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High Court of England & Wales Delivers Djibouti Port Decision

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By MarEx 2018-09-05 21:15:59

The High Court of England & Wales has granted an injunction restraining Djibouti’s port company, Port de Djibouti S.A. (PDSA), from treating its joint venture shareholders’ agreement with global trade enabler DP World as terminated. 

The High Court has further prohibited PDSA from removing directors of the Doraleh Container Terminal (DCT) joint venture company who were appointed by DP World. PDSA is not to interfere with the management of DCT until further orders of the Court or the resolution of the dispute by a London-seated arbitration tribunal.

On February 22, the Djibouti government seized control of the DCT from DP World, which had been awarded the concession in 2006. The move came after the government had attempted to force DP World to renegotiate the terms of the port concession. The port has three berths and an annual capacity of 1.2 million TEUs.

PDSA is owned in majority by the Government of Djibouti, and its CEO is the Chairman of the Ports & Free Zones Authority of Djibouti. Hong Kong-based China Merchants, which has been given operational control of the Djibouti Freezone in breach of DP World’s exclusivity rights, is the minority shareholder in PDSA.

The High Court’s order follows an attempt by PDSA to terminate the joint venture agreement with DP World and the calling of an extraordinary shareholders’ meeting on September 9 by PDSA to replace DP World appointed directors of the DCT joint venture company. 

This is the third legal ruling in relation to the DCT following two previous decisions from the London Court of International Arbitration, all of them in favor of DP World. It recognizes that although PDSA is the majority shareholder of the DCT joint venture company, it is DP World that has management control of the company, in accordance with the parties’ legally binding contracts.

The new ruling against PDSA was issued by the Court without PDSA’s participation. If PDSA disobeys the Court’s order and seeks to replace DP World nominated directors of DCT on September 9, it may be in contempt of court and face a fine or the seizure of its assets and its officers and directors may be imprisoned.

The Court has ordered PDSA to present its defense at another hearing on September 14.

Meanwhile, DP World is notifying Standard Chartered Bank so that the bank will reject any instructions that may be sent to them after the September 9 meeting. China Merchants will also be informed given its minority shareholding in PDSA.