English High Court continues restraint against Djibouti Port Company over shares in Joint Venture

September 26, 2018 - 10:32
English High Court continues restraint against Djibouti Port Company over shares in Joint Venture

Court extends Order to prohibitinterference with DP World's right to manage DCT


DUBAI, UNITED ARAB EMIRATES - EQS - 26 September 2018 -The High Court of England andWales in London has continued the injunction first made on 31 August 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 31 August, the Court issued a without notice injunctionagainst PDSA, as shareholder in DCT, prohibiting the following actions:

  • It shall not act as if the joint venture agreement with DP World has been terminated
  • It shall not appoint new directors or remove DP World's nominated directors without its consent
  • It shall not cause the DCT joint venture company to act on "Reserved Matters" (being matters contractually reserved to DP World) without DP World's consent.
  • It shall not instruct or cause DCT to give instructions to Standard Chartered Bank in London to transfer funds to Djibouti.

Followinga hearing on 14 September 2018, at which PDSA failed to appear despite beingnotified, the Court ordered that the injunction will continue until it makes afurther order or an award of the arbitration tribunal at the London Court ofInternational Arbitration ("LCIA") that will be formed imminently to considerthe shareholding dispute with DP World.


On DPWorld's application, the Court also extended the injunction to include any'affiliate' of PDSA.  Under the JVAgreement, PDSA's affiliates include the Government.  The decision follows the enactment of an"emergency" ordinance by the President of Djibouti on 9 September.  This ordinance purported to transfer PDSA'sshares in DCT to the Government of Djibouti.  


PDSA is 23.5% owned by China Merchants PortHoldings Company Ltd of Hong Kong ("China Merchants").


TheCourt further ordered that PDSA must ensure that any transferee of DCT sharesis legally bound by the Joint Venture Agreement and Articles of Association inthe same way as PDSA.  The ruling meansneither the Government nor PDSA can control DCT or give valid instructions tothird parties on behalf of DCT without DP World's consent.


DPWorld confirmed last week it will continue to pursue all legal means to defendits rights as shareholder and concessionaire in the Doraleh Container Terminal inthe face of the Government's blatant disregard for the rule of law and respectfor binding commercial contracts.


A DP World spokesperson, said: "Thisis yet another in a series of rulings -- all in favour of DP World -- thatdemonstrate Djibouti's continuing disregard for the rule of law. We underlineour belief that companies intending to operate in such a country or alreadyoperating there need to seriously consider their dealings with this Governmentin the face of such behaviour."


The2006 Concession Agreement that the Government awarded to DP World is governedby English law.  It provides that all disputesrelating to the Agreement are to be resolved through binding arbitration at theLCIA with two such LCIA proceedings already completed.


In thefirst proceeding, the Government filed an arbitration against DP World seekingto rescind the Concession Agreement, claiming its terms were unfair to theGovernment and were procured through bribery. The LCIA tribunal (comprising Sir Richard Aikens, Lord Hoffmann, PeterLeaver QC) ruled against the Government, finding the terms were fair and therewas no bribery.  Certain counterclaimsraised by DCT and DP World in relation to DP World's exclusive right tocontainer handling facilities in Djibouti remain to be decided by theTribunal. 


In aseparate proceeding, another LCIA Tribunal (comprising Professor ZacharyDouglas QC) held that the 2006 Concession Agreement was valid notwithstandingthe Government's attempts to terminate it through special legislation anddecrees.  DP World's claims for damagesagainst the Government will now be determined in these proceedings.


To date,the Government has not made any offer to compensate DP World.