Dispute Between Dubai And Djibouti Over Port Seizure Continues, Despite Tribunal Ruling

People stand next to a ship loaded with containers at the Doraleh Container Terminal in Djibouti, on July 4, 2018. (Photo: YASUYOSHI CHIBA/AFP/Getty Images)


Dispute Between Dubai And Djibouti Over Port Seizure Continues, Despite Tribunal Ruling

By Dominic Dudley | Forbes

The dispute between Dubai-based DP World and Djibouti over control of the east African country’s container port looks set to rumble on, after the government said it “does not recognise” a decision by an international arbitration court that DP World’s contract to operate the port remains valid.

On August 2 the London Court of International Arbitration (LCIA) ruled that the Djibouti government had acted illegitimately when it seized control of the Doraleh Container Terminal from DP World on February 22 this year.

DP World designed, built and operated the terminal following a concession awarded in 2006, in which it took a 33% ownership stake, with the remaining 67% held by the Djibouti authorities. The port opened in 2009 but DP World says the government subsequently began to pressure it to renegotiate the terms of its concession, which it was unwilling to do.

Djibouti then moved to strip the company of its concession. Under Law No. 202 enacted in 2017, along with a number of decrees issued in 2018, the government gave itself the power to terminate the contract with the Dubai-based port operator.

Having fought to hold on its concession, DP World welcomed the latest tribunal decision and said it “will now reflect on the ruling and review its options”.

However, the Djibouti government appears unwilling to give up. In a statement issued in response to the tribunal’s ruling, it claimed the contract for the port was “seriously prejudicial to the country's development imperatives and to the control of its most strategic infrastructure” and that terminating the contract was “necessary and unavoidable [and] made in accordance with international public law.”

The government declined to take part in the arbitration process and now says “the Republic of Djibouti does not recognize this arbitral award” and that “only an outcome consisting in the payment of a fair compensation in accordance with the principles of international law can be envisaged”.

It is not clear from its statement which side it thinks should pay compensation or what amount it would deem to be ‘fair’.

Arbitrators have consistently sided with DP World in the dispute. An LCIA tribunal in 2017 found the terms of the concession to be “fair and reasonable”. Following the passage of Law No. 202, DP World launched a new arbitration case in February this year. The latest ruling backed up the 2017 findings, with the court deciding that the concession agreement “remains valid and binding notwithstanding Law 202 and the 2018 decrees”.

DP World claims the Doraleh Container Terminal is the largest employer and biggest source of revenue in Djibouti and has operated at a profit every year since it opened.

The port is located at the centre of a region of growing interest for Gulf countries, with ever more apparent competition for influence between the UAE and Qatar in particular. DP World also operates a port in Berbera in the self-declared republic of Somaliland and UAE military forces have used the Eritrean port of Assab as part of their ongoing campaign in Yemen.

DP World’s chairman and chief executive Sultan bin Sulayem recently announced his company is planning to develop a logistics hub in Ethiopia, which will be linked to Berbera port. The recent historic rapprochement between Ethiopia and Eritrea – which was partly enabled by active diplomacy from Mohammed bin Zayed Al-Nahyan, crown prince of Abu Dhabi – could provide another useful boost to the prospects for DP World’s new Ethiopian project.

All this fits in with what Dubai sees as one of its core strengths: transport and logistics. Speaking in London on July 26, minister of state for foreign affairs Anwar Gargash said “A large part of the success of the UAE is in logistics, so our interest in ports is basically driven by our national experience. One of our big successes is really being able to be a logistics centre for the region.”

That suggests that DP World and the UAE government are unlikely to give up on their fight for control of the Djibouti port any time soon.

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