Finds Republic of Djibouti in breach of contract
Doraleh Container Terminal SA (DCT), a Djibouti port operator owned 33.34% by DP World Group, and 66.66% by Port de Djibouti S.A., an entity of the Republic of Djibouti, has been successful in the London Court of International Arbitration proceeding against the Republic of Djibouti.
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 its 2006 Concession Agreement.
The concession was signed to develop a container terminal at Doraleh, in Djibouti, specifically, and confirmed DP World’s exclusivity over all container handling facilities in the territory 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.
Further damages are possible if Djibouti develops a planned Doraleh International Container Terminal (DICT) with any other operator without the consent of DP World.
The Tribunal found that “In respect of the development of the Djibouti Multipurpose Port (DMP) facility, the facts are clear.
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]”.
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.
Litigation 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.