Arbitration court rules against Djibouti port seizure

14 August 2018

An international court of arbitration has ruled against the Djibouti government’s seizure in February of the Doraleh Container Terminal (DCT) from Dubai-based DP World.

But the London Court of International Arbitration (LCIA) ruled that the terminal’s concession agreement remained “valid and binding notwithstanding Law 202 and the 2018 Decrees”.

The African state had “asserted its legal right” to take over the port because it was consistently underperforming under DP World’s management. Around the time of the seizure, the Djibouti government had enacted Law 202, giving itself the power to terminate its infrastructure agreements. But the tribunal found that it was ineffective in law.

The Djibouti government said in a statement it did not acknowledge the decision of the LCIA.

DP World responded by saying the comments demonstrated that “Djibouti does not recognise the international rule of law”.

“The court’s decision upholding the continuing validity of the concession is based on recognised principles of international law and is internationally binding both on the Djibouti government and so far as third parties are concerned,” said DP World.

“As the court has held, Djibouti does not have sovereignty over a contract governed by English law. It is well established that, in the absence of an express term to that effect, an English law contract cannot be unilaterally terminated at will. The contract therefore remains in full force and effect.”

This development came several months after tensions over the terms of the DCT’s 2006 concession agreement came to a head with Djibouti authorities seizing control of the port.

Dijibouti Ports and Free Zones Authority took back the contract “in light of the recent poor performance of the DCT” and to “rectify irregularities in the agreement covering its operation”, the government said in a statement.

Dubai state media claimed the port seizure was part of Djibouti’s plan to force DP World to renegotiate the terms of the 2006 contract. DP World began arbitration in February 2018, seeking a declaration that the original agreement was valid and binding.

In 2017, a different LCIA tribunal ruled the DCT’s concession terms were “fair and reasonable”.

DCT was inaugurated in 2009 and is an extension of the Port of Djibouti. It has a handling capacity of 1.2m twenty-foot equivalent units.

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