DP World: Djibouti’s Breakdown of Rule of Law Threatens Investment in the Country

doralehImage Courtesy: Government of Djibouti

Djibouti’s recent action to denounce the international Rule of Law is calling into question any investment in the country both now and in the future, Dubai-based port and terminal operator DP World said. 

Later this week, the government of Djibouti is to take a decision to apply to the country’s high court to rule all previous international adjudications null and void.

DP World believes that this is “a complete disregard for and contravention of the global legal system and existing contracts.”

Last year, Djibouti terminated the concession contract with DP World for the operation of the Doraleh Container Terminal SA (DCT). DP World controlled 33.34% in DCT and Port de Djibouti S.A., an entity of the Republic of Djibouti, 66.66%.

As a result, DP World launched an arbitration case against the country’s government. Although DP World has been successful in previous substantial rulings by the London Court for International Arbitration (LCIA) and the High Court of England and Wales, Djibouti ignored all of them despite the original contract for the concession being written under English law.

The most recent decision by the LCIA on March 29 this year found that by developing new container port opportunities with China Merchants Port Holdings, a Hong-Kong based port operator, Djibouti has breached DCT’s rights under its 2006 Concession Agreement to develop a container terminal at Doraleh, specifically, its exclusivity over all container handling facilities in the territory of Djibouti.

The tribunal ordered Djibouti to pay DCT USD 385.7 million plus interest for breach of DCT’s exclusivity, with further damages possible if Djibouti develops a planned Doraleh International Container Terminal (DICT) with any other operator without the consent of DP World.

The tribunal also ordered Djibouti to pay DCT USD 88 million for historic non-payment of royalties for container traffic not transferred to DCT once it became operational. Djibouti is also ordered to pay DCT’s legal costs.

The court recognized that the 2006 concession agreement remains valid and binding.

“DCT and DP World continue to seek to uphold their legal rights in a number of legal fora, following Djibouti’s unlawful efforts to expel DP World from Djibouti and transfer the port operation to Chinese interests,” DP World said in a statement, adding that litigation against China Merchants also continues before the Hong Kong courts.

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