A foreign affairs perspective to diplomatic protection

Virtual assets like cryptocurrency are gaining popularity in the global investment market. A teeming and vibrant youth population has driven crypto adoption in Nigeria and presently, it is not uncommon to find cryptocurrency among the investment portfolios of many Nigerians.

Around the 2017 crypto boom, many governments all over the world had not fully internalised the dynamics of a virtual assets market and hardly regulated the space. This was a gain for investors but a loss for countries. As economic teams in some countries worked to get ahead of a new, fast-moving asset class, other countries resorted to cracking down on cryptocurrency – at least until its elements could be deciphered and regulated.

In 2021, the Central Bank of Nigeria (CBN) issued a circular restricting banks and financial institutions from operating accounts for cryptocurrency service providers. According to the CBN, this was to ‘curb money laundering and terrorism financing’ which state intelligence suggested could be facilitated with crypto.

What followed was a public outrage against this government policy which was described as ‘regressive, insensitive and against the development of the youth’. The new central bank administration in 2023 reversed the ban, acknowledging the global cryptocurrency trend and the need for regulation. In essence, their policy was to tame the storm rather than refuse to sail.

The move improved citizens’ opinions of the new government and the economy. However, Nigeria’s official grouse against cryptocurrency was still to continue. Amidst the pressure created by a plummeting naira, the government has once again fingered virtual assets as a major component of the exchange rate volatility.

The arrest of Binance officials in Nigeria
Reports indicate that two executive members from a leading global cryptocurrency exchange, Binance, unsuspectingly arrived in Nigeria in February 2024 to engage the government on its concerns with their product. They were subsequently detained by the Nigerian government. The charge against the exchange bosses and the company were five counts of money laundering of about $35 million filed by the Economic and Financial Crimes Commission (EFCC) of Nigeria.

These charges, according to the government, were also related to the suspicion that the free-fall of the naira was triggered by currency speculation and fixing of exchange rates, enabled by platforms like Binance. Separate from the economic accusations levelled against Binance, some international law questions relating to State arrest of a foreign national are highlighted. The questions calling to be addressed are: (a) the jurisdiction of a State to arrest a foreigner in international law and (b) the possibility of intervention by a foreign State of nationality for the wrongful arrest of its citizen by another State.

Jurisdiction to arrest a foreigner in International law
In international law, jurisdiction is primarily territorial. This means that a country can only exercise its powers over everything and everyone within its territory. Exceptions exist like diplomats from foreign countries representing their governments within the country. In this case, the Vienna Convention on Diplomatic Relations and Vienna Convention on Consular Relations requires diplomatic premises or their staff to be treated with the sovereignty accorded to their sending States. While territoriality is the general principle, the incidental nature of harm occurring outside the territory required an extension of the principle.

Other principles for which a State can exercise jurisdiction beyond its jurisdiction are (a) on the basis of nationality which means that a State can extend its jurisdiction to its nationals even when they are outside the State (b) the protective principle which means that a State can impose jurisdiction on its nationals or foreign citizens if their actions completed outside the State threaten the interests, or business of the State, (c) the passive personality principle which allows a State to impose jurisdiction over an act committed by a foreigner if the act injures a national of the State (d) the universal principle which applies to a few crimes considered to be offences against all of humankind like maritime piracy, and empowers all States to arrest and prosecute and finally, (e) the objective territoriality principle upon which a State can assert jurisdiction if an action has been committed in its territory even if elements of the crime has been performed outside the State.

These elements of jurisdiction are not prescriptive but can be seen from the type of offence and its factual circumstances. In the case of Binance, Nigeria asserts that although the senior executives are not Nigerian nationals, their operations occur in Nigeria through exchanges occurring regularly on the Binance platform used by citizens of Nigeria within Nigeria. As such, the protective principle may be the basis for Nigeria’s assertion that a crime has been committed by a foreign company within its jurisdiction.

Additionally, the charge by EFCC indicates an allegation of tax evasion which is characterised as a crime in Nigeria. In this case, the allegation is that a crime has been committed in Nigeria, thus, potentially bringing it within the territoriality principle.

Intervention by a foreign State for (wrongful) arrest of its national
Even though Nigeria has a basis to challenge Binance for a crime allegedly committed within the country, basic corporate law teaches the distinction between a company and its officers. The company can be sued for offences committed by it without the involvement of its principal officers unless the court gives an order to lift the veil of incorporation in limited circumstances. If this is followed, Binance should be solely charged with committing an offence without including or arresting its officials, who are in law, separate from the company.

Where the rights of a foreigner have been violated by a foreign country, the country of nationality of the foreigner can challenge this act as an element of violation of its own sovereignty. In essence, the arrest of a national in a foreign State without the authorisation of the national State is prohibited in international law.

States interested in prosecuting a foreigner alleged to have committed a crime within its jurisdiction usually do so through extradition agreements with the national State. Otherwise, there may be an international law breach. This was the case in Nottebohm (Liechtenstein v Guatemala) and in Ahmadou Sadio Diallo (Guinea v DRC) where Liechtenstein and Guinea respectively challenged the action of Guatemala and DRC against their citizens.

Specifically in Diallo’s case where an associé of two companies incorporated in DRC was arrested and prosecuted for debts owed to the two companies for which DRC was a shareholder. The International Court of Justice (ICJ) found violations of the civil and political rights of Mr. Diallo and affirmed that the rights of Mr. Diallo are separate from the companies.

In Diallo’s Case, DRC arrested Diallo for wrongs allegedly done by him in order to protect the right of shareholders in the DRC-incorporated companies, thereby upholding the distinction between the man and the companies. This is factually dissimilar to the Binance case where wrongs alleged to be done by a foreign company are levied against its executives. In the latter case, the state of nationality of the executives may intervene in the matter to prevent a violation of its sovereignty.

Silence and escape
On March 25, 2024, one of the arrested Binance executives reportedly escaped custody to Kenya. He was recently rearrested by the Kenyan Police as the two countries prepare to extradite him to Nigeria. Nigeria’s criminal process against the two men has continued without intervention and with surprising silence from the States of nationality of the two executives.

Nadeem Anjarwalla, who escaped to Kenya, reportedly holds a British and Kenyan citizenship and Tigran Gambaryan is a citizen and former law enforcement official of the United States of America. These states may, at any time, intervene through an international process to stop proceedings against their citizens in the domestic courts of a foreign state.

Pressure currently mounts for the government of the United States to intervene as Kenya finalises Anjarwalla’s extradition to Nigeria. Without the immediate intervention of a foreign State, the lawyers of the executives will be left to request the court’s consideration of the corporate personality principle as a way of discharging their clients from fault in the meantime.

We watch as the case unfolds.

Elizabeth Nwarueze is a Lawyer, Rhodes Scholar and international law researcher at University of Oxford. She advises on foreign policy and international law and can be reached via: elizabeth.nwarueze@law.ox.ac.uk.