Waiver of Sovereign Immunity Clause – Separating Truth from Falsehood

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By Iheanyichukwu Azubuike Dike

All through human history, lending has been a very veritable means of boosting the economic advancement of many civilized nations especially when such loans are utilized to provide the necessary infrastructural development of the recipient countries.

However, such loan agreements have never been lenient as a stroll in the park, never. Usually, no Lender gives out money without stringent conditionality. Lenders would make you sign up just anything, except your life, just to convince and indemnify them that you’re willing to repay. It doesn’t necessarily mean that you will lose your life for it. Those conditions are simply a symbol of demonstration of serious to repay, on the part of the recipient of the loan.

Like in simple conventional loan transactions, the Lender must insist on credible collaterals. In most cases, it could involve your own living house. But, it doesn’t mean your house is gone already. It’s just the standard practice, world over.

Therefore, all the noise about Nigeria signing off their country are just uncalled for, false and even suspicious in many ways than few. The Leadership of the National Assembly should not allow mischievous political motives, to becloud their judgement on this issue. And when a probe appears to be or smacks of politics rather than for policy and advancement of the public good, investors would take flight. They must realize that it is in the very nature of Loan Agreements, to be embedded with stringent conditions. I earnestly pray, and wish, that true and most altruistic motives and wisdom, prevails in our NASS!

But let us dissect the legal implications of the clause of; Sovereign Waiver.

Please, note: Sovereign here, doesn’t connote the ceding of Nigeria’s sovereignty as an independent nation, with its own exclusive rights to govern All or any Part of its territorial integrity. No, that’s NOT the sovereign that’s usually envisaged in such contracts.

However, the TRUTH is; in many legal systems of the world, there still exists a legal doctrine that says that the King can do no wrong – thus, such kings and the countries they rule cannot be sued in municipal courts or arbitration tribunals, even when they have done wrong, or are in breach of commercial agreements. That, in a nutshell, is the doctrine of sovereign immunity.

Gradually, legal systems began to scale back the ambits of the doctrine, and the position today is that in jurisdictions where the doctrine still applies, sovereign immunity can be waived voluntarily by the nation to which it attaches, rendering the nation which has waived it amenable to civil processes in commercial litigation.

Therefore, a waiver of sovereign immunity has become a standard clause in most international commercial contracts in order to render their terms enforceable in law. If a waiver of sovereign immunity is not incorporated, the money lent to a borrower-country may be lost forever in case of a breach, as no court or arbitration tribunal will agree to assume jurisdiction and enforce the terms of the loan contract.

What a waiver of sovereign immunity therefore implies is that the defence of sovereign immunity cannot be raised by the debtor-nation in arbitral proceedings, wherever held, to forestall the enforcement by the creditor-nation of the facility’s terms and conditions, especially where the facility is collateralized.

No serious nation grants a loan without these terms. The presence of these terms in those agreements with China does not in the least imply cession of sovereignty to China. But what it does underscore is the need to borrow sparingly but strategically, and to spread the projects out equitably, since the successful enforcement of the contract’s terms might necessitate a seizure of a strategic national asset only, but not the sovereignty of the country.

It has become part of international best practices to insert such clauses, as waivers of sovereignty, so as to allow the investors to maintain an action in Court, in the event of a breach of the Loan Agreement. Municipal laws, which prohibits an institution of litigation against the(sovereign) country are just what has been waived in such clause and, not the surrendering of our sovereignty as some people erroneously speculates.

I hope we get the point now.

Barr. Iheanyichukwu Azubuike Dike is a Port Harcourt-based lawyer