Dubai: The Djibouti government’s seizure of control of Doraleh Container Terminal from DP World was illegal, an Arbitral Tribunal of the London Court of International Arbitration (LCIA) ruled on Thursday.
As a result, DP World’s 30-year concession to operate the port “remains valid and binding” and laws and decrees issues to the contrary by the Djibouti government were devices to avoid its contractual obligations, the tribunal ruled.
DP World will now reflect on the ruling and review its options, the firm said in a statement issued by the Dubai Media Office.
DP World built the Doralah Container Port under concession from the Djibouti government in 2006, following a previous deal to run the Port of Djibouti signed in 2000. Under the deal, Djibouti retains 67 per cent ownership of the Doraleh terminal, while DP World owns 33 per cent.
The terminal, which opened in 2009, has three berths, just over a kilometre of quay capable of accommodating Super-Post-Panamax ships, and a capacity of 1.2 million twenty-foot equivalent units (TEUs).
At the time, Djibouti president Esmail Omar Guelleh said: “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 His Highness Shaikh Mohammad Bin Rashid Al Maktoum, for whom we harbour deep respect and gratitude”.
But more recently, the Djibouti government sought to change the terms of the concession. DP World went to arbitration, winning a ruling from the LCIA that the existing terms were “fair and reasonable”.
Later that year, the Djibouti government passed a law — Law 202 — allowing it to terminate infrastructure agreements, and in February, it seized control of the Doraleh terminal, by that time the country’s largest employer and largest single source of revenue, prompting the latest arbitration claim from DP World.
In March, a week after the Doraleh seizure, DP World announced it had reached a new agreement regarding the Port of Berbera in Somaliland, with the government of landlocked Ethiopia acquiring a 19 per cent stake and promising to invest in the port as a trade gateway.
Under the new deal, DP World would retain 51 per cent ownership of the Port of Berbera, with Somaliland retaining 30 per cent ownership.
Announcing that deal, DP World Chairman Sultan Ahmad Bin Sulayem said, “The ports of Berbera and Doraleh will provide significant capacity to the region. Both these ports and more capacity will be needed to serve the region’s growth potential in the future.”
He added: “The economies of the region are growing at a pace that needs the development of Berbera supplementing Djibouti and additional gateways in the future”.