FG Negotiates Ajaokuta Steel Contractual Dispute Down to $496m

The Federal Government of Nigeria has announced that it has been able to settle the long-standing contractual dispute on Ajaokuta Steel with a foreign investor group after reducing mediation to $496m from $5.28bn.

A statement issued by Dr Umar Gwandu, special assistant to the Attorney General of the Federation, Abubakar Malami, SAN, noted that the mediation proceedings were done under the International Chamber of Commerce’s (ICC) Alternative Dispute Resolution Framework.

It read: “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%.

“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.

It might be recalled that the seeds 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 group, the Global Steel group.

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

The statement blamed the government of former President Olusegun Obasanjo for prematurely terminating the Ajaokuta Share Purchase Agreement rather than waiting for the 55-day period after which FG would have collected about US$26m in liquidation damages.

It was revealed that after Global Steel took Nigeria to the ICA, Paris, the government was able to get aa settlement in May 2013 which the administration in power did not pay. “In May 2020, Global threatened a resumption of the arbitration and announced an anticipated claim in damages of over $10-14 billion against the Nigerian State in respect of the affected 5 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, 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 added, “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.”