DP World to pursue legal action over disputed Djibouti port

The decision by Djibouti to nationalize the Doraleh Container Terminal came after the government scrapped a 50-year concession contract with DP World. (Reuters)
Updated 11 September 2018
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DP World to pursue legal action over disputed Djibouti port

  • The Dubai-based firm said that nationalizing Doraleh amounted to an attempt to flout an injunction of the English High Court
  • The disputed terminal is an essential facility for supplies to neighboring landlocked Ethiopia and is located in the strategic Horn of Africa

DUBAI: Dubai’s global port operator DP World said Tuesday it will pursue all “legal means” to defend its claim to a Djibouti terminal after the African nation nationalized the facility.
The decision by Djibouti on Sunday to nationalize the Doraleh Container Terminal came after the government scrapped a 50-year concession contract with DP World, triggering a dispute between the two sides.
DP World said it has won three rulings from Britain-based courts over the matter, most recently an injunction at the High Court in London on August 31.
The Dubai-based firm said Tuesday that nationalizing Doraleh amounted to “an attempt to flout an injunction of the English High Court,” which barred Djibouti authorities from taking control over the facility.
The concession agreement between DP World and Djibouti signed in 2006 is governed by English law and through the London Court of International Arbitration, the port operator said.
The disputed terminal is an essential facility for supplies to neighboring landlocked Ethiopia and is located in the strategic Horn of Africa.
The Djibouti government had a two-thirds stake in the venture.
The terminal had been run by DP World since 2006, but in late February Djibouti canceled the contract.
Currently, Hong Kong-based China Merchants Port Holdings Company owns a 23.5-percent stake in the facility.


Dubai real estate market recovery to be seen as of 2022: S&P

Updated 20 February 2019
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Dubai real estate market recovery to be seen as of 2022: S&P

  • The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate
  • S&P was generally comfortable with the credit ratings of the emirate’s banking system

DUBAI: S&P Global, the ratings agency, painted a grim picture for the real estate sector in Dubai, with a meaningful recovery in property prices expected only after 2022.
At a presentation to journalists in the Dubai International Financial Center, S&P analyst Sapna Jagtiani said that under the firm’s “base case scenario,” the Dubai real estate market would fall by between 5 and 10 percent this year, roughly the same as the fall in 2018, which would bring property prices to the levels seen at the bottom of the last cycle in 2010, in the aftermath of the global financial crisis.
“On the real estate side we continue to have a very grim view of the market. While we expect prices to broadly stabilize in 2020, we don’t see a meaningful recovery in 2021. Relative to the previous recovery cycle, we believe it will take longer time for prices to display a meaningful recovery,” she said.
S&P’s verdict adds to several recent pessimistic assessments of the Dubai real estate market. Jagtiani said that conditions in the other big UAE property market, in Abu Dhabi, were not as negative, because “Abu Dhabi never did ramp up as much in 2014 and 2015 as Dubai.” S&P does not rate developers in the capital.
She added that a “stress scenario” could arise if government and royal family related developers — such as Emaar Properties, Meraas, Dubai Properties and Nakheel — which have attractive land banks and economies of scale, continue to launch new developments.
“In such a scenario, we think residential real estate prices could decline by 10-15 percent in 2019 and a further 5-10 percent in 2020. In this case, we expect no upside for Dubai residential real estate prices in 2021, as we expect it will take a while for the market to absorb oversupply,” she said.
S&P recently downgraded Damac, one of the biggest Dubai-based developers, to BB- rating, on weak market prospects.
However, Jagtiani said that, despite the “significant oversupply” from existing projects, several factors should held stabilize the market: Few, if any, major product launches; improved affordability and “bargain hunting” by bulk buyers; and a resurgence of Asian, especially Chinese, investor interest in the market.
Jagtiani also said that government measures such as new ownership and visa regulations and reduction in government fees could help prevent prices falling more sharply, as well as “increased economic activity related to Dubai Expo 2020, which is expected to attract about 25 million visitors to the emirate.”
The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate. “In our view, credit conditions deteriorated in Dubai in 2018, reducing the government’s ability to provide extraordinary financial support to its government related entities (GREs) if needed,” S&P said in a report. “The negative outlook on Dubai Electricity and Water
Authority (DEWA) partly reflects our concern that a real estate downturn beyond our base case could out increased pressure on government finances,” the report said.
It pointed out that about 70 percent of government revenues come from non-tax sources, including land transfer and mortgage registration fees, as well as charges for housing and municipality liabilities, as well as dividends from real estate developers it controls, like Emaar and Nakheel.
S&P was generally comfortable with the credit ratings of the emirate’s banking system, which has an estimated 20 percent exposure to real estate. “Banks in the UAE tend to generally display a good level of profitability and capitalization, giving them a good margin to absorb a moderate increase in risks,” the report said.