Djibouti rejects awarding port operations to Dubai firm

The Djibouti government has rejected an order of arbitration that awarded control of a key port terminal to an Emirati firm – DP World.

In what could either settle or perpetuate the row over the lucrative facility, President Ismail Guelleh said on Thursday Djibouti will not honour the decision of the London Court of International Arbitration because it violates the country’s “high national interest.”

The government says the ruling is part of DP World’s continual legal war that seeks to have Djibouti disregard its national law and allow the company take all the benefits from the Dolareh Port Terminal.

“Under no circumstances can the Republic of Djibouti accept such a ruling, which was handed down in an arbitration in which it did not take part and which flouts the rules of international law,” President Guelleh said in a statement.

“These rules allow a sovereign State to terminate any contract for reasons of higher national interest subject to the payment of fair compensation.”

The terminal is an important facility for landlocked Ethiopia. But the larger part of the port, a key gateway for shipping to Europe and Asia, is run by China Merchants Port Holdings, a Hong Kong based conglomerate, under a concession with the Djiboutian government.

Earlier this month, DP World indicated it had been awarded back the terminal after a sole arbitrator appointed by the London Court of International Arbitration issued a new arbitral award for the container terminal of Doraleh.

The company said an independent assessor had estimated that the cancellation of its concession agreement in February 2018 had caused it $1 billion in losses. This ruling indicated Djibouti authorities had “acted illegally when it forcibly removed DP World from management of the terminal …and transferred the Terminal assets to a state-owned entity.”

DP World had pursued the challenge in court, winning six times in the London Court of International Arbitration and the High Court of England and Wales, all of which Djibouti rejected.

The Doraleh Container Terminal agreement had been signed in 2016 as a joint venture between the Djibouti International Port Authority and DP World. In November of 2017, the Djibouti Parliament passed a law that made the deal illegal.

Under the deal, the Djibouti government had a two-thirds stake in the venture but claimed that the terminal had come under the de facto control of DP World.

The country nationalised the terminal in September 2018, bringing under its control an essential facility for supplies to neighbouring landlocked Ethiopia.

“DP World's operation of the terminal had proved to be contrary to the fundamental interests of the nation.

“Its continuation would have seriously harmed Djibouti's economic and social priorities by placing unacceptable restrictions on its development policy and giving a foreign-owned company total control over one of its most strategic infrastructure,” President Guelleh said in the statement.

Djibouti says the Doraleh container terminal had not been operated to its full potential by DCT in order ostensibly to avoid rivalling the company’s operations in Dubai, and that it refused a renegotiation. Now Djibouti says its operations have risen by a third.

“As the Republic of Djibouti has consistently indicated since the termination of the concession, the only possible outcome is allocation of fair compensation in accordance with international law.”