Zhongshan Fucheng Investment Co Ltd v Federal Republic of Nigeria

Factual and Procedural Background

The Plaintiff, Company A, sought enforcement of an arbitration award dated 21 March 2021 against the Defendant, the Federal Republic of Nigeria, relating to investments made in Ogun State pursuant to a bilateral investment treaty ("the BIT") between Nigeria and the Government of the People's Republic of China. The arbitration tribunal, chaired by a distinguished arbitrator, found Nigeria in breach of the BIT, awarding Company A US$55.6 million for expropriation. Nigeria did not honour the award and subsequently challenged the tribunal's jurisdiction under section 67 of the Arbitration Act 1996, including contesting the validity of the arbitration agreement for the first time. Nigeria discontinued this challenge before it was heard.

Company A then applied under section 66 of the Arbitration Act to enforce the award as a judgment, supported by a solicitor's witness statement outlining the procedural history and addressing potential state immunity claims under the State Immunity Act 1978 ("the 1978 Act"). The enforcement application was made ex parte under CPR 62.18, which allows summary enforcement orders unless arguable grounds for resisting enforcement exist.

The court granted the enforcement order ex parte on 21 December 2021, providing Nigeria with a right to apply to set aside or vary the order within a specified period, including a further period for immunity challenges. Nigeria was served with the order on 30 May 2022 but failed to apply within the deadline. Nigeria subsequently sought extensions of time to apply to set aside the order, initially without raising state immunity, and only later indicated a possible immunity argument. The court dismissed these applications for extensions, applying the Denton v White criteria for relief from sanctions.

Nigeria appealed the refusal of extensions and the enforcement order, raising four grounds including the alleged necessity of a court determination on state immunity on the balance of probabilities before enforcement and the application of Denton principles to the extension requests. Permission to appeal was refused by Males LJ, who found no real prospect of success and no compelling public importance.

Subsequently, Nigeria applied under CPR 52.30 to re-open the refusal of permission to appeal. The court directed an oral hearing to consider the merits of this application.

Legal Issues Presented

1. Whether the court is required to make a determination on the balance of probabilities as to whether an exception to state immunity under section 1(1) of the State Immunity Act 1978 applies before enforcing an arbitration award against a state.
2. Whether the Denton v White criteria apply to an application for extension of time to set aside or vary an enforcement order involving a state party.
3. Whether the court erred in refusing to give directions for a determination of state immunity during the enforcement proceedings.
4. Whether there are other compelling reasons of general public importance warranting the grant of permission to appeal.

Arguments of the Parties

Appellant's Arguments

• The court must determine on the balance of probabilities whether state immunity applies before proceeding with enforcement, as required by section 1(2) of the 1978 Act.
• Until such a determination is made, the court lacks jurisdiction over the state defendant.
• Prior authorities, including J.H. Rayner Ltd v Department of Trade, establish that state immunity must be decided as a preliminary issue before substantive proceedings.
• The judge erred in applying Denton principles to Nigeria’s late application for extension of time, arguing that no sanction arises under CPR 3.1(2)(a).
• The court should have conducted a full factual determination on immunity by reviewing arbitration documents rather than relying on a prima facie assessment.
• There is a need for appellate guidance on these issues due to their general public importance.

Appellee's Arguments

• The enforcement procedure under CPR 62.18 is summary and properly allows an ex parte order where there is a prima facie case that state immunity does not apply.
• The judge’s ex parte order constituted a provisional determination that the arbitration exception to state immunity applied, subject to Nigeria’s right to apply to set aside within a generous timetable.
• The failure by Nigeria to comply with the procedural timetable and raise immunity within time disentitled it from doing so later without satisfying Denton criteria.
• The Denton principles apply to applications for extension of time even when made under CPR 3.1(2)(a).
• Allowing Nigeria to raise immunity arguments out of time would amount to abuse of process given that Nigeria had previously run and abandoned similar arguments.
• There is no basis to require a full factual hearing on immunity prior to enforcement where no timely immunity claim is made.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the procedural framework under CPR 62.18 for enforcement of arbitration awards, which allows ex parte orders where no arguable grounds for resisting enforcement exist. The judge’s decision to grant the enforcement order ex parte was a provisional determination that the exception to state immunity under section 9 of the 1978 Act applied, based on the evidence before the court. The court emphasised that this procedure equally applies to states and that the defendant state is afforded a generous timetable to apply to set aside the order, including on immunity grounds.

The court rejected the appellant’s argument that the judge was required to conduct a full factual determination on immunity on the balance of probabilities prior to enforcement. It held that such a formalistic approach is unnecessary and unworkable, particularly where the state has failed to comply with procedural rules and timelines. The court noted that the procedural rules and case law allow the court to impose appropriate procedural requirements, including timelines for raising immunity.

The court applied the Denton criteria to assess Nigeria’s delay in applying to set aside the enforcement order and found the breaches to be serious, deliberate or conscious, and unjustified by any good reason. The court found that allowing further delay would undermine the need for speedy finality in enforcement proceedings and that Nigeria’s attempt to re-argue immunity issues already abandoned amounted to abuse of process.

The court concluded that the judge’s refusal to extend time and to conduct a further immunity determination was correct and within her discretion. The court found no error in law or principle and no real prospect of success on appeal. It also rejected the suggestion that the case raised any point of general public importance requiring appellate guidance.

Holding and Implications

The court DISMISSED the application to re-open the refusal of permission to appeal and upheld the refusal of permission to appeal by Males LJ.

The direct effect is that the enforcement order against the Defendant stands, and Nigeria is precluded from raising state immunity arguments out of time or without satisfying the stringent Denton criteria. No new precedent was established, and the decision affirms the application of existing procedural rules and principles regarding enforcement of arbitration awards against states and the handling of state immunity claims within those proceedings.