English High Court Continues Djibouti Port Company Restraint

The High Court of England and Wales in London has continued the injunction first made on August 31, 2018 prohibiting the Government of Djibouti’s port company, Port de Djibouti S.A. (PDSA) from interfering with the management of the joint venture company, Doraleh Container Terminal S.A. (DCT). 

On August 31, the Court issued an injunction against PDSA, as shareholder in DCT, prohibiting it from acting as if the joint venture agreement with DP World has been terminated. The continuation follows the enactment of an ordinance by the President of Djibouti on September 9 that purported to transfer PDSA’s shares in DCT to the Government of Djibouti. The Government has indicated that it is acting to protect the fundamental interests of the nation of Djibouti and the legitimate interests of its partners in the face of what it called severe irregularities.

DP World has issued a statement saying: “Following a hearing on September 14, at which PDSA failed to appear despite being notified, the Court ordered that the injunction will continue until it makes a further order or an award of the arbitration tribunal at the London Court of International Arbitration that will be formed imminently to consider the shareholding dispute with DP World.”

On DP World’s application, the Court also extended the injunction to include any ‘affiliate’ of PDSA. Under the JV Agreement, PDSA’s affiliates include the Government. PDSA is 23.5 percent owned by China Merchants Port Holdings Company of Hong Kong.

The Court ordered that PDSA must ensure that any transferee of DCT shares is legally bound by the Joint Venture Agreement and Articles of Association in the same way as PDSA. The ruling means neither the Government nor PDSA can control DCT or give valid instructions to third parties on behalf of DCT without DP World’s consent.

The Government filed an arbitration against DP World seeking to rescind the Concession Agreement, claiming its terms were unfair to the Government. The London Court of International Arbitration tribunal (comprising Sir Richard Aikens, Lord Hoffmann, Peter Leaver QC) ruled against the Government, finding the terms were fair and there was no bribery. Certain counterclaims raised by DCT and DP World in relation to DP World’s exclusive right to container handling facilities in Djibouti remain to be decided by the Tribunal. 

In a separate proceeding, another LCIA Tribunal (comprising Professor Zachary Douglas QC) held that the 2006 Concession Agreement was valid notwithstanding the Government’s attempts to terminate it through special legislation and decrees. DP World’s claims for damages against the Government will now be determined in these proceedings.

DP World says that the Government has not offered any compensation, and the company confirmed last week it will continue to pursue all legal means to defend its rights as shareholder and concessionaire in the Doraleh Container Terminal. A DP World spokesperson, said: “This is yet another in a series of rulings – all in favor of DP World – that demonstrate Djibouti’s continuing disregard for the rule of law. We underline our belief that companies intending to operate in such a country or already operating there need to seriously consider their dealings with this Government in the face of such behavior.”