By Bassey Udo
The Federal government has accepted to part with about $496 million to settle a $5.23 billion claim by Indian firm, Global Steel Holdings Limited (GSHL), over the failed concession agreement on the multi-billion-dollar Ajaokuta Steel Company.
The Attorney-General of the Federation and Minister of Justice, Abubakar Malami, who confirmed this in Abuja said the deal reached under the alternative dispute resolution framework of the International Chamber of Commerce would save the country a huge sum if the country were to pay what the Indian firm filed as claims.
The Minister’s spokesperson, Umar Gwandu said GSHL had filed the claims at the International Chamber of Commerce, International Court of Arbitration, Paris, after it disputed the decision by the Umar Yar’ádua administration in 2008 to cancel the concession agreement entered with over the rehabilitation of the steel plant.
The concession agreement by the Olusegun Obasanjo administration to GSHL, which involved the rehabilitation of the moribund steel complex and its affiliate facility, the National Iron Ore Mining Company (NIOMCO), was cancelled after the Yar’adua government considered its terms unfavourable to Nigeria’s interest.
The government faulted the terms of concession agreements between 1999 and 2007 which handed over to the Indian Steel Infrastructure conglomerate the complete control over the giant steel complex on which the Nigerian government spent billions of dollars to build and later abandoned.
Following the revocation of the contract, GSHL had instituted a suit against Nigeria claiming damages over the decision. The case dragged for several years, effectively stalling subsequent rehabilitation plans by successive administrations.
But Malami said the decision to revoke the concession contracts by the Yar’adua administration in 2008 was taken despite the legal advice by the Federal Ministry of Justice, which highlighted the high cost of such a decision in terms of potentials liabilities and damages the country could incur.
Describing the revocation as hasty, the Ministry noted that if the government had waited for another 55 days before the decision, the contract would have lawfully become null and void, and the government entitled to more than $26 million as damages from the Indian firm.
“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),” the statement said.
“This failure would have given Nigeria a right to over $26million as liquidated damages under Clause 12 of the Ajaokuta Share Purchase Agreement.
“Global steel, in consequence, took the federal government 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,” the Ministry stated.
In May 2020, Global Steel had threatened to resurrect the arbitration by announcing an anticipated claim in damages of over $10-14 billion against Nigeria.
The Ministry said the federal government agreed to pay over $400 million to secure a complete settlement of the case after engaging the services of the audit firm, PricewaterhouseCooper (PwC) Nigeria to carry out a comprehensive review of the agreement to protect the country’s interest.
Consequently, the Ministry said President Muhammadu Buhari recently approved that the steel industry be rescued from interminable and complex disputes, to save the country from further avoidable damages.
The Ministry explained the AGF, which inherited the case from his predecessor, deployed a seven principles blueprint adopted for the cost-effective resolution of contractual disputes wherever they occur.
Gwandu said the blueprint included the use of institutional mediation, choice of Federal Government legal counsel, the use of international 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.