15 September 2018

Djibouti's Takeover On Doraleh Fans Flames of Dispute With DP World

DP World announces that it would continue to pursue all legal means

The dispute between DP World and the government of Djibouti is heating up following the recent move by the East African nation to take direct control of the disputed Doraleh Container Terminal (DCT) by nationalising the state-owned Port De Djibouti's stake.

Last Sunday, Ismail Omar Guelleh, president of Djibouti, ordered the nationalisation of Port de Djibouti's 66.66pc stake in the terminal, following the termination of DP World's concession and seizure of its shares in the terminal last July.

"The nationalisation was made to protect the fundamental interests of the nation and ensure the situation of the DCT Company aligns with reality," reads the statement from the government.

The termination removed Doraleh from its role at the terminal and transferred the concession staff and assets to a public company specifically established to manage the infrastructure, Société de Gestion du Terminal de Doraleh (SGTD). SGTD is wholly-owned by the government of Djibouti and has taken over the operations of the terminal.

Following the nationalisation decree by the government, DP World announced that it will continue to pursue all legal means to defend its rights as a shareholder and concessioner.

"The transfer was made in an attempt to flout an injunction by the English High Court," reads a statement from DP World.

Though Djibouti declared that it does not recognise it, the High Court of England & Wales has recently injuncted Port de Djibouti's annulment of the joint venture deal with DP World and prohibited the port authority from removing directors of the terminal appointed by DP World until further orders by a London-based arbitration tribunal is issued. By the beginning of August, the tribunal upheld the validity of the concession agreement that gave rights to DP World to operate the terminal.

Djibouti denounced the two rulings.

The decision was obtained without Port de Djibouti being warned beforehand of the commencement of the legal procedure and without any adversarial debate taking place, argued the government of Djibouti.

The dispute between the two started last February when Djibouti annulled DP World's concession on the terminal and awarded it to the Singapore-based Pacific International Lines with the commitment of raising the terminal's handling capacity by 300,000 twenty-foot equivalent container units . This led DP World to take the case to the London-based arbitration tribunal, which ruled in favour of DP World.

The two parties had had a long-standing partnership beginning in 2000 when they formed a joint venture after DP World was awarded the authority to operate the Port of Djibouti. The partnership between the two grew, and they partnered again to construct the Doraleh Container Terminal in 2006, the same year that DP World was awarded the concession to operate the terminal. The terminal, which possesses three berths and can accommodate 15,000 TEU super post-Panamax vessels, has an 18m draft and 1,050m quay.

Three years into the partnership the terminal became operational with the capacity of handling 1.2 million TEU a year. The terminal is the primary handler of Ethiopia's international shipments. Annually, Ethiopia ferries 13.5 million tonnes of imports and 1.8 million tonnes of export cargoes.

The relationship deteriorated, and the two became embroiled in a dispute, which led the government of Djibouti to annul DP World's concession at the terminal.

DP World's spokesperson warned investors in Djibouti by stating that the government "would not respect legal agreements."

"Investors must think twice about investing in Djibouti," DP World's spokesperson said.

Djibouti argues that the termination was lawful.

"The termination was made in strict compliance with Djiboutian law that governs joint ventures and the statutes of the terminal," reads Djibouti's government statement. "Djibouti reaffirms that the DCT Company cannot under any circumstances 'come back' under the control of DP World."

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