DP World wins London tribunal case over Djibouti port seizure

The London Court of International Arbitration says the contract to operate Doraleh terminal in the African state 'remains valid and binding'

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 London court has ruled against the Djibouti government's seizure of the Doraleh Container Terminal from DP World, confirming the illegitimacy of the Africanstate's February move, the port operator said on Thursday.

The London Court of International Arbitration has said that the concession agreement awarded to DP World in 2006 to operate the terminal "remains valid and binding notwithstanding Law 202 and the 2018 decrees", the port operator said in a statement citing the LCIA tribunal ruling.

The law and decrees enacted by the Djibouti government to evade its contractual obligations were found to be ineffective in law and DP World will now "reflect on the ruling and review its options", it said without providing further details of what those options are.

The Djibouti government has rejected the ruling in a statement

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.

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The UAE denounced Djibouti’s termination of DP World’s concession, calling it an “arbitrary” breach of a signed agreement. DP World said the move to take control of the port was illegal and began court proceedings. The concession terms were found to be “fair and reasonable” in 2017 by another LCIA tribunal led by Lord Leonard Hoffmann, Peter Leaver and Richard Aikens.

The seizure of the terminal followed the government’s campaign to force DP World to renegotiate the terms of the concession. It enacted Law 202 in Djibouti, which purports to empower the government to terminate its infrastructure agreements, which compelled DP World to commence a new arbitration in February 2018 seeking a declaration that the 2006 agreement was valid and binding.

“The Tribunal, comprised of Zachary Douglas, has definitively confirmed that the concession agreement, which is governed by English law, remains binding and in force notwithstanding the government’s purported termination of it under Law 202,” DP world said on Thursday.

The company earlier this month threatened legal action against third parties if they violated its concession agreement for Doraleh Terminal, following news reports regarding the opening of the first phase of the Chinese-built International Free Trade Zone.

DP World said it is in violation of its exclusive management rights it holds and it “reserves the right to take all available legal actions, including claims for damages against any third parties that interfere or otherwise violate its contractual rights.”

In June, DP World said it would not consider an out of court settlement in its dispute with the Djibouti government.

“We remain committed to operating Doraleh port as per the original agreement of the concession, and we will not consider any other alternative settlement option,” a company spokesperson said at the time.

Despite challenges in Africa, the Dubai port operator remains bullish on the African markets’ potential for growth and has continued to expand there.

The Nasdaq Dubai-listed company earlier this month said it will build and operate a logistics hub in Mali under a 20-year concession agreement. In May, DP World signed a preliminary agreement with Egypt’s Suez Canal Authority and government to jointly develop a new inland container depot that will boost the flow of cargo between ships and major land transport networks in the country.

It also won a 30-year concession to develop a $1 billion deep-water port along the Democratic Republic of Congo’s Atlantic coast in March.

Earlier in July DP World revealed global gross container volumes grew 4.8 per cent on a reported basis in the first six months of the year compared to the same period in 2017 and 6 per cent on a like-for-like basis, which does not include new capacity additions. The ports operator handled 35.6 million 20-foot equivalent units in the first half.