FG confirms sovereignty clause as Reps faults Chinese loan terms

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The federal government has confirmed the sovereignty clause in Nigeria’s loan agreement with China which has been described as “dangerous” by the House of Representatives.


Speaking at the investigative hearing on external loans and commercial agreements which was attended by the Minister of Transportation, Rotimi Amaechi; Minister of Works and Housing, Babatunde Fashola; Minister of Communications and Digital Economy, Ali Pantami; Minister of Police Affairs, Muhammad Maigari; and Minister of the Federal Capital Territory, Mohammed Bello, Chairman of the  House Committee on Treaties, Protocols and Agreements, Nicholas Ossai disclosed that Nigeria’s loan agreement with China is governed by Chinese laws.


Ossai who noted that the Federal Government signed an Executive Order in 2014 providing guidelines on waiver of sovereign immunity during loan and commercial agreement negotiations, accused Nigerian officials of violating the order.


He added that the probe was not about the ruling All Progressives Congress or the  Peoples Democratic Party as the controversial clauses and agreements had been existing before the Muhammadu Buhari-led administration.


Ossai said;


“We will like Nigerians to know that we are not focusing on only Chinese loans. From what we know, Nigeria has over 500 bilateral loan/commercial contract agreements and investment treaties with different countries and institutions. There is no way the committee will do a thorough job without segmenting the issues based on countries, institutions or MDAs.

“The loan agreements we have seen so far show that government  officials charged with the responsibility of representing Nigeria in these issues are more desperate to just take the loans at any condition, possibly using non-negotiated loan agreement templates rather than go through the rigour of diligent technical review of negotiating specific clauses with clarity and for national interest.

“Even in situations where countries, out of desperation and weak economic position, waive their national sovereignty in bilateral or contractual agreements, the immunity of sovereignty waiver clause will usually be clear and categorically state specific assets associated with the loans for takeover in the event of default.

“However, the immunity clauses in most of these agreements before us are not only ambiguous, but also very obscure and without recourse to the fact that the Nigerian government had issued a circular on the subject matter with Reference Number SGF/OP/1/S.3/X/1739, dated 11th August, 2014, which is an Executive Order, that provides guidelines on issues of waiver of sovereign immunity clause during loan and commercial agreement negotiations.”


The committee chairman who affirmed that the arbitration centres for bilateral loan agreements are known to be in neutral places, also revealed that Hong Kong which is also governed by China laws was designated as the arbitration centre in most of the Nigeria/China agreements.


Ossai also accused government agencies of signing commercial agreements in billions of dollars before going to the Federal Executive Council for approval to execute them and also without attaching the negotiated loan and commercial contract agreements details.


He added;


“This approach is the reason we have government representatives signing empty pages of loan agreement repayment schedule and other key documents required for the loan agreements to become effective.

“We have commercial contracts signed in US dollars, while the loan agreements for the execution of the same contracts were signed in Chinese Yuan currency in the Ministry of Communications and Digital Economy/Galaxy Backbone Limited.”


The committee chairman who further revealed that they noticed from documents on commercial contracts’ prices signed by the Federal Ministry of Transportation alone were over $33bn “without any clear cut financing arrangements”, disclosed that there were issues relating to procurement process, evidences of 15 per cent advanced payments, payment of management fees, drawdown process and remittances.


Amaechi however denied claims of a $33bn contract in Ministry of Transportation. He said;


“In slight response to your speech earlier, I will repeat here that we need to be more patriotic than we are being.”


When interrupted by Ossai, he added;


 “Mr Chairman, I have the right to speak. You invited me, I was once a member of the House (of Assembly in Rivers State). If you say Ministry of Transportation has a contract $33bn, we want to see it, because as the Minister of Transportation, the only contract awarded so far is $1.6bn contract for Lagos-Ibadan, which is under threat.

“Mr Chairman, the implication of having a contract of $33bn is that I will have a large number of workers. There is no $33bn contract in Ministry of Transportation. What we have is the $1.6bn contract awarded under President Buhari and the $800m contract awarded by Goodluck Jonathan.

“There are over 20,000 workers and only 560 of them are Chinese. We need to begin to say the truth. It is good to tell Nigerians the truth. This is very political and we will show all the contracts awarded by the PDP government.”


However when asked about the clause-waiving immunity in one of the contract agreements, Amaechi said the questions should be directed to the ministry of finance


Responding to the question, the Permanent Secretary (Special Duties in the Ministry of Finance) Aliyu Ahmed who represented the Minister of Finance Zainab Ahmed said;


“Regarding the waiver of sovereign immunity, if you check most of the international commercial agreements these days, it is a standard clause in a number of international financial loans and commercial agreements worldwide.”


Ossai however interjected by saying;


“I am aware. This is an arm of the World Bank, the International Centre for Settlement of Investment Disputes. This is in the event that you have an investment dispute with any of the contracting parties. You can go to arbitration.”


The permanent secretary also affirmed that the judgment would be enforceable in Nigeria. To this, Ossai said;


“That means that the particular clause is dangerous. Now, you have a circular, agreed by the Federal Government to guide you in signing agreements. You disobeyed that circular issued by the President of the Federal Republic of Nigeria to guide you. But you were desperate enough to go and sign and waive the immunity clause of Nigeria. And you come on the pages of newspapers and tell Nigerians that, that is a standard. That is not a standard.”