Abubakar Malami, the Attorney-General of the Federation and Minister of Justice, announced that the Federal Government had paid $496 million to resolve a long-running $5.26 billion contractual dispute with a foreign investment group in the steel industry.Information Guide Nigeria
The International Chamber of Commerce’s Alternative Dispute Resolution framework, headed by Phillip Howell-Richardson, was the basis for the mediation processes, according to a statement released on Sunday by Dr. Umar Gwandu, Special Assistant, Media and Public Relations, Office of the AGF.
According to the government, the settlement agreement came into effect on 19 August 2022.
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“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 that the five contracts signed by President Olusegun Obasanjo’s government between 1999 and 2007—which gave one firm group, the Global Steel group, total domination over the Nigerian steel market—were the cause of the problems.
He claims that in 2008, the Umaru Yar’ Adua administration went ahead and terminated the contracts in defiance of the Federal Ministry of Justice’s legal counsel, who highlighted the termination cost in the form of damages.
Gwandu claimed that the Ajaokuta Share Purchase Agreement would have been legitimately terminated and that the government would have received more money from Global Steel if it had not been cancelled on April 1, 2008, as it did.
He stated, “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.
“Global Steel, in consequence, took the FGN to the International Chamber of Commerce, International Court of Arbitration, Paris, commencing arbitration in 2008. 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.”
The statement reads in part, “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.”