Dubai based maritime company DP World has won an arbitration ruling against the Djibouti government over the seizure of a container terminal.
Africa Industry

DP World wins arbitration case against Djibouti in London

Dubai based maritime company DP World has won an arbitration ruling against the Djibouti government over the seizure of a container terminal.

The International Arbitration Tribunal in London has ordered Djibouti to restore rights and benefits in accordance with the 2006 DP World and Doraleh Company’s compensation agreement within two months or pay damages. DP World estimates it has lost $1 billion since Djibouti took over the terminal in February 2018.

The tribunal ruled that Djibouti broke the law when it removed the company from the management of the terminal and transferred the terminal’s assets to a state-run company.

DP World said Djibouti had ignored five previous rulings in its favour despite the fact that the contract is governed by English law.

Djibouti had seized the container terminal after DP World created another corridor for imports to landlocked Ethiopia in Somaliland through the port of Berbera, endangering Djibouti’s near-monopoly on Ethiopia’s imports.

Djibouti’s port alone accounts for 95% of Ethiopia’s imports. With a population of 110 million people, Ethiopia is the largest economy in the Horn of Africa.

In April last year, a court in London has awarded DP World $385 million in compensation for the government of Djibouti’s decision to shut it out of previously-agreed development opportunities. When adding in unpaid royalties, the total award comes to $533 million.

The expansion into Somaliland which the DP World is undertaking at a cost of US Dollars 442 million came alongside plans by the United Arab Emirates to build a naval base in Berbera, part of its expanding military presence in the region.

Ethiopia has a 19% shareholding in the Berbera port, with DP World enjoying 51 per cent while Somaliland has 30 per cent.

DP World, which is majority-owned by the Dubai government in the United Arab Emirates, operates nearly 80 marine and inland terminals around the world.

DP World’s trouble in Doraleh Container Terminal (DCT) started in February 2018 when Djibouti’s government unilaterally terminated DP World’s lease for the operation of the terminal, the small African nation’s primary container terminal.

The two parties had fought for years over the terms of the lease and allegations of impropriety in its signing; at the time, the office of President Ismail Omar Guelleh said that the move was intended to serve “the higher interests of the nation, in particular, those relating to the sovereignty of the state and the economic independence of the country.”

The government-controlled company Port de Djibouti SA (PDSA) took over its operation, and DP World sued in a London court to regain control of its assets.

On August 31, 2018, the High Court of England & Wales issued an injunction against PDSA, ordering that it must not act as though its JV with DP World had been terminated, must not remove any DP World board members, and must not use London-based Standard Chartered Bank to transfer funds to Djibouti.

Djibouti broadly ignored the ruling and proceeded to cooperate with China Merchants Port Holdings (CM Port) on port-related development projects, despite its exclusive concession agreement with DP World.

One of those projects included the construction of an adjacent terminal, the Doraleh Multipurpose Port (DMP), which was built and operated by CM Port.

DP World initiated separate arbitral proceedings before the London Court of International Arbitration about Djibouti’s partnership with CM Port on the deal, and the court issued a binding ruling finding that Djibouti erred.

According to the government of Dubai, the court found that Djibouti improperly gave CM Port the right to develop the Doraleh Multipurpose Port without first offering the opportunity to DCT, in which DP World holds a 33 per cent stake.

“In respect of the development of the Djibouti Multipurpose Port (DMP) facility, the facts are clear. 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.

Djibouti was therefore in breach of the [agreement],” said the government of Dubai, describing the court’s decision.

The latest ruling is yet another victory for DP world but it remains to be seen if the Djibouti government will give in to the decisions.