Djibouti Ordered To Pay $533M In Compensation In Container Terminal Dispute With Dubai: FORBES

The Djibouti government has been ordered to pay at least $533m in compensation to a port operator partly owned by Dubai-based DP World, in a ruling by the London Court of International Arbitration.

The decision is the latest in a series of legal victories for DP World in a dispute which began when the Djibouti government seized control of a container terminal in the country in February last year.

However, the Djibouti authorities have declined to recognise at least one previous ruling made against them at the arbitration court and it remains to be seen how it will react to the latest decision.

The dispute centres around Doraleh Container Terminal (DCT), a company which is 33.3% owned by DP World and 66.6% by the local government’s Port de Djibouti. Although the latter has a controlling stake in DCT, a ruling by the High Court of England and Wales in August last year blocked it from interfering in the management of DCT.

Under a 30-year concession agreement signed with the government in 2006, DCT has exclusive rights to develop container handling facilities in Djibouti. The award by the tribunal includes $385m plus interest for breaching DCT’s exclusivity rights.

The tribunal also ordered Djibouti to pay $148m for the non-payment of royalties for container traffic not transferred to DCT once it became operational. Djibouti has also been ordered to pay DCT’s legal costs.

In place of DP World, the Djibouti authorities have been working with Hong-Kong based China Merchants Holdings International to develop alternative container facilities at the Doraleh Multipurpose Terminal (DMT). In February, the Wall Street Journal reported that the Chinese port operator was also asserting control at the DCT.

There has also been talk of a further development in the strategically-located Horn of Africa country, in the shape of the Doraleh International Container Terminal. DP World has warned that a further award for damages is possible if the Djibouti authorities develop that facility with another operator without first gaining DCT’s consent.

That warning appears well-founded, given the London tribunal’s latest decision. In a statement released by the Dubai government on April 4, it said the tribunal had ruled that “the facts are clear. At no stage before the decision was made to go ahead with that [DMT] facility with China Merchants did … Djibouti … offer … DCT … the right to develop the proposed container facilities … Djibouti was therefore in breach of clause 3.6.3 of the [Concession Agreement]”.

China Merchants has also been developing a free trade zone alongside the port, which DP World argues is also in contravention of DCT’s rights; that is the subject of other legal proceedings.

The dispute has led DP World to exclude DCT from its financial reporting. In its results for 2018, published last month, the Dubai port operator reported a slight dip in profits, from $1.36bn for 2017 to $1.33bn for 2018. Throughput at its ports rose 2% over the year to 71.4 million containers, while revenues were up 20% to $5.6bn.

Dominic Dudley is a freelance journalist with almost two decades’ experience in reporting on business, economic and political stories in the Middle East, Africa, Asia and Europe. Dominic Dudley

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https://www.forbes.com/sites/dominicdudley/2019/04/04/djibouti-ordered-to-pay-533m-in-compensation-in-container-terminal-dispute-with-dubai/#1ab8f0563410