Monday, August 6, 2018

Government Refuses to Accept Court Ruling Over Management of Container Freight Terminal

Despite Initiating Legal Action in London it Seems Negative Result Unpalatable to Djibouti
Shipping News Feature
DJIBOUTI – DUBAI – UK –The government of the east African state which lies on the Gulf of Aden seems to have painted itself into a corner on the question of the status and ownership of the Doraleh container freight terminal and its seizure from concessionaries DP World, a subject which we have written on at length previously. After a series of court actions held in London, all of which the government lost, it has now issued a statement over last week's case in which it denies its involvement in the court action saying the result is 'biased' and claiming immunity from the decision arrived at by the London Court of International Arbitration (LCIA).

What the government chooses to ignore is the fact that it was its own legal claims, made in London, which started the whole process. At no stage has the government claimed sovereign immunity (something which technically it is not entitled to these being commercial matters) but now it states:

”The decision seems to find that the legal provisions of the concession contract between the Port of Djibouti and DCT are above Djiboutian law. This decision disregards the sovereignty of the Republic of Djibouti and takes no account of the rule of international law. Following the arbitrator’s reasoning, a sovereign state would not have the right to terminate a contract considered to be working against its fundamental interests, whilst the co-contractor (DP World) would retain the authority to cancel the contract to protect its commercial interests.

”In other words, a contract would have more value than a law which had been voted for on behalf of a sovereign people. A fair compensatory settlement is the only option, in line with international law. In addition, DP World’s approach, which consists in trying to oppose the will of a sovereign nation, is unrealistic and destined to fail. The concession contract has been terminated and the staff and the assets of the concession have been transferred to a public company, created specifically for this purpose, which now manages the infrastructure.”

As immediately the contract was unilaterally cancelled by Djibouti and the DP World staff deported, the state, via its aforementioned public company, renegotiated management of the Doraleh facility, allegedly ceding control to shipping lines CMA CGM and PIL, something that may yet see the pair subject to legal action by DP World, the government's position will be seen by many as being on decidedly shaky legal ground.

For its part the Dubai based port and logistics outfit was quick to point out that the contract held for management and future development of the infrastructure in the port area was specifically drafted as subject to English law, and it was for this reason the government had turned to London when it brought its original case. Presumably had that action been ruled in its favour it would not have denied the result but insisted DP World accepted the decision. The DP World statement in response reads:

”The statement by the Djibouti government states that it does not acknowledge the decision of the London Court of International Arbitration demonstrates that Djibouti does not recognise the international rule of law. The Court’s decision upholding the continuing validity of the Concession is based on recognised principles of international law and is internationally binding both on the Djibouti government and so far as third parties are concerned.

”As the Court has held, Djibouti does not have sovereignty over a contract governed by English law. It is well established that, in the absence of an express term to that effect, an English law contract cannot be unilaterally terminated at will. The contract therefore remains in full force and effect. The Djibouti government’s repeated statements that the port concession has proved contrary to the fundamental interests of the Republic of Djibouti do not bear scrutiny.

”As the Court’s decision records, the government’s own representatives have given evidence that the port has been ‘a great success for Djibouti’. The terms of the concession have also been held in two previous cases brought by the Government itself to have been ‘even handed and fair’. In light of that indisputable success, and the fair and reasonable terms of the concession, the government’s attempts to terminate it cannot have anything to do with the fundamental interests of the people of Djibouti.”

Note that ‘as far as third parties are concerned’. Whilst CMA CGM and PIL must be reflecting on their decisions, several governments are reconsidering their military interests based in Djibouti after the recent Eritrean/Ethiopian peace treaty, and it us certain that lawyers in the UAE, France and particularly Singapore and China will be considering a variety of possible options.

It is of course more than a little tricky to extract the result one wants from an independent government which has decided to ignore a Court’s ruling. However it may be that the pressures brought to bear on any commercial organisations looking to profit from what many will see as an illegal occupation of the facilities in this case will prove to be excessive and meanwhile, as we have illustrated previously, there are those in Washington who feel that politically Djibouti is no longer the stable and amenable state it has proved to be over the past two decades.

Photo: Ismael Omar Guelleh, ex head of the country’s secret police and President of the Republic of Djibouti since 1999, was actually born in Ethiopia and changed the constitution to remain in power. A skilled politician, his acceptance of more Chinese influence may well put his relationship with the US in difficulties.