London Court rules against Djibouti in dispute with DP World over port concession rights

Djibouti’s Port Company wrongfully tried to terminate the joint venture agreement and transfer its shares to the state, the London Court of International Arbitration has ruled

Authorities in Djibouti in February 2018 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 Djibouti in a longstanding legal battle with DP World, one of the world’s largest port operators, over port concession rights.

An Arbitral Tribunal of the London Court of International Arbitration has ruled against Djibouti’s port company, the Port de Djibouti (PDSA), in its dispute with DP World over the concession to operate the Doraleh Container Terminal, according to a statement by the Dubai government media office on Monday.

"The tribunal has now ruled that PDSA breached the joint venture agreement by wrongfully attempting to terminate it, and by engaging in the attempted transfer of its shares to the government," the statement said. "The tribunal ruled that the joint venture agreement was not terminated and remains in full force and effect."

The ruling found that PDSA remains a shareholder in the joint venture and its attempted transfer of its shares to the government had no effect, according to the statement.

The arbitration will now proceed to a second phase to decide the damages owed by PDSA to DP World.

PDSA has also been ordered to reimburse DP World’s legal costs, which amounted to £1.7 million (Dh8.65 billion).

DP World and Djibouti have been locked in a dispute since 2012 over the Dubai-based company’s concession to operate the Doraleh Container Terminal, which is located in the Horn of Africa along major trade routes in the Red Sea. In 2018, Djibouti seized the terminal from state-owned DP World.

The court had previously ruled that DP World’s concession to operate the terminal is legal and binding and ordered it be restored.

The government of Djibouti has yet to comply with these rulings and remains in breach of its international obligations, the statement said.

DP World will continue to pursue "all legal means" to defend its rights as shareholder and concessionaire in the Doraleh Container Terminal in the face of the Djibouti government’s "blatant disregard for the rule of law and respect for binding commercial contracts", the statement added. The Djibouti government has not yet made any offer of compensation in an effort to negotiate a settlement to the dispute.

The ongoing legal battle with Djibouti has not deterred DP World from expanding its footprint in Africa, a major growth market for the ports operator.

DP World grew its presence significantly across the African continent in recent years with investments in seaports, terminals and logistics services as it seeks to tap into lucrative trade routes in the region. Its existing investments in Africa include projects in Egypt, Algeria, Rwanda, Somaliland, Mozambique and Senegal, according to the company's website.

Last week, DP World said it plans to buy South Africa's Imperial Logistics for $890m, further strengthening its footprint in the world's second largest continent.