Abu Dhabi, UAEMonday 22 July 2019

London panel awards $385 million Djibouti port compensation to DP World

Djibouti government must be bound by 2006 container port concession

In February, authorities in Djibouti abruptly cancelled DP World’s contract to run the terminal and seized its facilities, which the port operator had designed, built and operated. Reuters
In February, authorities in Djibouti abruptly cancelled DP World’s contract to run the terminal and seized its facilities, which the port operator had designed, built and operated. Reuters

A panel in London has awarded substantial damages to a DP World affiliate over the Djibouti government’s seizure of the country’s most advanced container terminal operations.

The UAE-backed venture was kicked out despite holding a 30-year concession to operate the port, triggering legal battles over its control.

The London Court of International Arbitration ordered the African nation to pay $385 million (Dh1.41 billion) plus interest for breach of the Doraleh Container Terminal (DCT) holding company’s exclusive rights.

The ruling states that the 2006 concession remains valid despite the government of Djibouti taking over the terminal in February after cancelling DP World’s operating rights the previous year.

The ruling gave DP World the right to claim further damages if Djibouti continues with plans to develop the container port with any other operator, the ruling said.

Executives said it was the fifth legal ruling that upheld ownership rights against the government of Djibouti since the battle for control began.

The High Court of England and Wales twice issued injunctions against the seizure of the terminal last year.

The port was designed and develop by DP World and has been the gateway for much of the container trade across the Horn of Africa, playing a crucial role in Ethiopia’s import and export.

While Djibouti owns a two-thirds stake in Doraleh, it nationalised the joint venture in September and then scrapped the concession agreement.

The contract awarded DP World exclusive rights over container operations in the country.

Operations have since been run by China Merchants Port Holdings, based in Hong Kong, which also bought a minority stake in the terminal.

DP World launched a lawsuit in the Hong Kong courts last year to assert its contractual rights and force compliance on the Beijing controlled conglomerate.

The London arbitration panel also gave DP World authority to seek compensation over China Merchants' plans to expand the container facilities.

The Hong Kong-listed company is operating a $3.5bn free trade zone developed in contravention of DP World’s exclusive concession.

“In respect of the development of the Djibouti Multipurpose Port facility, the facts are clear,” the ruling said.

“At no stage before the decision was made to go ahead with that facility with China Merchants did Djibouti offer DCT the right to develop the proposed container facilities at the DMP.”

The government of Ismail Omar Guelleh has manoeuvred for more than a decade to take control of Djibouti's container trade, which is one of the few business assets the country has.

It waged a long legal battle with a London-based businessman Abdourahman Boreh after seizing his shareholdings.

While the company battles against the setback in Djibouti, it has ambitious plans for the Horn of Africa and the continent as a whole.

Last year it said it would undertake a $442m investment in the first stage of its Berbera port expansion, to develop the Somaliland port’s capacity for handling major container ships, turning the outpost into a leading facility in the region.

“Our aim is to make this an important regional hub for the maritime industry in the Horn of Africa,” DP World chairman and chief executive, Sultan bin Sulayem, said at the time.

The Somaliland port is 51 per cent owned by DP World and 19 per cent by the government of Ethiopia.

The Dubai port operator has also said African market growth remains a key strategic interest and it has secured a 20-year concession to build and operate a logistics centre in Mali.

An agreement with Egypt’s Suez Canal Authority to jointly develop a new inland container depot has also been signed.

Updated: April 5, 2019 01:52 AM

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