Concerns mount over loan agreement clause waiving Nigeria’s sovereignty

Concerns mounted at the weekend over the rising trend of government officials signing loan agreements with a clause that waives the sovereign immunity of the country if it defaults in its repayment plan.

Last week, the House of Representatives summoned the Minister of Transportation, Hon. Rotimi Amaechi; Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed; and Minister of Communications and Digital Economy, Alhaji Isa Pantami; over a loan agreement with China, which contained the waiver clause.

According to the House, Article 8(1) of the commercial loan agreement signed between Nigeria and Export-Import Bank of China concedes Nigeria’s sovereignty to China.

The lawmakers had picked holes in the $400 million loan agreement for Nigeria National Information and Communication Technology (ICT) Infrastructure Backbone Phase II Project, signed in 2018.

The controversial clause in the agreement, signed by Federal Ministry of Finance (borrower) on behalf of Nigeria and the Export-Import Bank of China (lender) on September 5, 2018, provides that “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.”

While the ministers are to have their day with the House on August 17, 2020, to explain their action, some critics, including former vice president, Alhaji Atiku Abubakar, agreed with the federal legislators at the weekend that the clause was capable of mortgaging the sovereignty of Nigeria, saying it exposes Nigeria to the fate of Zambia, which signed a loan agreement with a similar clause with China and has now lost some of its national assets to the Asian country on default of repayment.

China in 2018 had taken over Zambia National Broadcasting Corporation (ZNBC) over loan default and had commenced talks with the Zambian government to take control of Zambia’s national electricity company, ZESCO, and the Kenneth Kaunda International Airport, Lusaka, owing to the inability of Zambia to meet its loan repayment promises to the Asian country.

According to data from the China Africa Research Initiative (CARI) at Johns Hopkins University, Zambia had accumulated loans from China totalling almost $6.4 billion as at December 2017.

Senior lawyers, including Mr. Ebunoluwa Adegboruwa (SAN) have called on the National Assembly to compel President Muhammadu Buhari to submit to both chambers all agreements signed with China to enable experts to vet them, saying the contract might not have been signed with the input of experts.

Many other lawyers that spoke said the waiver clause might have been accepted by the Nigerian officials out of ignorance of the concept of the sovereign immunity of states, which protects sovereign states from the jurisdiction of courts, particularly in a foreign country without the consent of the state.

They pointed out that it is this concept that Nigeria is hanging on to in its $9.6bn arbitral award case with Process and Industrial Development (P&ID) in the United States, where the nation is challenging the enforcement of the award on the ground of sovereign immunity.

Besides, some legal experts said that the agreement having not been approved by the National Assembly would be unconstitutional and illegal, adding that although Amaechi claimed in a statement on Saturday that the loan was approved by the federal legislature, the contract might not bound the country if its details were not approved by the legislature.

“I think Amaechi has missed the point. The National Assembly might have approved the executive’s borrowing plan but not the agreement signed on the loan,” a senior lawyer said last night.

Amaechi had warned that the Chinese authorities might not sign the $5.3 billion Ibadan-Kano rail line loan if the lawmakers continued to investigate the agreement.

The minister had also explained that the clause ‘waiving sovereignty’ in the loan agreement between Nigeria and China was only a contract term, a sovereign guarantee that assures payback according to the terms and conditions of any loan.

However, a former Minister of External Affairs, Prof. Bolaji Akinyemi, clarified that Nigeria and other African countries cannot plead sovereign immunity when they are sued for defaulting in loan repayment, saying that the special clauses in these agreements are standard procedures.

But Atiku and the Peoples Democratic Party (PDP) flayed the agreement and Nigeria’s rising debts yesterday, warning that both were a threat to the country’s sovereignty.

They called on President Muhammadu Buhari to rethink the borrowing strategy leaving a heavy debt burden for successive administrations.

Atiku, in a statement on Sunday by his media office, urged the federal government and the All Progressives Congress (APC) to apologise to Nigerians and make an admittance of guilt for taking the country through the throes of subjugation to another country.

Atiku recalled that he had called the attention of the country to the reality of reckless borrowing by the present APC administration and how the terms of those loans could compromise the future of the country.

He lamented that some managers of the party and even the government denied the allegations that he raised and also discounted the warning for caution.

“Regrettably, just last week, a cabinet minister confirmed our fears. Now, we all are aware that Nigeria’s sovereignty may have been traded for foreign loans and God forbids our inability to service those loans, the lender country would take ownership of choice infrastructure on the Nigerian soil. No negotiation could be weaker than that!

“Nigeria had a total foreign debt stock of $7.02 billion on May 29, 2015. Today, our foreign debt is $23 billion and rapidly rising. Debt, by itself, is not a bad thing. But debt budgeted for such unproductive ventures, like the proposed $500 million upgrade of the Nigerian Television Authority and other sundry bogus contracts is debt that leads to death. To trade Nigeria’s sovereignty for this type of profligacy is the height of irresponsibility,” Atiku said.

The PDP said the revelation of the clause in the agreements entered by the APC administration with their Chinese lenders had vindicated its stand that the APC had been secretly mortgaging the sovereignty of Nigeria to benefit its selfish leaders.

The PDP also called on the National Assembly to review all foreign loan agreements entered into by the APC administration and take urgent steps to redress the situation.

The PDP, in a statement, signed by its National Publicity Secretary, Mr. Kola Ologbondiyan, said its investigation showed that the mortgaging of the nation’s sovereignty to foreign lenders, including the $500 million loan from China, had been with the active connivance of the APC.

The PDP rejected the attempts by the Buhari administration to justify its action.

It said: “Nigerians can recall that our party had on May 28, 2020, alerted that the Buhari administration and the APC had placed our nation on the international auction market with an accumulation of foreign loans under nebulous terms.”

Nigeria, Others Can’t Plead Sovereignty if they Default, Says Akinyemi

Former External Affairs Minister, Akinyemi, however, said that Nigeria and other African countries cannot plead sovereign immunity if they default on loans from international organisations or nations.

Akinyemi, during an interview on Daily Motion recently, said the country could only plead sovereignty during political relations and not economic relations, which the commercial loan agreement falls on.

He said: “Africa should look closely into terms of engagements. African governments should not sign agreements they cannot operate with. It doesn’t make sense to sign an agreement where the Chinese promise to give you money in Yuan whereas you are to pay back in dollars. That is an unequal term of agreement.

“Ask yourself if the project will be in your favour in the future. What is the point of signing an agreement for Chinese to build a railway system with the terms paid within 20 years, when the volume of people travelling by railway in your country cannot sustain the railway system?

“If the income generated by the railway system can generate the loan, then go ahead, but if you know you will be unable to repay the loan, then don’t go into it.

“There is usually a clause in these agreements, which are standard procedures. It usually says country X cannot plead its sovereignty if there are disagreements, and you need to go to arbitration. You cannot say you are a sovereign country and cannot be dragged to the court of arbitration. That is standard procedure. Economic relations are different from standard relation.”

He said for political relations, a country could plead its sovereignty to protect itself, but for economic relations, it was not possible.

“Always get experts to interpret the terms of your agreement to ensure it will not lead you to economic slavery,” he added.

Akinyemi also stated that there was nothing wrong in Africa broadening the basis of its interaction with the economic global community, as this was better than just being dependent on one source.

“It makes sense for us to have many economic and trading partners. What a lot of people are worried about is the content of the engagement our countries have been signing with China.

“We should separate these two issues from the propaganda we are getting from the West that we should have nothing to do with China and that we should be afraid of getting China too deeply involved in African affairs. They are only trying to protect their own trading relationship with Africa,” he stated.

Former president of the Nigerian Bar Association (NBA), Mr. Olisa Agbakoba (SAN), stated that the loan agreement Nigeria entered into with the Chinese government does not mean it has signed away its sovereignty to the Asian giant.

In an interview on Sunday, he said China’s agreement with Nigeria means if it defaults in paying its loans, it would waive its sovereign immunity such that it can be taken to the arbitration court for defaulting, adding that this was different from signing away a country’s sovereignty.

He said: “If you take a loan, you must present a guaranty. So what this China – Nigeria loan stated is that if Nigeria defaults, it cannot raise sovereign immunity.

“In 1973, Nigeria’s cargo plane was arrested in the United Kingdom. So the London court said if Nigeria is involved in a connection transaction, it cannot invoke sovereign immunity.

“What the Chinese has done is to say, they are giving us a loan on a connection basis, and that in the event that we default, we cannot avoid the court by saying we are bringing in sovereign immunity into it. You know sovereignty would mean the country is immune from liability.”

He said although loans were necessary for infrastructural development, it was important that they go through the relevant processes, adding that Bi-lateral Investment Treaty (BIT) ought to be vetted by the Ministry of Justice before they should be signed.

He said: “The vetting is to check if it is in the best interest of Nigeria. For instance, is there an arbitration agreement that makes China the place of the hearing and not Nigeria? As you know, arbitration has become a very big issue, and if Nigeria loses that arbitration, it is losing about 20 per cent of its foreign reserve.

“While it is important to keep in mind that loans are not a bad thing to get into, it is important proper legal framework is followed. I am not sure proper legal framework has been followed in this case because it is the Ministry of Justice that advises the executives on how loans are structured,” he added.

Sovereign immunity, or state immunity, is a principle of customary international law, by virtue of which one sovereign state cannot be sued before the courts of another sovereign state without its consent. Put in another way, a sovereign state is exempt from the jurisdiction of foreign national courts.

The United Nations Convention on Jurisdictional Immunities of States and Their Property, which seeks to lay the global ground rule was adopted by the General Assembly on 2 December 2004 but is yet to come into force.  (ThisDay)