Arbitral tribunal says Djibouti's port company acted unlawfully in terminating agreement with DP World
An arbitral tribunal of the London Court of International Arbitration (LCIA) has ruled against Djibouti’s port company, Port de Djibouti (PDSA), in its dispute with DP World.
The ruling confirms the unlawfulness of PDSA's effort to terminate its joint venture agreement with the Dubai port operator and transfer its shares to the state, DP World said on Monday.
PDSA is 23.5 percent owned by China Merchants Port Holdings Company Ltd of Hong Kong (China Merchants), and the rest of its shares are held by the Government of Djibouti.
On February 23 2018, the government illegally seized control of the Doraleh Container Terminal from DP World, who designed, built and operated the terminal following a concession awarded in 2006.
Until the seizure, the terminal was being managed under a joint venture between DP World and PDSA. In July 2018, PDSA unilaterally declared that its JV agreement with DP World was terminated and also tried to remove DP World’s nominated directors from the joint venture company in an effort to seize control of that company.
DP World approached the High Court of England & Wales and secured an injunction against PDSA to restrain it from doing so until the Tribunal had the opportunity to rule on the dispute.
In an attempt to circumvent the effect of the injunction, PDSA attempted to transfer its shares in the joint venture to the Government of Djibouti, relying on an Ordinance issued by the President of Djibouti. DP World sued PDSA over these matters in the arbitration.
The tribunal has now ruled that PDSA breached the agreement by wrongfully attempting to terminate it, and by engaging in the attempted transfer of its shares to the government. It ruled that the agreement was not terminated and remains in full force and effect.
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 to date in the sum of £1.7 million.
The new ruling is the seventh decision by an international court or tribunal in favour of DP World in its ongoing dispute with the Republic of Djibouti.
DP World has reiterated that it 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 government’s "blatant disregard" for the rule of law and respect for binding commercial contracts.
The company added that despite three years having passed, the government is yet to come forward with any offer of compensation in an effort to find a negotiated settlement to the dispute.
The Doraleh Container Terminal, the largest employer and biggest source of revenue in the country, has operated at a profit every year since it opened.
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