London Court of International Arbitration finds the Djiboutian Government’s Seizure of Doraleh Terminal Illegal

Disputes, Legal, Port Conditions, Ports & Terminals — By on August 2, 2018 at 12:14 PM

Tribunal declares validity of the concession agreement

DUBAI, United Arab Emirates, August 2, 2018/ — An Arbitral Tribunal of the London Court of International Arbitration (“LCIA”) today confirmed the illegitimacy of the Government of Djibouti’s action of seizing control of the Doraleh Container Terminal from DP World (http://web.DPWorld.com).  The LCIA Tribunal has ruled that Doraleh Container Terminal’s Concession Agreement “remains valid and binding notwithstanding Law 202 and the 2018 Decrees”.  Law 202 and the referenced decrees were devices enacted by Djibouti to seek to evade Djibouti’s contractual obligations, and these have been found to be ineffective in law.  DP World will now reflect on the ruling and review its options.

On 22 February 2018, the Government illegally seized control of the Doraleh Container Terminal from DP World, who designed, built and operated the terminal following a concession awarded in 2006. The Terminal is the largest employer and biggest source of revenue in the country, has operated at a profit every year since it opened, and has been found to have been a “great success” for Djibouti under DP World’s management.

The illegal seizure of the Terminal followed the Government’s campaign to force DP World to renegotiate the terms of the concession. The Concession terms were found to be “fair and reasonable” in 2017 by another LCIA tribunal led by Lord Leonard Hoffmann, Peter Leaver QC and Sir Richard Aikens, all highly respected English jurists.

Following the enactment of Law No. 202 in Djibouti, which purports to empower the Government to terminate its infrastructure agreements, DP World was compelled to commence a new arbitration in February 2018 seeking a declaration that the Concession Agreement was valid and binding on the Government. The Tribunal, comprised of Professor Zachary Douglas QC, 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 is a leading enabler of global trade and an integral part of the supply chain. It operates multiple yet related businesses – from marine and inland terminals, maritime services, logistics and ancillary services to technology-driven trade solutions.

With a portfolio of 78 operating marine and inland terminals supported by over 50 related businesses in over 40 countries across six continents with a significant presence in both high-growth and mature markets, the company enjoys strong relationships with governments around the world, working in partnership to strengthen economies through investment in infrastructure and the implementation of smart trade solutions.
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DP World Doraleh (Djibouti) – facts at a glance

Concession agreement signed in 2006
Shareholding structure: 67% government of Djibouti and 33% DP World
Quay length: 1,050 metres
Number of berths: 3
Annual capacity: 1.2 million TEU
Built and operated by DP World, Doraleh Container Terminal (DCT), is widely recognised as the most advanced container terminal on the east coast of Africa, enabling safe, smooth and efficient movement of cargo in and out of the country. The terminal is Djibouti’s single biggest employer and is responsible for creating thousands of jobs – both directly and indirectly – for people in the local community

Background

2009: Official opening of Doraleh Container Terminal in the presence of The President of Djibouti Ismail Omar Guelleh, Sultan Ahmed bin Sulayem, Sheikh Ahmed Bin Mohammed bin Rashid Al Maktoum.
The ceremony was attended by more than 400 local and foreign guests. President Guelleh’s statement on DP World and Dubai’s contribution to Djibouti’s growth: ”By constructing and inaugurating this terminal, the long-thought dream of the people of Djibouti has turned into a tangible reality thanks to support lent by Vice President and Prime Minister of the UAE and Ruler of Dubai H. H. Sheikh Mohammed bin Rashid Al Maktoum, for whom we harbour deep respect and gratitude.

2000: DP World and the Djibouti Government establish a joint venture to operate the Port of Djibouti.
The partnership leads to the joint venture building the nearby Doraleh Container Terminal.
Stimulates the economy, supports trade, creates jobs.
Doraleh has capacity to handle 1.2 million TEU (twenty-foot equivalent container units) annually, the largest and most modern terminal in East Africa. Its 18 metre draft and 1050 metre quay handle the largest ships in service, including 10- 15,000 TEU “Super-Post-Panamax” vessels. Capacity at the terminal is set to grow in line with market demand to around 3m TEU over time.
Djiboutian trainees contribute to operations at the company’s other African terminals, such as Dakar, Senegal.
Following the official opening, DP World Chairman launches the newest wing of the Kempinksi Djibouti Palace Hotel, a Nakheel Hotels project.
Djibouti President and Sheikh Ahmed Bin Mohammed Bin Rashid Al Maktoum open a 16 km road linking Djibouti with the new terminal, donated by Sheikh Mohammed and named after him. The USD 21 million road has four lanes in both directions

DP World Contribution to Djibouti’s Economy

As a foreign investor that has invested millions of USD in the country, DP World has added greatly to the economy of Djibouti throughout the years.
It has consistently contributed 12% to Djibouti GDP
It has grown origin and destination cargo by 380% in the last 14 years
It grew volumes over 70% in 2017 and was aiming for 80% in 2018

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