DP World, Djibouti Fail to See Eye to Eye

The government of Djibouti offers DP World close to 500m dollars to buy out its share

The government of Djibouti and DP World, the UAE port management company, are embroiled in a tense dispute, unable to see eye to eye on the most fundamentals issues in the disputes over the concession to run the Doraleh Container Terminal for 50 years.

The officials of Djibouti Ports & Freezone Authority (DPFZA) claim they have offered DP World close to half a billion dollars to buy out the 33pc stake in the terminal owend by the company along with compensation. Djibouti’s government claim that 334 million dollars of it was made to buyout DP World’s stake, while the balance is allotted as compensation.

“We’re going to buy their shares,” Aboubaker O. Hadi, chairman of the Authority, told Fortune.

However, the management of DP World insists that the company has received no offer from the government of Djibouti.

“We haven’t received any official offer from the Djibouti government,” the spokesperson of DP World responded to Fortunevia email.

A month ahead of the dispute last February, officials of the two parties met in Jebel Ali, where DP World’s headquarters is located. The meeting was held between officials of Djibouti and Sultan Ahmed bin Sulayem, the Group Chairman and CEO of DP World.

Though DP World officials insist that the meeting was a regular one, the Djibouti government claim that it was during this meeting where Sultan Ahmed bin Sulayem made the initial offer to sell the company’s share to Djibouti. If agreed, DP World could be paid after calculating the profit and the dividend it could have been paid for the coming 20 years, according to Djibouti officials.

But the management of DP World now seems to close the door on negotiation, stating that it will wait for the result of the ongoing arbitration between the two parties in London, United Kingdom. DP World claims that its concession agreement is still valid, despite Djibouti’s parliament voting to make it null and void immediately after the two sides met in Dubai.

Djibouti believes the concession agreement violates its sovereignty for it has a clause stopping it from entering into a concession agreement with any other party in any other part of the country during the 50-year period. The deal was signed by Abdourahman Boreh, chairman of DPFZA at the time, and retained as a consultant by DP World at the same time.

While the Doraleh Container Terminal became operational in 2009, the terminal’s concession was awarded to DP World in 2006. But the deal was terminated by the Djibouti government alleging misconduct by DP World over a concession to operate the terminal, which can hold 1.6 million twenty-foot-equivalent units (TFU). The facility also operates eight super-post-Panamax container cranes.

Djibouti then hired the Singapore-based Pacific International Lines (PIL), with the agreement of raising the handling performance of the terminal to an additional 300,000 TFU. Just three months after the new deal with PIL, Djibouti”s Authority reported the port’s capacity was boosted from 25 containers per crane per hour to 34.

The larger value of Ethiopia’s import-export cargo is ferried through Djibouti ports. Currently, the imported freight of Ethiopia hit 13.5 million tonnes, while the export reaches more than 1.8 million tonnes a year.

The unresolved dispute with DP World led its lawyers to take the case to an arbitration court in London, where the Djibouti government launched a suit against DP World four years ago over allegations that the company had made improper payments to Boreh in exchange for favourable concession terms. Djibouti lost the suit despite proving that Boreh indeed received fee from DP World while serving as chairman of DPFZA.

“We’ll wait for the outcome of the arbitration,” a spokesperson for DP World told Fortune. “We don’t consider any alternative settlement options.”

Hadi sees no arbitration process.


Published on Jul 28,2018 [ Vol 19 ,No 952]



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