Djibouti slapped with $385m bill for breach of port contract

April 5, 2019 in Business, Companies, Finance, Foreign News, Infrastructure, Transport by Editor

The gist of the dispute is that the Djibouti government pulled out of the joint venture last year which notably included a 30-year concession to DP World to manage the port.

April 5—Authorities in Djibouti have been put in a tight and expensive spot after an arbitration court in London decided they had breached provisions in a joint venture, Doraleh Container Terminal SA (DCT) with partners, DP World, the Dubai-based logistics firm.

This week the London Court of International Arbitration ordered Djibouti to pay DCT $385 million plus interest for breach of DCT’s exclusivity by development of container facilities at Doraleh Multipurpose Terminal. DP World is a global port operator that was founded in 2005 by a merger of Dubai Ports Authority and Dubai Ports International.

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

This now calls into question the legality of the Djibouti government’s subsequent deal with China Merchants Holdings International Company Limited for operating the much prized Doraleh Container Terminal. Although not a complete surprise, the ruling strengthens a growing view that China can arm twist countries that are highly indebted to Beijing.

Djibouti’s total debt is nearly 90 pc of its GDP and most of the money is owed to China. Getting the Doraleh facility into Chinese hands through China Merchants Holdings, was widely seen as a way to please a powerful creditor. Doraleh has been described as the most technologically advanced container terminal port on the African continent and would fit in well with China’s Belt and Road Initiative.

The gist of the dispute is that the Djibouti government pulled out of the joint venture last year which notably included a 30-year concession to DP World to manage the port. Disagreements between the two venture partners had been brewing since 2014 after Djibouti authorities claimed DP World was involved in questionable business practices. Despite denials, DP World was soon told to vacate the terminal.

During the past year, DP World has sought legal redress both in London and Hong Kong where China Merchants Holdings International is domiciled.

The Tribunal has also ordered Djibouti to pay DCT $148 million 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.