DP World wins UK high court judgment against Djibouti over terminal

The case was heard at the UK High Court in London. Credit: Getty Images
The case was heard at the UK High Court in London. Credit: Getty Images

DP World has won an injunction from the UK High Court forcing Djibouti to abide by its obligations under the original legal agreement signed by both parties.

Until now, the government of Djibouti has continually flouted the London International Court of Arbitration’s rulings in its dispute with DP World over management of Doraleh Container Terminal (DCT) in Djibouti’s Port of Doraleh near the Gulf of Aden. However, the Djiboutian government must now comply with the ruling or risk imprisonment of Djiboutian port officials or the seizure of assets.

“The High Court of England and Wales has granted an injunction restraining Djibouti’s port company, Port de Djibouti SA (PDSA), from treating its joint venture shareholders’ agreement with global trade enabler DP World as terminated,” a statement published on the website of the Government of Dubai Media Office said on 5 September.

The dispute has rumbled on since Djibouti unilaterally terminated the agreement in February, ostensibly shutting DP World out of its management contract at DCT, which is based on a minority shareholding.

“The high court has further prohibited PDSA from removing directors of the DCT joint-venture company who were appointed by DP World pursuant to that agreement. PDSA is not to interfere with the management of DCT until further orders of the court or the resolution of the dispute by a London-seated arbitration tribunal,” the website added.

The pronouncement of the high court in the case represents an escalation of hostilities. The findings have given Djiboutian authorities pause for thought, as their government has usually been quick to respond to DP World statements on the verdicts of international bodies, which have hitherto been limited to pronouncements by the London Court of International Arbitration, on the case.

“As soon as there is any update on this matter, we will ensure that it is circulated,” a representative of the Djibouti Ports and Free Zones Authority (DPFZA) told IHS Markit on 6 September. “Neither the government nor DPFZA has released a statement in response. At this stage, I am afraid that I am also unable to confirm whether or not they will be doing so.”

DP World said the high court’s order had followed “the unlawful attempt by PDSA to terminate the joint venture agreement with DP World and the calling of an extraordinary shareholders’ meeting on 9 September by PDSA to replace DP World-appointed directors of the DCT joint venture company.

“If PDSA disobeys the court’s order and seeks to replace DP World-nominated directors of DCT on 9 September, it may be in contempt of court and face a fine or the seizure of its assets and its officers and directors may be imprisoned,” the media office said in its statement.

The new ruling makes clear that PDSA cannot act as if the joint-venture agreement with DP World has been terminated, cannot appoint new directors or remove DP World’s nominated directors without its consent, cannot cause the DCT joint-venture company to act on the “reserved matters” (believed to be matters under continuing dispute) without DP World’s consent, and cannot instruct or cause DCT to give instructions to Standard Chartered Bank in London to transfer funds to Djibouti.

DP World said PDSA’s attempt to terminate the agreement and call the meeting to replace DP World-appointed directors of DCT was “unlawful”.

The media office said DP World had advised Standard Chartered Bank to reject any instructions that may be sent to them after the 9 September meeting. “China Merchants, which has been given operational control of the Djibouti Freezone in breach of DP World’s exclusivity rights, will also be informed, given its minority shareholding in PDSA,” it said.

The ability to attract foreign investors has always been crucial to Djibouti’s vision of turning its prime geostrategic location into a marketable commodity, and the unspoken fear is that the small east African state would come off worse in this dispute against the Gulf behemoth. The findings of the UK high court place that ability into greater jeopardy than ever.

Earlier this year, Djibouti cited World Bank Group Logistics Performance Index data that say it ranked ninth out of all African countries and fifth among the Common Market for Eastern and Southern Africa (COMESA) countries in performance. In 2017, the country opened three major ports, said to be among the most modern in Africa, as well as the continent’s first trans-border electrified railway.

“The strong logistics ranking of the country will also be a welcoming sign for new investors to Djibouti’s recently opened International Free Trade Zone,” DPFZA said.

However, a recent warming of relations between Djibouti and China, which opened Doraleh Multipurpose Port in May 2017, may give the east African port enough room to continue ignoring international court rulings, as it nestles under the wing of the world’s newest superpower.