A Tribunal from the London Court of International Arbitration has ordered the Republic of Djibouti to compensate Doraleh Container Terminal SA (DCT), a Djibouti port operator, for breaking an agreement in regard to the country’s port.
The Tribunal has found that by developing new container port opportunities with China Merchants Holdings International Co Limited (China Merchants), a Hong-Kong based port operator, Djibouti has breached DCT’s rights under a 2006 Concession Agreement to develop a container terminal at Doraleh, in Djibouti, specifically, its exclusivity over all container handling facilities in the territory of Djibouti.
DCT is 33.34% owned by Dubai’s DP World Group, and 66.66% by Port de Djibouti S.A., an entity of the Republic of Djibouti.
The Tribunal ordered Djibouti to pay DCT $385 million plus interest for breach of DCT’s exclusivity by development of container facilities at Doraleh Multipurpose Terminal, with further damages possible if Djibouti develops a planned Doraleh International Container Terminal (DICT) with any other operator without the consent of DP World.
“In respect of the development of the Djibouti Multipurpose Port (DMP) facility, the facts are clear,” the Tribunal ruled.
“At no stage before the decision was made to go ahead with that facility with China Merchants did … Djibouti … offer … DCT … the right to develop the proposed container facilities at the DMP. Djibouti was therefore in breach of clause 3.6.3 of the Concession Agreement,” said the team in a statement released this week.
China Merchants also operates a $3.5 billion free trade zone it developed pursuant to an agreement with Djibouti, in contravention of DP World’s exclusive right to develop and operate such a free zone under its own concession, which is the subject of other litigation proceedings.
The Tribunal also ordered Djibouti to pay DCT $148 million for historic non-payment of royalties for container traffic not transferred to DCT once it became operational. Djibouti is also ordered to pay DCT’s legal costs.
The Tribunal’s Award recognises that the 2006 Concession Agreement remains valid and binding, as has also been confirmed by another LCIA arbitration tribunal and the London courts.
This is the fifth substantial ruling in DCT and DP World’s favour on disputes relating to the Doraleh terminal. DCT and DP World continue to seek to uphold their legal rights in a number of legal fora, following Djibouti’s unlawful efforts to expel DP World from Djibouti and transfer the port operation to Chinese interests.
A case against China Merchants also continues before the Hong Kong courts. DP World has previously issued public notices, following the confirmation of the validity of the 2006 Concession Agreement in a judgment in 2018, warning others against interfering with its and DCT’s concession rights.