DP World awarded $385m compensation in Djibouti port dispute

A London Court has awarded global ports operator DP World $385m in compensation  after the government of Djibouti excluded DP World from previously-agreed development opportunities. Including unpaid royalties the award will total $533m.

In February 2018 Djibouti’s government unilaterally terminated DP World’s lease for the operation of DCT, the country’s main primary container terminal, situated at the mouth of the Red Sea. Djibouti’s action followed years of disagreements over the terms of the original lease. President Ismail Omar Guelleh said at the time that the move was served “the higher interests of the nation, in particular those relating to the sovereignty of the state and the economic independence of the country”.

Port de Djibouti SA (PDSA) took over the operation of the port and DP World sued to regain control of assets.

On August 31 last year the court issued an injunction against PDSA, ordering that it must not act as though its JV with DP World had been terminated, must not remove any DP World board members, and must not use London-based Standard Chartered Bank to transfer funds to Djibouti.

Djibouti broadly ignored the ruling. Since then it has been cooperating with China Merchants Port Holdings (CM Port) on port-related development projects, despite its exclusive concession agreement with DP World.

One of those projects included the construction Doraleh Multipurpose Port (DMP), built and operated by CM Port.

DP World initiated separate arbitral proceedings before the London Court of International Arbitration about Djibouti’s partnership with CM Port on the deal, and the court has now issued a binding ruling. According to the government of Dubai, the court found that Djibouti improperly gave CM Port the right to develop the Doraleh Multipurpose Port without first offering the opportunity to DCT, in which DP World holds a 33% stake.

An additional arbitral proceeding continues over Djibouti’s partnership with CM Port for a free trade zone. DP World has threatened to launch a third suit if Djibouti follows through with its plans to work with another company to build a new container terminal.