Friday, February 23, 2018

Government Seize Freight Container Terminal from Port and Logistics Group

Amid Cross Accusations Assets Appropriated Despite Court Decision
Shipping News Feature
DJIBOUTI – In an astonishing move by the government of Djibouti, the Doraleh Container Terminal S.A. has been 'seized' according to a statement from operating concessionaire, and 33% stakeholder, port management group DP World. The freight terminal is operated under an agreement negotiated in 2006 and has consistently produced profits every year since that time. DP World says it is the largest employer and biggest source of revenue in the country and this is a cynical move following extensive international court action.

The Djibouti government, having awarded the thirty year concession after working with DP World since 2000, stated it was rescinding the agreement in 2014 and has since demanded that the contract be renegotiated. In February 2017 DP World won an arbitration case in which the Djibouti authorities had accused the group of making illegal payments to obtain the concession.

Despite accusations that the UAE based port and logistics group had bribed the former head of the country’s Free Zone authority, these were rejected as politically inspired, and dismissed by a London Court after government evidence was discredited and with no finding of corruption. Latterly a London Court of International Arbitration tribunal comprising Lord Leonard Hoffman, Peter Leaver QC and Sir Richard Aikens, found the terms of the concession agreement to be ‘fair and reasonable’, and in December 2017 the Djibouti government continued pressing its claim for renegotiation culminating in a final demand that the contract be renegotiated by 21 February 2018.

That date having passed, the contract was unilaterally terminated by Presidential decree the following day with all assets of Doraleh Container Terminal SA appropriated by the state. The statement from DP World calls the move ‘particularly oppressive and cynical’ and it says it has been compelled to immediately commence a new arbitration against the Government in London, seeking a declaration that the contracts are valid and binding on the Government and to obtain urgent interim relief. The statement concludes:

”We demand that the Government will cease its unlawful conduct and continue to work as partners with us in the same spirit of cooperation that has been in place for the last 18 years, which has yielded hundreds of millions of dollars of direct and indirect benefits to Djibouti and enhanced its attractiveness as a leading investment destination in East Africa.”

At 18 metres Doraleh is said to be the deepest port in Africa and other stakeholders in the terminal include Chinese investors the China Merchants Group with the Port of Djibouti having strong, and expanding links with Chinese trade, a Chinese Naval base is currently under construction adjacent to the Port itself.