DP World sues China Merchants Port Holdings over Djibouti Port

DP World sues China Merchants Port Holdings over Djibouti Port

DP World has sued China Merchants Port Holdings Company (CM Port) over infringement of its exclusive port agreement with the Djibouti government.

The UAE-based port operator accused CM Port of causing the Djibouti government to revoke DP World’s exclusive right to run the country’s ports in a legal filing obtained by FactWire.

The concession agreement between DP World and the Djibouti government took effect in February 2004 for a period of 30 years with the option for two 10-year renewals.

According to DP World, it gave the port operator “full and exclusive right to establish, develop and operate” the Doraleh Container Terminal (DCT).

The original concessional agreement also stated that Djiboutian authorities were unable to grant concessions for any other port capable of handling ocean-going vessels or free zone facilities within the country for the duration of the agreement.

To develop and run the terminal, DCT S.A. was set up – a joint venture in which the Djibouti authorities owned 66.66% of DCT’s shares while DP World held 33.34%.

The Djibouti government expressed dissatisfaction with its agreement with DP World, once DCT commenced operations in 2009, as it claimed it hindered the economic and social development process of the Republic of Djibouti.

In 2012, the Djibouti authorities and CM Port signed a strategic partnership agreement following negotiations over the development of ports and free-trade projects in the nation.

The Djiboutian authorities sold 23.5% of its shares in DCT to CM Port, effectively allowing the company to hold 15.67% of the shares according to the UAE-based firm.

In the legal filing submitted to Hong Kong Kong High Court in August 2018, DP World claimed this contradicted its agreement as Djibouti was bypassing its contractual obligations and implementing its partnership with the Chinese firm.

In 2014, CM Port and Djibouti decided to build the Doraleh Multipurpose Port and the facility began operations in mid-2017 which DP World also claimed was a contradiction of the operational agreement.

According to the UAE port operator, Djibouti attempted to revoke its exclusive agreement through allegations of corruption.

The government sued former presidential confidante Abdourahman Boreh, who was involved in the negotiation and execution of the agreement between the two parties, twice in 2012 and 2017.

The first case was thrown out of the High Court of England and Wales and in the second case at the London Court of International Arbitration (LCIA) the charges were dismissed as the court found no corruption was involved.

The Djibouti authorities seized the port from DP World in February 2018, in a move ruled illegal by the LCIA, due to poor performance as it claimed DCT had only achieved 57% of its total capacity since 2008.

Djibouti also claimed that the port operator was deliberately slowing down performance in favour of its main terminal in Jebel Ali and it also hit out against “irregularities” in the operational agreement.