Following a session between Galaxy Backbone and the Nigerian Federal House of Representatives Committee on Treaties, Protocols & Agreements on July 28, 2020, the media frenzied over the Committee’s alleged claim that a Sino-Nigerian commercial loan agreement signed in September 2018 could jeopardize Nigeria’s sovereignty in the event that it defaults on its loan repayments. The session followed an investigative hearing into several loan agreements between Nigeria and other nations conducted by the Committee.
According to recent reports, the Committee had discovered a clause that waives sovereign immunity in the loan agreement between China Exim Bank (CEB) and the Federal Republic of Nigeria (via the Federal Ministry of Finance, Budget and National Planning) for the National Information and Communications Technology Infrastructure Backbone (NICTIB) Phase II project.
The clause in question? Article 8(1) of the agreement, which provides: “The Borrower hereby irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding pursuant to Article 8(5), thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets.”
Several news sources, including The Nigerian Tribune, have cited Hon. Ossai Nicholas Ossai, the chairman of the Committee, has allegedly stated the following about the loan agreement on the NICTIB Phase II project: “I have also seen from the Ministry of Communications where Nigeria signed off some certain level of its sovereignty if part of the clause is breached? So, when the National Assembly reacts in this matter, to question some level of agreements being entered into by any ministry of this country with any other nation, we have every right to question that because anything that is going to happen will happen to our generations unborn.”
Galaxy Backbone, the ICT agency of the federal government, has since dismissed the headlines as “misleading to the reading public” and “never a true reflection of the deliberations in the session”.
In its official press release on the matter, Galaxy Backbone explains that it is only an implementing agency tasked by the Federal Ministry of Communication and Digital Economy to oversee the full implementation of the NICTIB Phase II project. According to the press release: “NICTIB Phase II project is one of the projects in the National Borrowing Plan recently approved by the National Assembly and is yet to commence. It is therefore unlikely and out of place to have insinuation that the National Assembly will raise such allegations” (that the agreement could potentially concede Nigeria’s sovereignty). Further, it clarifies that “the issue of clauses in loan agreement and their potential implications for the Nigerian sovereignty never came up for discussion.”
There is still much contention over what actually ensued during the session. As the public awaits further developments to the investigation, it is important to elucidate the concept and scope of sovereign immunity as it relates to the Sino-Nigerian loan agreement in question.
The doctrine of sovereign immunity
Sovereign immunity is a legal doctrine that protects a sovereign (e.g. head of state) or state from legal liability in a civil or criminal suit. Through the doctrine, a sovereign or state is immune to such suits, as they cannot commit a legal wrong.
Many countries have enshrined the doctrine of sovereign immunity in their sources of law. In the United States, for example, the federal government has sovereign immunity and may not be sued in the country except when it has waived its immunity, expressly consented to suit, or if the waiver is covered under the Federal Tort Claims Act or Tucker Act.
In Nigeria, sovereign immunity lives in Section 308 of the Constitution of the Federal Republic of Nigeria 1999, as amended.
Can Nigeria waive its immunity?
Where the borrower (the sovereign) in a commercial loan agreement retains its immunity, the lender would have no recourse in law to enforce the agreement if the borrower were to default on its loan repayments or breach a term of the contract. On many occasions, Nigeria has enjoyed impunity for failing to uphold commercial agreements by arguing sovereign immunity, as in Avionics Technologies Limited v The Federal Republic of Nigeria, Attorney General of the Federation of Nigeria [2016] EWHC 1761(Comm). Section 84 of The Sheriffs and Civil Process Act 2004 tends to further safeguard public officers from debt penalties by requiring a fiat from the Attorney General of the Federation or State, were appropriate, before garnishing the accounts of the government. Thus, lenders often insist on immunity waiver clauses to protect themselves against this outcome.
A state can waive its sovereign immunity, though rules on this matter differ by country. For instance, it was decided in Trendtex Trading v Bank of Nigeria [1977] 1 QB 529 that sovereign immunity does not extend to commercial transactions in the UK.
In Nigeria, however, sovereign immunity may be waived on at least three grounds. Firstly, the federal government has the power to waive sovereign immunity in writing, according to the leading judgment of Kayode Eso J.S.C. in African Reinsurance Corporation v Abate Fantaye (1986) LPELR-SC.1/1986.
The other two grounds involve arbitration, the second being that no existing statutory provision extends sovereign immunity to arbitral proceedings. Thirdly, Nigeria is party to the 1958 Convention on the Recognition and Enforcement of Arbitral Awards (the ‘New York Convention’). Through this Convention, as long as Nigeria has explicitly agreed to resolve a dispute with another signatory country through arbitration, the award may be enforced in any signatory country.
Therefore, in the present case, Nigeria will not be able to claim sovereign immunity for two strong reasons: (1) it expressly waived its immunity under Article 8(1) of the loan agreement and (2) it agreed to resolve its dispute with CEB through arbitration under Article 8(5). Because both Nigeria and China are parties to the New York Convention, CEB may enforce the arbitration award in any court that is signatory to the Convention.
Waiving sovereign immunity vs. waiving sovereignty
Whereas sovereign immunity is the doctrine that protects sovereigns against civil and criminal suits, sovereignty is the full power of a country over itself without interference from other countries.
While Article 8(1) waives sovereign immunity, it does not and cannot sign away Nigeria’s sovereignty. A country cannot waive its sovereignty through a commercial loan agreement, nor can anyone waive Nigeria’s sovereignty unbeknownst to the National Assembly. Article 8(1) simply ensures that the lender is able to enforce an arbitral award favorable to it without the enforcement being rejected on the ground of sovereign immunity.
Conclusion
If the assertion that Nigeria has conceded its sovereignty is based solely on Article 8(1) of the loan agreement for the NICTIB Phase II project, then those forwarding this assertion have misapprehended the concept of sovereign immunity. Waiving sovereign immunity is starkly different from signing away a state’s sovereignty.
For the reasons stated above, Nigeria has waived its immunity, not its sovereignty, to China on proceedings related to the NICTIB Phase II loan agreement.
