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Abu Dhabi, UAESunday 24 June 2018

DP World launches legal action over Djibouti terminal seizure

The seizure is the latest move in a long-running campaign by the East African nation against the Dubai-based port operator

FILE PHOTO: A Djibouti policeman stands guard during the opening ceremony of Dubai-based port operator DP World's Doraleh container terminal in Djibouti port February 7, 2009. REUTERS/Ahmed Jadallah/File Photo
FILE PHOTO: A Djibouti policeman stands guard during the opening ceremony of Dubai-based port operator DP World's Doraleh container terminal in Djibouti port February 7, 2009. REUTERS/Ahmed Jadallah/File Photo

DP World has started new legal action in London after Djibouti seized control of a terminal run by the Dubai-based port operator in an escalation of a long-running dispute.

The seizure of Doraleh Container Terminal is the latest move to try to force DP World to renegotiate the terms of a 30-year concession signed in 2006.

DP World has now taken the case to the London Court of International Arbitration (LCIA) to try to resolve the dispute and secure damages. Unlike a civil court case, proceedings are held in secret and take an average of 16 months to conclude, according to an LCIA official.

The Doraleh terminal was designed, built and operated since 2006 by a company owned by DP World under contract to the Government of Djibouti.

In 2014, however, the government of Djibouti brought an unsuccessful legal challenge against DP World, accusing it of bribing the head of Djibouti's port authority and calling the overall agreement unfair.

London’s High Court cleared Djibouti port authority head Abdourahman Boreh of misconduct in 2016. In that ruling, a judge accused Djibouti of “reprehensible conduct” in court which fell “a long way short of the standards of behaviour which the court is entitled to expect of a sovereign state”.

The company won a previous case at the LCIA, which ruled that the terms of the original agreement were “fair and reasonable,” according to a company statement.

Despite the loss of those cases, the Djibouti government "decided to proceed with the unilateral termination of the concession contract ... awarded to DP World," according to a statement on behalf of President Ismail Omar Guelleh's office issued Thursday.

The statement blamed the seizure on DP World's refusal to "settle amicably," a likely reference to the international arbitration hearing.

DP World issued a statement late Thursday acknowledging that Djibouti authorities seized the port, which it described as the East African nation’s largest employer.

“The illegal seizure of the terminal is the culmination the government's campaign to force the DP World to renegotiate the terms of the concession,” DP World said.

"The government's conduct is particularly oppressive and cynical."

Djibouti's port is particularly crucial to its landlocked-neighbor Ethiopia. More than 95 percent of Ethiopia's imports come through Djibouti, authorities say.

Guelleh has been Djibouti's president since 1999 and his family has controlled the small nation, with a population of less than one million, since it gained independence from the French in 1977. Corruption allegations have surrounded his rule. Mr Boreh has been in exile for a decade after falling out with the president.

Djibouti's location near the Bab el-Mandeb, a chokepoint at sea for oil tankers heading from the Gulf to Europe, makes it a militarily crucial location. Djibouti is already the site of a US base that launches drone missions over Somalia and Yemen, as well as a Chinese military base and Japan's first overseas base since World War II. Saudi Arabia also is considering building a base there.