Djibouti ordered to pay US$385m to DCT

DCT Credit: Skilla1st [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]
Industry Database

DP World secured another legal victory this week when the Djibouti government was ordered to pay US$385m plus interest to Djibouti port operator Doraleh Container Terminal (DCT) for breaching its exclusivity rights by developing container facilities at Doraleh Multipurpose Terminal.

Ruling on the case of DCT, 33.34% owned by DP World Group and 66.66% by Port de Djibouti S.A., an entity of the Republic of Djibouti, the London Court of International Arbitration (LCIA) found that by developing new container port opportunities with Hong-Kong based port operator China Merchants, Djibouti breached the rights of DCT under the 2006 Concession Agreement to develop a container terminal at Doraleh. Djibouti was also found to have breached DCT’s exclusivity over all container handling facilities in the territory of Djibouti.

Additional payment

The Tribunal also ordered Djibouti to pay DCT US$148m for historic non-payment of royalties for container traffic not transferred to DCT once it became operational. Djibouti is also ordered to pay DCT’s legal costs.

In February 2018, the government of Djibouti took control of the terminal, arguing the terms of the agreement had been broken and that DP World had underperformed. In August 2018, an arbitral tribunal of the LCIA ruled that the Government of Djibouti’s seizure of the Doraleh Container Terminal from DP World was illegal because the latter’s concession agreement remains valid.

Warning

The tribunal said that further damages are possible if Djibouti develops a planned Doraleh International Container Terminal (DICT) with any other operator without the consent of DP World.

China Merchants also operates a US$3.5bn free trade zone it developed pursuant to an agreement with Djibouti, in contravention of DP World’s exclusive right to develop and operate such a free zone under its own concession, which is the subject of other litigation proceedings.

DP World said it had "no further comment to make".

By Rebecca Jeffrey

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