Djibouti has accused Dubai state-controlled DP World of infringing on the East African nation's sovereignty and refusing a fair settlement in the high-stakes struggle over operation of the strategic port.
In an exclusive statement to TradeWinds, Djibouti authorities claimed Dubai's state-controlled DP World of seeking to "take control over the whole of Djibouti's coastline and beyond". But DP World representatives pointed to a series of arbitration awards in its favour showing that Djibouti has seized its terminal there illegally.
DP World and the Djibouti Ports & Free Zones Authority (DPFZA) are fighting over the aborted joint venture Doraleh Container Terminal, which DP World developed and opened in 2008 under a long-term contract.
In February 2018, after a long-simmering feud, Djibouti replaced DP World with a newly created state-owned entity as operator after direct intervention by the Republic of Djibouti's legislature long-time ruler Ismail Omar Guelleh.
DPFZA claims it had good reasons.
"The contract linking DP World and [Doraleh] placed unacceptable restrictions on Djibouti’s sovereignty as it prevented Djibouti from developing any port infrastructure on its own territory," DPFZA officials told TradeWinds through a London representative.
A London Court of International Arbitration (LCIA) panel has agreed with DP World that the contract was not subject to legislative renegotiation.
"Real intention to take control"
DPFZA claimed DP World had rejected "the Djiboutian government's legitimate demands to redress an inherently asymmetrical relationship" before it was evicted and has afterwards refused reasonable settlement offers.
"The Republic of Djibouti and the DPFZA have repeatedly tried to negotiate a fair compensation with DP World," wrote the officials.
"We remain convinced that a compensatory settlement is the only option in line with international law. However, it appears that DP World's real intention is not to seek compensation; it is to take control over the whole of Djibouti’s coastline and beyond, in order to serve their own infrastructure assets."
Port activity has increased by 30% since the DP World left, claimed the DPFZA, who blamed DP World for not developing Doraleh's full potential under the contract.
"Its continuation would have seriously harmed Djibouti’s economic and social priorities by placing unacceptable restrictions on its development policy and giving a foreign-owned company total control over one [part] of its most strategic infrastructure,” the officials told TradeWinds.
DP World declined to make officials available to be interviewed but said through the representative that it remains the legal concession holder.
“The government of Djibouti acted illegally in seizing the Doraleh Container Terminal in 2018," DP World said in a prepared statement.
"Six substantive rulings have been made in DP World’s favour in the LCIA and the High Court of England and Wales. We are seeking damages for the period we have been excluded from the concession, and will not give up pressing for the government to restore DP World’s rights and benefits as ordered by the courts."
TradeWinds has previously reported on litigation in the US and Hong Kong in support of the London arbitration, in which different sums are mentioned based on successive LCIA awards on different aspects of the claim.
Global political hotspot
Local and global politics have played a role in the feud at Djibouti, where the navies of both the US and China operate bases and where China is said to hold 70% of Djibouti's sovereign debt because of Belt and Road Initiative infrastructure financing.
DP World originally took on management of an older general cargo port there in 2000, soon after president Ismail Omar Guelleh came to power. In 2006, it won a long-term exclusive contract to develop and operate a new container terminal, which opened for business in December 2008.
In 2012, China Merchants Port Holdings began running the old terminal — in breach of its rights, DP World complained. But Guelleh's government warmed to DP World's Chinese rival and brought an LCIA arbitration to push DP World out.
The earlier panel rejected Djibouti's claims that DP World had bribed its way to its 2006 concession. But in February 2018, Guelleh ousted DP World and DP World commenced an arbitration of its own, which continues.
On 9 April, Guelleh won re-election to a fifth consecutive term as president, claiming the support of over 98% of Djibouti's electorate.
DP World reported Ebitda of $3.32bn on revenues of $8.53bn in 2020, and gross throughput of 71.2m teu at all terminals in which DP World has an equity interest.
