High Court continues injunction against state-controlled Port de Djibouti

The High Court in London has continued its injunction prohibiting the state-controlled Port de Djibouti S.A. (PDSA) from interfering with the management of the joint venture company, Doraleh Container Terminal SA (DCT). The injunction was first issued on August 31st, prohibiting PDSA, as shareholder in DCT, from acting as if the joint venture agreement with DP World had been terminated.

The continuation of the injunction followed the enactment of an ordinance by the President of Djibouti on September 9th that purported to transfer PDSA’s shares in DCT to the Government of Djibouti.

The Government claimed that it was acting to protect the fundamental interests of the nation of Djibouti and the legitimate interests of its partners.

DP World said that, following the hearing on September 14th when PDSA failed to appear despite being notified, the Court ordered that the injunction would continue until it made a further order or an award of the arbitration tribunal at the London Court of International Arbitration that would be formed imminently to consider the shareholding dispute with DP World.

The Court also acceded to DP World’s request and extended the injunction to include any ‘affiliate’ of PDSA. Under the JV Agreement, PDSA’s affiliates include the Government. PDSA is 23.5% owned by China Merchants Port Holdings Company of Hong Kong.

The Court ordered that PDSA must ensure that any transferee of DCT shares was legally bound by the Joint Venture Agreement and Articles of Association in the same way as PDSA. The ruling means neither the Government nor PDSA can control DCT or give valid instructions to third parties on behalf of DCT without DP World’s consent.

The Government filed an arbitration against DP World seeking to rescind the Concession Agreement, claiming its terms were unfair to the Government. The London Court of International Arbitration tribunal (comprising Sir Richard Aikens, Lord Hoffmann, Peter Leaver QC) ruled against the Government, finding the terms were fair and there was no bribery.

Counterclaims raised by DCT and DP World in relation to DP World’s exclusive right to container handling facilities in Djibouti remain to be decided by the Tribunal.

Another LCIA Tribunal held that the 2006 Concession Agreement was valid, notwithstanding the Government’s attempts to terminate it through legislation and decrees. DP World’s claims for damages against the Government will be determined in these proceedings.

DP World has said that the Djibouti Government has not offered any compensation.

DP World said that this was “yet another in a series of rulings – all in favour of DP World – that demonstrate Djibouti’s continuing disregard for the rule of law. We underline our belief that companies intending to operate in such a country or already operating there need to seriously consider their dealings with this Government in the face of such behaviour.”