Abuja pays $496m to settle Global Steel Group on arbitration
By Jeph Ajobaju, Chief Copy Edito
Abuja has paid $496 million to settle 14 years’ dragging of a contractual dispute with Global Steel Group, a foreign investor in Ajaokuta Steel whose deal was terminated in 2008 against genuine legal advice in the usual government shoddiness.
The original contract itself was worth $5.26 billion
The Nigerian side of the mediation was led by Federal Attorney General and Justice Minister Abubakar Malami.
The mediation was done under the Alternative Dispute Resolution framework of the International Chamber of Commerce led by Phillip Howell-Richardson.
The settlement agreement came into effect on 19 August, according to a statement issued by Malami’s Media Assistant Umar Gwandu.
“Nigeria succeeded in reducing the claim in mediation brought by the international firm of King and Spalding, legal representatives of the Global group, by 91 per cent.
“A claim for over $10bn was threatened in arbitration before the International Chamber of Commerce, International Court of Arbitration, Paris, in respect of five major contracts of 2004 – 2007 — covering steel, iron ore, and rail,” Gwandu said.
He disclosed the dispute arose from five contracts entered into by the Olusegun Obasanjo administration (1999-2007) which gave complete dominance of the Nigerian steel space to Global Steel Group.
In 2008, Gwandu added, the Umaru Yar’ Adua administration (2007- 2010) terminated the contracts, contrary to legal advice offered by the Ministry of Justice, which cited the termination cost in form of damages.
Gwandu said if Abuja had not terminated the Ajaokuta Share Purchase Agreement on April 1, 2008, and had waited just 55 days to do so, it would have terminated lawfully, and Nigeria would have collected more than $26 million from Global Steel.
“This was because the firm appeared unable to pay the first tranche for the Ajaokuta shares before the first anniversary of the agreement (25 May 2008).
“This failure would have given Nigeria a right to over $26m as liquidated damages under cl.12 of the Ajaokuta Share Purchase Agreement.
___________________________________________________________
Related articles:
Foreign countries return £6.32m stolen from Nigeria
US returns $335m Abacha heist, decries graft
Jersey to return to Nigeria £1.9m stolen by Jeremiah Useni
_________________________________________________________________
Lessons learnt
“Global Steel, in consequence, took the FGN to the International Chamber of Commerce, International Court of Arbitration, Paris, commencing arbitration in 2008,” Gwandu added, per reporting by The PUNCH.
“Although the Federal Government negotiated a settlement in May 2013, the previous administration failed to implement its settlement agreement.
“In May 2020, Global [Steel] threatened a resumption of the arbitration and announced an anticipated claim in damages of over $10-14bn against the Nigerian state in respect of the affected five contracts.
“With this development, Malami said President Muhammadu Buhari has now rescued the steel industry from interminable and complex disputes as well as saving the taxpayer from humongous damages.
“The Minister also stated that one of the lessons to be learnt included that the future arrangements – sale or concessions – must be carried out in the national interest and in compliance with the law.
“The Office of the Attorney General of the Federation and Minister of Justice grappled with the inherited problem by adopting a blueprint of seven principles for the cost-effective resolution of contractual disputes wherever they occur.
“They are the use of institutional mediation, choice of FGN counsel, the use of financial advisers with reputational capital, the importance of not discouraging foreign investment, fiscal responsibility, transparency, and the recognition that joined-up government produces superior outcomes.”