Port of Djibouti fails to overturn concession contract with DP World
In a case that illustrates the the power of private commercial arbitration courts and tribunals, a constituent tribunal of the London Court of International Arbitration (LICA) has ruled against Djibouti's port company, Port de Djibouti S.A. (PDSA), confirming the unlawfulness of its attempt to terminate its joint venture agreement with DP World and transfer its shares to the state.
DP World, one of the world's biggest port operators, and the Government of Djibouti have been in dispute since 2012 over DP World's concession to operate the Doraleh Container Terminal, strategically located on one of the busiest shipping routes in the world, linking Europe, the Horn of Africa and the Persian Gulf.
in February 2018 Djibouti announced it was seizing the terminal from DP World, who designed, built and operated the terminal following a concession contract awarded in 2006.
DP World called the seizure illegal, and the London Court of International Arbitration (LCIA) ruled in August 2018 that the company's contract in Djibouti was valid and binding, notwithstanding the Government of Djibouti's efforts to evade its contractual obligations.
A further ruling on 10 January, 2020 ordered the Government of Djibouti to restore the terminal to DP World.
It also ordered the Djibouti government to pay damages of $485.7 million to the joint venture company (in which DP World has a one-third stake) over the breach of its exclusivity rights, and for certain unpaid royalties for container traffic handled at other ports in Djibouti.
The Government of Djibouti has yet to comply with any of these rulings, and remains in breach of its international obligations, raising the spectre of government owned assets being seized and auctioned in foreign jurisdictions to enforce the terms of the rulings against it.
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, and has been found by an international tribunal and the Commercial Court of the High Court in London to have been a "great success" for Djibouti under DP World's management.
The arbitration will proceed to a second phase to decide the damages owed by PDSA to DP World, a statement by DP World statement, published online, said.
It added that DP World would continue to pursue all legal means to defend its rights as shareholder and concessionaire in the Doraleh Container Terminal.
