A strategic port in the Horn of Africa is at the center of a $500 million lawsuit

A London court has delivered the latest verdict in the battle to manage one of Africa’s most strategic ports.

The Court of International Arbitration, which helps to resolve international commercial disputes, has ruled that Djibouti breached the rights of Dubai port operator DP World to manage the Doraleh Container Terminal when it ended a 30-year concession agreement, signed in 2006, with the port operator last February, and took control of the terminal’s operations. The company called the move by the tiny coastal nation an illegal seizure, kick-starting a trans-continental legal battle. The tribunal ordered Djibouti to pay $385 million plus interest for breaking the deal, $148 million in unpaid royalties, and legal costs.

The fight over who manages the harbor comes as Djibouti seeks to become one of the biggest trading ports in Africa. With a population of less than a million people, the port is an important gateway to the Gulf of Aden, and a crucial route for global shipping operations.

The judgment follows years of legal tussling between Djibouti and DP World over the terms of its agreement, including an accusation by Djibouti in 2012 that DP World had offered bribes to secure the deal, which the port operator denied. The case reinforces previous tribunal court rulings that the agreement with DP world was still binding. Djibouti hasn’t recognized any of these rulings, although officials have in the past expressed a willingness to renegotiate the terms of the original contract.

Complicating matters, Djibouti has also been working with China Merchants Port Holdings, a Hong Kong-based subsidiary of state-owned conglomerate China Merchants Group (CMP), to develop alternative container facilities. The country sold 23.5% of its 66.66% stake in Doraleh to CMP in 2013, a move that vexed DP World, which owned the remaining 33.34% of the terminal. Following the cancellation of the deal with DP World last year, the government nationalized the shares held by Port of Djibouti in Doraleh last September and transferred all assets to a new company to manage the terminal.

DP World filed a lawsuit last November against China Merchants in Hong Kong for bypassing its concession agreement with Djibouti and building a free zone on the disputed terminal.

The fight over the Doraleh terminal highlights the challenges posed by China’s deepening reach in Africa. Djibouti is home to several military bases, key among them the United States’ lone permanent outpost in Africa, and China’s first overseas military base, opened in 2017.
Source: QZ