Djibouti ordered to pay Dubai’s DP World $533 Million

Published: April 11, 2019

The latest ruling is the fifth substantial verdict in DCT and DP World’s favour on disputes relating to the Doraleh terminal.

A London court has ruled in favour of a DP World partnership firm in Africa by ordering Djibouti government to pay $385 million plus interest to the joint venture port operator for breach of exclusivity rights.

The ruling by London Court of International Arbitration in favour of Doraleh Container Terminal SA (DCT), a Djibouti port operator owned 33.34 per cent by DP World Group, and 66.66 per cent by Port de Djibouti, is the latest round of victory for Dubai-based global ports operator, which has been involved in a protracted legal battle against the Djibouti government for violation of contractual rights.

The latest ruling is the fifth substantial verdict in DCT and DP World’s favour on disputes relating to the Doraleh terminal.

The legal battle between DP World and Djibouti government-owned Port de Djibouti erupted when the government of Djibouti illegally seized the DCT from DP World-owned entity in February 2018 over a dispute dating back to at least 2012.

The seizure forced DP World employees to leave the country. Since then, DP World has commenced arbitration proceedings against the Djibouti government before the London Court of International Arbitration and has been awaiting the outcome of the process. The terminal, the largest employer and biggest source of revenue for Djibouti, has been operating on profit. The terminal’s seizure is the culmination of Djibouti’s campaign to force DP World to renegotiate the terms of concession, which were found to be “fair and reasonable” by the London Court of International Arbitration in February 2017.

The London tribunal has found that by developing new container port opportunities with China Merchants Holdings International Co Limited, a Hong-Kong based port operator, Djibouti has breached DCT’s rights under its 2006 Concession Agreement to? develop a container terminal at Doraleh, specifically, its exclusivity over all container handling facilities in the territory of Djibouti.

The tribunal ordered Djibouti to pay DCT $385 million plus interest for breach of DCT’s exclusivity by development of container facilities at Doraleh Multipurpose Terminal, with further damages possible if Djibouti develops a planned Doraleh International Container Terminal, DICT, with any other operator without the consent of DP World.

China Merchants also operates a $3.5 billion free trade zone it developed pursuant to an agreement with Djibouti, in contravention of DP World’s exclusive right to develop and operate such a free zone under its own concession, which is the subject of other litigation proceedings.

The tribunal also ordered Djibouti to pay DCT $148 million for historic non-payment of royalties for container traffic not transferred to DCT once it became operational. Djibouti is also ordered to pay DCT’s legal costs.

The Tribunal’s award recognises that the 2006 Concession Agreement remains valid and binding, as has also been confirmed by another LCIA arbitration tribunal and the London courts.

DCT and DP World continue to seek to uphold their legal rights in a number of legal fora, following Djibouti’s unlawful efforts to expel DP World from Djibouti and transfer the port operation to Chinese interests. Litigation against China Merchants also continues before the Hong Kong courts.



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