DP World-Djibouti tensions boil over with ‘illegal’ seizure of container terminal

DP World accuses government of Djibouti of ‘oppressive and cynical’ conduct after DP World-run Doraleh Container Terminal seized by government in concession dispute.
DP World was awarded the right to operate the terminal in 2006, at which time it designed and built significant expansion and redevelopment of the container terminal. According to the port operator, the terminal has run at a profit for more than ten years.
DP World was awarded the right to operate the terminal in 2006, at which time it designed and built significant expansion and redevelopment of the container terminal. According to the port operator, the terminal has run at a profit for more than ten years.

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A long-running concession dispute between global port operator DP World and the government of Djibouti came to a head Thursday when the office of the country’s president issued an order terminating DP World’s contract to run the Doraleh Container Terminal.

“The Republic of Djibouti has decided to proceed with the unilateral termination with immediate effect of the concession contract awarded to DP World,” the office of President Ismail Omar Guelleh said in a statement.

The development marked the latest move in a long-running dispute between the two entities. Djibouti has accused DP World of securing unfair concession terms for the running of the terminal, but DP World has taken its case before the London Court of International Arbitration and won.

“The illegal seizure of the Terminal is the culmination the Government’s campaign to force the DP World to renegotiate the terms of the concession,” DP World said in a statement over the weekend.

“Those terms were found to be “fair and reasonable” by a London Court of International Arbitration tribunal led by Lord Leonard Hoffman and Sir Richard Aikens, both highly respected former English jurists,” the statement added.

DP World twice called the move an illegal seizure of the terminal and said it had begun new arbitration proceedings before the London Court of International Arbitration.

DP World was awarded the right to operate the terminal in 2006, at which time it designed and built significant expansion and redevelopment of the container terminal. According to the port operator, the terminal has run at a profit for more than ten years.

“The state-of-the-art Terminal is the largest employer and biggest source of revenue in the country, but since December 2017, the Government of Djibouti has sought to enforce the law against the concession contract entered into between DP World and Doraleh Container Terminal,” DP World said.

DP World, in an uncharacteristically strongly-worded statement, said that it considers the law, the attempt of the Government to enforce its terms, the purported termination and expropriation “to be in breach of the Government’s obligations under its agreements with us, in force since 2004, and international law”. 

“Moreover, the Government’s conduct is particularly oppressive and cynical. The Government only recently failed in its attempts to unravel the contracts by alleging the contracts were corrupt both before the High Court of England & Wales and before an arbitral Tribunal in London (comprising Sir Richard Aikens, Peter Leaver QC, Lord Hoffman), which dismissed the Government’s allegations that the contracts were unfair in their entirety,” the statement adds.

DP World has a 33% equity stake in the port of Doraleh (Djibouti) which has a capacity of 1.25-million TEU's. DP World says that there will be no material financial impact to the Group of the latest developments.

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