British Court Rejects Djibouti Port Company’s Bid to Escape Contract with DP World

  • 7/13/2021
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Dubai announced on Monday that an Arbitral Tribunal of the London Court of International Arbitration (LCIA) has ruled against Djibouti’s port company, Port de Djibouti S.A. (PDSA), in its dispute with DP World, confirming the unlawfulness of its effort to terminate its Joint Venture Agreement and transfer its shares to the State. The Tribunal has now ruled that PDSA breached the Joint Venture Agreement by wrongfully attempting to terminate it, and by engaging in the attempted transfer of its shares to the Government. PDSA is 23.5 percent owned by China Merchants Port Holdings Company Ltd of Hong Kong (China Merchants), and the rest of its shares are held by the Government of Djibouti. The Tribunal ruled that the Joint Venture Agreement was not terminated and remains in full force and effect. It also ruled that PDSA remains a shareholder in the joint venture, and the attempted transfer of its shares to the Government had no effect. The arbitration will now proceed to a second phase to decide the damages owed by PDSA to DP World. PDSA has also been ordered to reimburse DP World’s legal costs to date for GBP 1.7 million. The new ruling is the seventh decision by an international court or tribunal in favor of DP World in its ongoing dispute with Djibouti. DP World has reiterated that it will continue to pursue all legal means to defend its rights as shareholder and concessionaire in the Doraleh Container Terminal in the face of the Government’s blatant disregard for the rule of law and respect for binding commercial contracts. It has also highlighted that despite three years having passed, the Government is yet to come forward with any offer of compensation to find a negotiated settlement to the dispute. The Doraleh Container Terminal, the largest employer and biggest source of revenue in the country, has operated at a profit every year since it opened and has been found by an international tribunal and the English Commercial Court to have been a “great success” for Djibouti under DP World’s management. On February 23, 2018, the Government illegally seized control of the Doraleh Container Terminal from DP World, which designed built, and operated the terminal following a concession awarded in 2006. Until the seizure, the Terminal was being managed under a joint venture between DP World and PDSA. In July 2018, PDSA unilaterally declared that its Joint Venture Agreement with DP World was terminated. PDSA also tried to remove DP World’s nominated directors from the joint venture company to seize control of that company. DP World approached the High Court of England & Wales and secured an injunction against PDSA to restrain it from doing so until the Tribunal had the opportunity to rule on the dispute.

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