A landmark arbitration ruling has rocked the Nigerian business community, with SANEF Creatives Limited, a company owned by the Central Bank of Nigeria (CBN) and the Bankers’ Committee, ordered to pay a staggering N19.4 billion in damages. The arbitration tribunal found SANEF guilty of unlawfully terminating its contract with Hanson Dredging and Marine Service Limited (HDMS) for dredging and reclamation work at the National Theatre, Lagos.
The tribunal’s decision, delivered on December 30, 2024, marks the end of a bitter legal battle between the two parties that began after SANEF terminated its contract with HDMS in May 2022, despite the latter having completed more than 60% of the work.
The Case Unfolds
The legal dispute stemmed from a contract signed on November 11, 2021, between SANEF Creatives and HDMS for a large-scale dredging and reclamation project at the Lagos Creative Entertainment Centre (LCEC), also known as the National Theatre. HDMS mobilised promptly to site, only to encounter a series of unforeseen challenges that caused delays.
According to Dr. Charles Mekwunye, SAN, legal counsel for HDMS, the delays were not due to negligence on their part but were largely caused by factors beyond their control. “The delays were exacerbated by an economic downturn, the lingering effects of the COVID-19 pandemic, and unanticipated risks that arose on-site,” Dr. Mekwunye stated in a submission to the tribunal.
In spite of these difficulties, HDMS sought to renegotiate the terms of the contract, proposing a review of the contract sum to account for the new risks and challenges. However, instead of addressing these concerns, SANEF terminated the contract in May 2022, citing the expiration of the 36-week completion deadline stated in the agreement.
HDMS did not take this lightly, arguing that the decision was premature and unjustified. In its claims before the tribunal, the dredging firm sought 13 key reliefs, including the declaration that the contract termination was unlawful and that SANEF was estopped from relying on the contract’s time frame. “The time frame was clearly unrealistic given the circumstances,” said Dr. Mekwunye. “We were willing to negotiate, but SANEF’s refusal to engage in good faith led to an unlawful termination.”
Arbitration Tribunal’s Ruling
The Sole Arbitrator, Ayo Fanimokun, concluded that SANEF Creatives had acted unlawfully in terminating the contract without adequate consideration of the challenges HDMS faced. Fanimokun’s ruling stated that SANEF had failed to show reasonable grounds for such a drastic step, particularly when they had not insisted on the contract’s completion timeline for the first phase. This, the arbitrator argued, demonstrated that SANEF was aware of the difficulties on the ground.
“By failing to address the delays and refusing to consider the possibility of contract adjustment, SANEF effectively breached the terms of the agreement,” Fanimokun wrote in his final arbitral award. The tribunal also noted that the Central Bank of Nigeria (CBN), through SANEF, had directly debited HDMS for N4.2 billion, further exacerbating the situation.
In the aftermath of the ruling, HDMS emerged victorious but also expressed dismay at the damages suffered throughout the protracted dispute. “This decision is a victory for justice, but it doesn’t undo the significant losses we have endured,” said a representative from HDMS. “We remain committed to the completion of the National Theatre project, but this has been a long and difficult road.”
The Role of SANEF and the Bankers’ Committee
SANEF Creatives is a special-purpose vehicle formed by the Bankers’ Committee of the CBN, which includes a number of commercial banks in the country. The company was set up to manage and oversee high-profile projects, including the ambitious transformation of the National Theatre.
The Bankers’ Committee has faced significant scrutiny in recent years over its handling of various infrastructure projects, with this particular case now raising fresh concerns about the management of public-private partnerships and the accountability of state-backed companies. “It is disappointing that SANEF, a government-backed entity, would act in such a manner, putting taxpayers’ money at risk,” said a former official of the Economic and Financial Crimes Commission (EFCC), who preferred to remain anonymous.
Despite the ruling, the Bankers’ Committee has not publicly commented on the decision, and it remains unclear whether they will appeal the arbitration award. However, legal experts believe the ruling sets an important precedent for future cases involving public-private contractual disputes.
Context of the National Theatre Project
The National Theatre, located in Iganmu, Lagos, has long been a symbol of Nigeria’s cultural heritage. The ongoing renovation of the facility is part of a broader effort to revitalize the area and transform the National Theatre into a world-class entertainment and tourism hub. As the country’s most iconic cultural venue, the redevelopment project holds significant importance for the Nigerian entertainment industry.
The contract with HDMS was a crucial part of the project, as the dredging and reclamation work would allow for the construction of additional facilities around the theatre, including modern hotels and entertainment venues. The termination of the contract, therefore, not only impacted HDMS but also delayed the entire redevelopment effort, setting back the timeline for completing the National Theatre’s much-anticipated transformation.
Broader Implications for Nigerian Business and Governance
The N19.4 billion award could have wider implications for Nigerian businesses engaged in public projects, particularly those that are part of government-backed initiatives. Legal experts say the case underscores the importance of upholding contractual obligations and the need for clear communication between parties involved in large-scale ventures.
“This ruling sends a clear message to both public and private entities: contractual breaches, especially in government-backed projects, will not go unpunished,” said Adebayo Olayinka, a corporate lawyer based in Lagos. “It also highlights the need for proper risk management and renegotiation of terms when unforeseen challenges arise.”
In the face of such high-profile rulings, it remains to be seen how future public-private partnerships in Nigeria will evolve and whether entities like SANEF Creatives will face more rigorous scrutiny.
