Dubai-Based Cargo Operator, DP World Sues China Merchants Port for Persuading Djibouti to Breach Various Agreements

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DP World Limited, a Dubai-based international port operator, and its subsidiaries has taken legal action against China Merchants Port, a Hong Kong based cargo company, for building an international free zone on a terminal being disputed with Djibouti.

The lawsuit was filed in the High Court of Hong Kong for unlawfully procuring and inducing the Republic of Djibouti to breach various agreements between the African country and DP World.

In the lawsuit, DP World sought damages, interest, and a declaration that China Merchants unlawfully procured and induced Djibouti’s breaches of its agreements with DP World.

When the contract between DP World Limited and the Republic of Djibouti was signed, both parties seemed satisfied with the business deal and pledged to respect the terms of the agreement.

Under these agreements, Djibouti granted DP World Limited exclusive rights over port and free zone facilities within Djibouti, including container handling facilities, and DP World constructed, developed, and managed a state-of-the-art container terminal at Doraleh – an extension of Djibouti’s Port – that is jointly owned by DP World (33.34%) and a Djibouti state-owned entity, PDSA (66.66%).

In 2013, China Merchants bought 23.5% of PDSA from Djibouti.

China, which has the only foreign military base near the Red Sea terminal, developed and financed the free trade zone as it considers Djibouti an important part of its $1 trillion ‘Belt and Road’ global investment initiative.

DP World Limited, which operates 78 ports in more than 40 nations, warned that the “illegal seizure of the facility does not give the right to any third party to violate the terms of the concession agreement.”

UAE ports operator DP World Limited has vowed to continue defending its rights as a shareholder in Djibouti’s Doraleh Container Terminal, after it was nationalised.

“DP World will continue to pursue all legal means to defend its rights as a shareholder and concessionaire in Doraleh Container Terminal in the face of Djibouti’s blatant disregard for the rule of law and respect for commercial contracts,” the government of Dubai said in a statement.

The president of Djibouti enacted a decree on September 9th, 2018 purporting to transfer the private entity Port of Djibouti’s shareholding in the Doraleh terminal to the country’s government.

The move to nationalise the terminal and escalate the battle with the UAE company comes after a UK tribunal ruled that Djibouti’s cancellation of DP World’s contract to run Doraleh terminal in February was unlawful.

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