Djibouti Rejects Court Ruling to Hand Back Container Terminal
17 January 2020 - 10:01PM
Dow Jones News
By Costas Paris
Djibouti has rejected a U.K. court ruling to hand back control
of a container terminal to global port operator DP World, after
taking it over two years ago and allowing a Chinese state entity to
build a separate terminal for the growing African market.
The London Court of International Arbitration this week asked
the East African country to restore DP World's rights to run the
Doraleh terminal for 25 years in line with a deal signed in 2004.
It was the court's fifth order in favor of DP World since Djibouti
nationalized the facility in January, 2018.
"This ruling comes as no surprise," Djibouti's government said
in a statement. "It is the outcome of the iniquitous provisions of
the concession, which could force a state to set aside and
disregard its own law, to revive a concession that was terminated
on the grounds of the higher interest of the Djiboutian
nation."
The statement said Djibouti is open to discussing paying "fair
compensation" but won't accept the court's order. Legal experts
said the LCIA can't enforce any rulings if governments don't
abide.
"We encourage all parties to abide by the court's ruling," a DP
World spokesman said. "We were never offered compensation and we
don't want it. We want our concession back."
The spokesman said the port operator has lost more than $1
billion in business since it was forced out of the Doraleh
terminal.
The case reflects Beijing's growing influence in developing
African nations, which have been willing to lease state assets in
return for Chinese state investments.
Along with the concession that gave DP World the exclusive right
to move containers in Djibouti, the Dubai-based operator owned 33%
of the Doraleh terminal, with the government holding the rest.
After nationalization, Djibouti offered a quarter of its stake
to Chinese state behemoth China Merchants Ports Holdings, which is
active across the world in port construction, container logistics
and terminal management.
China Merchants also built a separate container terminal in
Djibouti as part of Beijing's Belt and Road Initiative, the
multi-trillion dollar China is undertaking to build out global
supply chains by running seaports in Europe, Asia and Africa.
These gateways afford Chinese vessels priority handling and
lower docking fees, giving China's carriers and their shipping
customers an advantage in the contest to deliver as much cargo as
possible in the shortest time to European markets.
Djibouti stands at the entrance to the Red Sea and about 12% of
all seaborne trade passes by there on giant vessels using the Suez
Canal. There are no other ports along the coastline of East Africa
with infrastructure to handle, store and trade cargo.
Djibouti's location at the Horn of Africa also makes its ports
strategically important for nations looking to exert influence
across the region. The U.S. has a military installation in Djibouti
for monitoring sea traffic tied to the Middle East. China also has
a military base in Djibouti, its first in a foreign country.
DP World has separately sued China Merchants for breach of
exclusivity in moving containers in and out of Djibouti. The case
will be heard at Hong Kong's High Court in March.
China Merchants executives say their own terminal, which
includes a China-backed $3.5 billion free trade zone, is legal
under a separate deal with Djibouti.
Write to Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
January 17, 2020 16:46 ET (21:46 GMT)
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