LONDON: Djibouti’s seizure of the Doraleh Container Terminal from the Dubai-based ports operator DP World was on Thursday ruled illegal by a London court.
The ruling will come as a blow to Djibouti and could potentially threaten the country’s ability to attract foreign investment in the future, analysts told Arab News.
A tribunal at the London Court of International Arbitration said that DP World’s concession agreement “remains valid and binding.” Dubai’s Media Office said DP World “will now reflect on the ruling and review its options.”
On Feb. 22, the Djibouti authorities seized control of the port from DP World, which had been awarded the concession in 2006.
In the run-up to the seizure, the Djibouti government had already attempted to force DP World to renegotiate the terms of the port concession. The London court had previously ruled in DP World’s favor in a 2017 hearing.
DP World started arbitration proceedings the same month to prove again that its original agreement was still legal and binding.
The Doraleh port has three berths and an annual capacity of 1.2 million 20-foot equivalent units of container traffic. Under the concession agreement, the Djibouti government had a 67 percent stake while DP World held 33 percent.
Olivier Milland, senior analyst at risk consultancy Allan & Associates, said that Thursday’s ruling could threaten Djibouti’s ability to attract foreign investment.
“International investors will likely be very concerned, particularly if they’re considering market entry,” said Milland.
“This is because the failure of a host country to honor its contract with foreign entities means that their investments and assets cannot be secured. If foreign investors see that their investments are not legally protected in Djibouti, appetite for the Horn of Africa country is likely to decrease,” he said.
While the move is likely to be viewed as a victory for DP World, it is far from the end of a dispute that first broke out in 2012, Milland noted.
“It is less clear to what extent the London Court of International Arbitration ruling will be enforced, as it is up to the national courts to enforce international rulings as per the New York Convention, which Djibouti has signed,” he said.
“Djibouti could appeal the verdict, or attempt to negotiate a settlement with DP World,” Milland said.
Judd Devermont, director of the Africa program at the Center for Strategic and International Studies in Washington DC, also raised questions about how Djibouti will respond to the ruling.
“This is not a pill Djibouti will willingly swallow,” he said.
“Djibouti has indicated that it is open to compensating DP World to a tune of half a billion dollars, but the time for arbitration is over. Moreover, the government is not really in a position to reverse its decision,” he said. “It has already inked a deal with Chinese state-owned enterprises to open a free trade zone at the port, which DP World claims is a violation of its concession to run Doraleh.”
In July, Djibouti is said to have opened the first phase of its Djibouti International Free Trade Zone, which will be managed by both Djibouti authorities and a number of Chinese companies.
DP World issued a statement in July in response to these reports. “This is yet another clear example by the Djiboutian government of violating its contractual obligations and the rights of foreign investors,” it said.
The court’s decision also comes as the UAE looks to strengthen its position in the Horn of Africa, exploring opportunities to develop other ports along the coast.
The Arab state is also positioning itself as a mediator between Ethiopia and Eritrea after the two East African countries signed an agreement in July to restore relations after years of conflict.