Tuesday, January 21, 2020

Doraleh Freight Container Terminal - the Djibouti Government Puts Forward its Position

Statement Offers to Pay Fair Compensation but No Signs as Yet
Shipping News Feature

DJIBOUTI – Last week we published the latest in an ongoing series of articles regarding the seizure of the Doraleh container freight terminal from the concessionary operator, DP World, by the government or its agents. The article indicated that, for the sixth time, the London Court of Arbitration, agreed referee in the case of contractual disputes, had found against the Djiboutian authorities.

The Courts have consistently required the Republic of Djibouti to reimburse DP World or reinstate it as terminal operator, for what it deems to be an unlawful action. Now the Djibouti government has issued a statement saying how it views the dispute, as follows:

”On 14 January 2020, DP World announced in a press release that, on 10 January 2020, a sole arbitrator appointed by the London Court of International Arbitration issued a new arbitral award in DP World's dispute with the Republic of Djibouti concerning the termination on 22 February 2018 of the Concession Agreement for the container terminal of Doraleh.

”This ruling comes as no surprise. It is merely the outcome of the iniquitous provisions of the concession, which could force a sovereign State to set aside and disregard its own national law, in order to revive a concession that was terminated on the grounds of the higher interest of the Djiboutian nation, and for the exclusive benefit of a foreign-owned company.

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

”In this dispute, the Republic of Djibouti reasserts the position it has expressed consistently since February 2018, that is:

  • 1) “The termination of the Concession Agreement for the Doraleh Container Terminal, awarded in 2006 to DCT (Doraleh Container Terminal), a joint venture between the Djibouti International Port Authority and DP World, was decided in the context of a legal framework that had previously been adopted by the Djiboutian parliament on 8 November 2017.
  • 2) “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.
  • 3) “The Doraleh container terminal had not been operated to its full potential by DCT in order, obviously, to protect DP World's operations in Dubai. Since the concession ended, the port's activity has increased by 30%.
  • 4) “Despite several attempts to renegotiate the concession, initiated by the government in accordance with Djiboutian law, DP World persistently refused to consider the government's legitimate demands to redress an inherently asymmetrical relationship in order to allow its citizens to enjoy the benefits of the efficient operation of the terminal.
  • 5) “Rather than comply with Djiboutian law and accept the Government's proposals (at both the contract renegotiation and post-termination compensation stages), the DP World group preferred to initiate a full-scale judicial and media battle against the Republic of Djibouti and its partners.
  • 6) “To this end, DP World had no qualms about using DCT, of which it is only a minority shareholder, to serve its own interests and to disrespect, unscrupulously, the decisions handed down by the Djiboutian courts in strict compliance with the adversarial principle. These courts appointed a provisional administrator in place of DCT's corporate bodies and annulled the resolution of the Board of Directors which, under pressure applied by DP World, authorised DCT to initiate the arbitration procedure whose decisions today have been obtained on the basis of the DP World unilateral actions.
  • 7) “In any case, the concession contract has been terminated, a public enterprise specifically created for this purpose now manages this infrastructure and there can obviously be no question of imposing any contracting party on a sovereign State, especially in order to operate its strategic infrastructure.
  • 8) “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. The State of Djibouti remains, as it has done so from the outset of this process, willing to negotiate the terms of a mutually satisfactory solution, but cannot accept arbitrary ‘convictions’ that disregard the interests of the country and so-called ‘independent’ expertise that can in no way serve as a financial ‘basis’ for an agreement between the parties.”
The Djiboutian argument loses some credibility however when it refers to the ‘iniquitous provisions’ of the concessions, given that it was the Djiboutian authorities which agreed the terms of the contract originally. The claim is that Djibouti ‘did not take part’ in the arbitration, clearly incorrect as it was the state operations which first took the matter to the London Court (which it then lost).

Even if one accepts the argument that somehow ‘international law’ supersedes an agreed contract that statement admits to the fact it must be ‘subject to the payment of fair compensation’, something which the Republic has had ample time to pay, whereas so far nothing has been forthcoming.

1) and 2) The ‘framework. For the ‘new’ contract was drafted in November 2017 in the Djiboutian Parliament, nine months after it lost the case it brought against the Dubai based port management company (otherwise known as moving the goalposts). The point about the operation being contrary to the fundamental interests of the nation rather loses steam as, since the expulsion, the Chinese have stepped into position, obviously giving rise to the argument that they were simply a better financial bet.

3) The calculation that throughput has risen 30%, as though DP World controlled the scope of shipping persuaded to arrive, might well be true given the amount of raw materials now being imported to construct the Chinese naval base adjacent to the port. How somehow lessening throughput to Doraleh would 'protect DP World's operations in Dubai' will remain a mystery.

4) 5) 6) The management at DP World simply went along with the continuing Court decisions that the agreement was fair and binding and therefore had no need, nor wish, to renegotiate. DP World chose to accept the contract terms appointing the Court of Arbitration in London as the arbiter of any dispute as agreed. It was therefore bound to object to the imposition of ‘an administrator’ and the annulling of the terms.

7) and 8) This is the state simply saying that nobody who enters into a contract with a sovereign state has the ability to make the pay for its unilateral actions. It says it will pay ‘fair compensation’ but so far there appears to be no sign of this. As the government debt to China balloons one fears that any compensation figure the Djibouti authorities put forward will nowhere near match that decreed by the Courts (that is if they ever bother).

To read the full history of this case enter Doraleh into the News Search Box.