|13 February, 2019

DP World moves Hong Kong court in Djibouti ports row

It has sued a Chinese state enterprise over infringement of its exclusive port agreement

Image used for illustrative purpose. A ship is moored as its containers are unloaded at the Jebel Ali port in Dubai June 27, 2006.

Image used for illustrative purpose. A ship is moored as its containers are unloaded at the Jebel Ali port in Dubai June 27, 2006.

REUTERS/Regi Varghese

UAE - Global port operator DP World has moved a Hong Kong high court against a Chinese company over its protracted legal battle for regaining control of Djibouti Ports.

The Dubai-based global trade enabler has sued a Chinese state enterprise in Hong Kong over infringement of its exclusive port agreement with the strategically located African nation. The case is in first court in Hong Kong involving China's Belt and Road Initiative.

In the legal filing against China Merchants Port Holdings Company Ltd at the high court, DP World accused the Chinese firm of causing the Djibouti government to revoke its exclusive right to run the Doraleh Container Terminal.

In the writ of summons filed to the Hong Kong court in August 2018, DP World accused the company of causing the Djibouti government to nationalise the Doraleh Container Terminal (DCT), despite the 30-year concession agreement that allowed DP World to exclusively run the terminal.

A DP World spokesperson told Khaleej Times on Wednesday that the claim is for damages arising from breach of contract and unlawful interference with the Dubai firm's and the joint venture company's rights under concession agreements with the Government of Djibouti.

"We contend that the development and operation of the port and free zone facilities by China Merchants constitutes unfair competition and breaches the exclusivity agreement granted to us and our joint venture company by the Government of Djibouti," said the spokesperson.

The joint venture DCT, which was created to develop and operate Doraleh terminal, is one-third owned by DP World and two-thirds owned by Port de Djibouti, which is majority owned by the Government of Djibouti but, since 2012, 23.5 per cent of its shares have been owned by China Merchants. Consequently, China Merchants must have been fully aware of DCT's exclusive rights to develop and operate container ports in Djibouti, the spokesperson explained.

DP World, which operates 78 ports in 42 countries including Terminal 3 in Kwai Chung, Hong Kong, said under its agreement with the Djibouti government, it would have "full and exclusive right to establish, develop and operate the Doraleh site."

Although Djibouti purported to rescind DCT's concession, and later to terminate it by decree, two separate arbitration tribunals based in London ruled these actions unlawful and upheld the validity of the concession agreement. Despite this, Djibouti physically seized DCT's container port in February 2018 and has since purported to re-transfer ownership to PDSA, restoring China Merchants' indirect interest in it.

DP World said it considers it inconceivable that Djibouti would have seized the port without China Merchants' complicity. "China Merchants has also developed and operates a free trade zone pursuant to an agreement with the government of Djibouti, in contravention of DP World's exclusive right to develop and operate such free zone under its own concession."

DP World said China Merchants have delayed the proceedings in Hong Kong by more than 12 months already by arguing the claim should be brought in the courts of Djibouti, where they will also seek to enforce an indemnity from the government against any claims brought by DP World. "The demand for an indemnity from the government of Djibouti already suggests awareness of the illegality of their actions. It is highly unusual for a defendant to object to legal action in its home jurisdiction and to prefer legal action against a government in the jurisdiction of that government," said the spokesperson.

DP World's concession agreement, which took effect in February 2004 for a period of 30 years with the option for two 10-year renewals, also said Djiboutian authorities cannot grant concessions for any other port capable of handling ocean-going vessels or free zone facilities within the country for the duration of the agreement.


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