Djibouti loses court case to Dubai’s DP World venture

The London Court of International Arbitration has ordered the government of Djibouti to pay $385 million to a venture part-owned by Dubai-based global ports operator DP World over breach of contract.

Djibouti was ordered o pay Doraleh Container Terminal (DCT) the amount plus interest for breach of its exclusivity over port operations in Djibouti.

The Djibouti port operator DCT is 33.34 percent owned by DP World, and 66.66 percent by Port de Djibouti, an entity of the Republic of Djibouti.

The tribunal found that by developing new container port opportunities with China Merchants Holdings International Co., a Hong-Kong-based port operator, Djibouti breached DCT’s rights under a 2006 concession agreement to develop a container terminal at Doraleh, in Djibouti.

The terminal had been run by DP World, but Djibouti unilaterally canceled the contract. Under the 2006 agreement DCT had exclusivity over all container handling facilities in the territory of Djibouti.

Further damages are possible if Djibouti develops a planned Doraleh International Container Terminal, DICT, with any other operator without the consent of DP World, according to UAE state news agency WAM.

China Merchants also operates a $3.5 billion free trade zone it developed under an agreement with Djibouti, which the UAE government said was 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, WAM reported. Djibouti is also ordered to pay DCT’s legal costs.

The London tribunal, which follows four other substantial rulings in DP World’s favor, recognized that the 2006 concession agreement remains valid and binding.