Reps

Waiver of Sovereign Immunity, which is what was quoted by the newspaper, simply means that if the sovereign (e.g. Nigeria) breaches its contract, obligations etc. judgment may be enforced against her or certain assets (especially those which have formed the security or collateral

Without waiver of sovereign immunity, it would always be difficult, if not completely impossible for states with not very great credit rating or that are considered to have substantial political risk (such as Nigeria) to obtain substantial financing or international investments.
Simply, no one will site huge infrastructural project or make huge investments in Nigeria without requesting for such waivers- can be different for much smaller investments. (although, no rule is absolute).

Also, the situation could be different with countries known to consistently honour obligations, with high credit ratings and which have very low political risks!

The foregoing makes common sense, because no one wants to invest billions or trillions of dollars and then lose it all or have the rules changed (obsolescing bargain) without serious recourse or ability to enforce their rights especially security rights or collateral.

Really, what is the effect of creating security or giving someone collateral under an agreement or arrangement, if that person cannot enforce security or take such collateral? Will you accept security or collateral you know you cannot enforce or take?

The problem really, is one of trust & not a problem with international commercial arrangements.

Any commercial lawyer worth his salt will ask for waiver of sovereign immunity, if advising an international investor undertaking a major project with the Nigerian govt.

I doubt that anyone destructively criticizing the concept will lend money to someone they know, they cannot collect their money back from or whose assets they cannot take as collateral, regardless of what they do or would you lend money to a person you cannot enforce a judgment for your money or a collateral/security against? The concept of waiver of sovereign immunity just seeks to ensure that investors and lenders can get their money back or enforce a judgment where they cannot!

I believe many Nigerians don’t trust our govt because of the historically high level of corruption; hence, I think the problem is not with the Waiver of Sovereign Immunity, but ‘thinking’ Nigeria’s assets will be sold or they will not get Nigerians a good deal.

I hope the foregoing provides more insights into the what the concept of sovereign immunity means and that it is not necessarily a condemnable commercial arrangement, as you wouldn’t even have much of the infrastructure we now have (the trains etc.) without that waiver!
There are key projects I had advised on (but cannot mention here) where sovereign immunity had to be granted or the investor, wasn’t going ahead. All Nigerians now enjoy the projects! Challenge may be, not trusting the political class.

I believe there is no middle point, it is either Nigeria becomes very low political risk with high credit ranking & minimal country risks (take a while) or continue to Waive Sovereign Immunity under major infrastructure type contracts to attract projects and investments.

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