Barristers & Solicitors
Ajaokuta: Fed Govt paid S496m in final settlement of contractual dispute, says Malami
Abubakar Malami

The Federal Government has settled the long-standing contractual dispute over the Ajaokuta Steel Mill and related companies with a foreign investor, Global Steel Group, the Attorney General of the Federation (AGF) and Justice Minister Abubakar Malami has said.

Malami said the settlement resulted from the mediation proceedings conducted in Paris, France, under the International Chamber of Commerce’s Alternative Dispute Resolution.

He said Nigeria would be paying the foreign firm $496 million as against the $5.258billion it earlier claimed.

A statement yesterday in Abuja by Malami’s Special Assistant on Media and Public Relations, Dr. Umar Jibrilu Gwandu, reads: “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 $10 billion 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.

“…The genesis of the disputes can be traced to five contracts entered into by the 1999 – 2007 administration that gave complete dominance over the Nigerian steel space to one company, the Global Steel Group.

“However, in 2008, a new administration proceeded to terminate these contracts, contrary to the legal advice supplied by the Federal Ministry of Justice, which cited the termination cost in the form of damages.

“Had the government of that day not terminated the Ajaokuta Share Purchase Agreement on April 1, 2008 and waited for just 55 days to terminate, it would have terminated lawfully and the government 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 (May 25, 2008).

“This failure would have given Nigeria a right to over $26 million 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 billion to $14 billion against the Nigerian state in respect of the affected five contracts.

“The administration of President Muhammadu Buhari, however, took decisive steps to resist this claim, rather than pass it on to a future administration with ballooning interest.”

With this development, Malami said President Buhari has rescued the steel industry from interminable and complex disputes as well as saved the taxpayer from humongous damages.

The minister also stated that one of the lessons to be learnt include the fact 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.

“The FGN engaged PwCNigeria to do a comprehensive review to ensure taxpayers are protected. Also, Dr. Tunde Ogowewo, a barrister (and senior academic at King’s College, London), represented the FGN and advised the government throughout the process.”

Gwandu quoted Malami as stating that Dr. Ogowewo’s report on Case Reference 15539/VRO/AGF/ZF/TO/AZR/SPN) of over 1,000 pages, provides a guide on how to avoid such contractual disputes and, where they occur, how to reach cost-effective savings for the benefit of Nigerian taxpayers.

Malami, he added, reiterated the commitment of the Federal Government to continue to make assiduous efforts in protecting public interest and ensuring that Nigeria is not denuded of its resources through whatever means.