The Federal Government of Nigeria says it has agreed to pay $496m to Global Steel Holdings (GSH) in settlement claim for potential damages against FGN, in respect of five contracts that were cancelled by the Yar’Adua Administration, including the concession of Ajaokuta Steel.
The settlement agreement came into effect on 19 August 2022, according to the FG.
The FG said that this settlement “has rescued the Nigerian steel, iron ore and rail industries from a variety of interminable and complex disputes with Global Steel Holdings (GSH) and Global Infrastructure Nigeria Limited.”
Below is the timeline line of events that spanned almost years starting from the Olusegun Obasanjo administration that led to the settlement as chronicled by the Federal Government in a press release titled “YET ANOTHER INHERITED PRIVATISATION MESS. FINALLY CLEARED BY THE BUHARI ADMINISTRATION, ALMOST 20 YEARS LATER: A TIMELINE.”
“July 2003: Obasanjo Administration concessions Ajaokuta Steel Company to SOLGAS (along with contracts to build a gas facility and a 2,300MW power plant), for $3.6 billion. The 10-year concession contract, meant to achieve the rehabilitation, completion, commissioning and operation of the Steel complex, is later cancelled, on the grounds of non-performance, and a new bidding process starts.
“June 2004: Obasanjo Administration announces BUA International as winner of the new bidding process for the
concession of Ajaokuta, and then again cancels the process, before finally granting the contract to Global Steel
Holdings (GSH), through a subsidiary, Global Infrastructure Nigeria Limited (GINL).
“December 2004: Solgas initiates arbitration proceeding against FGN in the lnternational Chamber of Commerce.
(This eventually results in a $15m award against FGN).
“2004 2007: Within this period the Obasanjo Administration granted a total 5 major contracts to GINL, as part of so-called privatization reforms. In addition to Ajaokuta and NIOMCO, other contracts granted GSH/GINL covered the Delta Steel Company, Nigerian Mining and Iron Ore Company (NIOMCO), and the Warri-Itakpe Railway.
“April 2008: The YarAdua Administration, on April 1, 2008, terminates all the 5 GINL contracts, contrary to legal advice by the Federal Ministry of Justice.
“Had the Federal Government waited 55 more days, it would have been able to lawfully terminate all the contracts at ZERO COST to the Federal Government of Nigeria. In fact, FGN would have had the right, from May 25, 2008 (the first anniversary of the signing of the Ajaokuta and NIOMCO Share Sales and Purchase Agreement), not only to terminate the Agreement, but also to claim more than US$26 million in liquidated damages, under Clause 12 of the Agreement, as the company appeared unable to pay the first tranche for the shares as agreed.
“2008: GSH/GINL drags Nigeria before the International Court of Arbitration, London, alleging wrongful termination and breach of contract.
“2012: Jonathan Administration commences out-of-court settlement, based on legal advice that potential cost of the termination could be humongous. Negotiating Team set up by FGN.
“2013: A Framework Settlement Agreement (FSA) is reached between FGN and GSH/GINL, which the Jonathan Administration unfortunately did not executelimplement before leaving office in 2015. Among the terms of the 2013 FSA were:
a. Re-concession NIOMCO to GINL for 7 years, and draw up a Modified Concession Agreement (MCA) to this effect
b. Retrieve Ajaokuta from GINL
“June 2016: Buhari Administration initiates a further review/negotiation of the MCA for NIOMCO, to achieve more favorable terms for Nigeria, as part of the overall FSA.
“Aug 2016: The Buhari Administration begins execution of the Jonathan Administration FSA, along with the Buhari Administration MCA. According to the Federal Government, at the time, “execution of the Agreements marks the commencement of process to liberate Ajaokuta Steel Plant from every arbitral encumbrance with GINL, which had held it bound since 2008.”
“May 2020: Global Steel Holdings (GSH) threatens resumption of the ICC arbitration in abeyance, with a cost implication of as much as $10-14 billion in potential damages against FGN, in respect of all the five contracts that were cancelled by the Yar’Adua Administration.
“Global Steel’s legal representatives, King and Spalding, eventually advances a reduced claim of $5.258 billion in ICC-led mediation under Mr. Phillip Howell-Richardson. For this process Nigeria signed-on Dr Tunde Ogowewo, a barrister (and senior academic at King’s College London), to advise the FGN through the process of the final and full resolution of the arbitral claims. He produced a 1,000-page report on the case. PwCNigeria was also engaged by the Nigerian Government during the process.
“3 September, 2022: FGN announces settlement of the $5.258 billion claim in mediation under the International Chamber of Commerce (ICC) ADR framework, for $496m – less than 10 percent of the original sum being claimed. The settlement agreement came into effect on 19 August 2022.
“By this settlement, the Buhari Administration has rescued the Nigerian steel, iron ore and rail industries from a variety of interminable and complex disputes with Global Steel Holdings (GSH) and Global Infrastructure Nigeria Limited.
Ifunanya Ikueze is an Engineer, Safety Professional, Writer, Investor, Entrepreneur and Educator.