Court rules DP World Djibouti contract is ‘valid and binding’

The arbitration court rules the operator’s Doraleh terminal agreement in the African nation is ‘valid and binding’

A tribunal of the London Court of International Arbitration has ruled against the Djibouti government’s seizure of the Doraleh Container Terminal from D P World in February.

The decision highlighted the arbitrary nature of the African nation’s move against the world’s fourth-biggest ports operator.

The tribunal said the concession agreement awarded to D P World in 2006 to operate the terminal “remains valid and binding notwithstanding Law 202 and the 2018 decrees”, the Dubai Government’s media office said in a statement citing the LCIA tribunal ruling.

The law and decrees enacted by the Djibouti government to evade its contractual obligations were found to be ineffective, and DP World has said it will now “reflect on the ruling and review its options”.

“The tribunal, comprised of Zachary Douglas, has definitively confirmed that the concession agreement, which is governed by English law, remains binding and in force,” D P world said.

In 2017, the terms of the concession were found to be “fair and reasonable” by another LCIA tribunal.

In February, authorities in Djibouti abruptly cancelled D P World’s contract to run the terminal and seized its facilities, which the port operator had designed, built and operated and turned into one of the biggest employers and the leading revenue earner in the country.

D P World in July threatened legal action against third parties if they violated its concession agreement for Doraleh Terminal, following news reports regarding the opening of the first phase of the Chinese-built International Free Trade Zone.

In June, the Nasdaq-Dubai listed company – which operates businesses in more than 40 countries – rejected the idea of an out-of-court settlement in its dispute with the Djibouti government. It remained committed to operating the port as per the original agreement of the concession, and would “not consider any other alternative settlement option”, a spokesman said at the time.

A London court has ruled against the Djibouti government’s seizure of the Doraleh Container Terminal from DP World, confirming the illegitimacy of the African state’s move, the port operator said Thursday.

The London Court of International Arbitration said that the concession agreement awarded to DP World in 2006 to operate the terminal “remains valid and binding notwithstanding Law 202 and the 2018 decrees”, the port operator said in a statement citing the LCIA tribunal ruling.

The law and decrees enacted by the Djibouti government to evade its contractual obligations were found to be ineffective in law and DP World will now “reflect on the ruling and review its options”, it said without providing further details of what those options are.

In February, Djibouti authorities abruptly cancelled DP World’s contract to run the terminal and seized its facilities, which the port operator had designed, built and operated.

The UAE denounced Djibouti’s termination of DP World’s concession, calling it an “arbitrary” breach of a signed agreement. DP World said the move to take control of the port was illegal and began court proceedings. The concession terms were found to be “fair and reasonable” in 2017 by another LCIA tribunal led by Lord Leonard Hoffmann, Peter Leaver and Richard Aikens.

The seizure of the terminal followed the government’s campaign to force DP World to renegotiate the terms of the concession. It enacted Law 202 in Djibouti, which purports to empower the government to terminate its infrastructure agreements, which compelled DP World to commence a new arbitration in February 2018 seeking a declaration that the 2006 agreement was valid and binding.

“The Tribunal, comprised of Zachary Douglas, has definitively confirmed that the concession agreement, which is governed by English law, remains binding and in force notwithstanding the government’s purported termination of it under Law 202,” DP world said on Thursday.

Earlier in July, the company threatened legal action against third parties if they violated its concession agreement for Doraleh Terminal, following news reports regarding the opening of the first phase of the Chinese-built International Free Trade Zone.

DP World said it is in violation of the company’s exclusive management rights it holds and it “reserves the right to take all available legal actions, including claims for damages against any third parties that interfere or otherwise violate its contractual rights.”

In June, DP World said it would not consider an out-ofcourt settlement in its dispute with the Djibouti government.

“We remain committed to operating Doraleh port as per the original agreement of the concession, and we will not consider any other alternative settlement option,” a company spokesperson said at the time.

Despite challenges in Africa, the Dubai port operator remains bullish on the potential for growth in the continent and has continued to expand there.

In July, the Nasdaq Dubai-listed company said it will build and operate a logistics hub in Mali under a 20-year concession agreement.

In May, DP World signed a preliminary agreement with Egypt’s Suez Canal Authority and government to jointly develop a new inland container depot.

It also won a 30-year concession to develop a $1 billion deepwater port along the Democratic Republic of Congo’s Atlantic coast in March.

Last month DP World revealed global gross container volumes grew 4.8 per cent on a reported basis in the first six months of the year compared to the same period in 2017 and 6 per cent on a like-for-like basis, which does not include new capacity additions.

The law and decrees enacted by the Djibouti government to evade its obligations were found to be ineffective in law