DP World faces challenge on its operations at Djibouti container terminal

The government of Djibouti says it has rescinded DP World’s concession to run East Africa’s largest container terminal.

Djibouti men and women dance during the opening ceremony of DP World’s Doraleh container terminal in Djibouti port in February 2009. Adam Schreck / AP Photo

DP World is facing a legal battle to keep hold of its concession to run Djibouti’s container terminal after the government accused it of using bribery to win the contract.

In a statement, the government of the East African country said the agreement unfairly favoured DP World. It said it had rescinded DP World’s concession at the Doraleh Container Terminal and had launched arbitration proceedings in London.

DP World rejected the allegations and said it would vigorously defend its position. It will continue to manage the port pending the outcome of the case, DP World said.

“We are disappointed that the Djiboutian government has chosen to take this action after working so closely with us as partners over the past 14 years,” it said in a statement. “We have invested significantly in Djibouti over those years and have been a major contributor to its economy and to its community.”

DP World, which has a portfolio of about 65 terminals around the world, in 2006 signed a 30-year concession to operate the terminal. Located near the southern tip of the Red Sea, Doraleh is a main gateway for oil imports into East Africa, as well as a transshipment point for goods moving between Asia, Africa and Europe. With an annual handling capacity of 1.2 million twenty-foot equivalent units, the terminal is the largest in East Africa.

The row follows an investigation by the Djibouti government into the activities of Abdourahman Boreh, a Dubai-based businessman and former chairman of the Djibouti Ports and Free Zones Authority between 2003 and 2008. In the statement released on Tuesday, it alleged Mr Boreh misused his government position to procure significant personal gains.

Officials have already made steps through courts in London, Paris, Dubai and Singapore to seek US$150 million from Mr Boreh. In October, Dubai International Financial Centre Courts granted an application by the Djibouti government to freeze assets worth more than $5m in the emirate, including three properties in Limestone House, close to the DIFC central precint. At the time, Mr Boreh denied the allegations of abuse of position. The matter will go for trial in the UK next year.

Further investigation by the Djibouti government had revealed “evidence indicating that DP World paid bribes and gave other financial incentives to Mr Boreh while he was a negotiating the Doraleh Container Terminal Concession Agreement with DP World, as well as afterwards”, it said.

Mr Boreh had been appointed on behalf of the Djibouti government as its representative in the negotiations.

If DP World loses the Djibouti operations, it would be the second exit from the Horn of Africa region. In September 2012, it announced it had sold its 50 per cent stake in the company managing the container terminal of the port of Aden in Yemen.

The Djibouti government alleges bribes were made through the use of “consultancy agreements” and overseas “shell companies”. Other financial incentives were also given, including the reward of construction contracts to Mr Boreh’s companies and an attempted covert sale of a proportion of DP World’s shares in the terminal to Mr Boreh. According to DP World’s annual report, it owns one-third of the terminal.

DP World’s shares opened 3.24 per cent lower on the news but closed unchanged in Dubai.