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

Court extends Order to prohibit
interference with DP World’s right to manage DCT

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DUBAI, UNITED ARAB EMIRATES – EQS – 26 September 2018 –
The High Court of England and
Wales 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 injunction
against 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.

Following
a hearing on 14 September 2018, at which PDSA failed to appear despite being
notified, the Court ordered that the injunction will continue until it makes a
further order or an award of the arbitration tribunal at the London Court of
International Arbitration (“LCIA”) that will be formed imminently to consider
the shareholding dispute with DP World.

 

On DP
World’s application, the Court also extended the injunction to include any
‘affiliate’ of PDSA.  Under the JV
Agreement, 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’s
shares in DCT to the Government of Djibouti.  

 

PDSA is 23.5% owned by China Merchants Port
Holdings Company Ltd of Hong Kong (“China Merchants”).

 

The
Court further ordered that PDSA must ensure that any transferee of DCT shares
is legally bound by the Joint Venture Agreement and Articles of Association in
the same way as PDSA.  The ruling means
neither the Government nor PDSA can control DCT or give valid instructions to
third parties on behalf of DCT without DP World’s consent.

 

DP
World confirmed last week it will continue to pursue all legal means to defend
its rights as shareholder and concessionaire in the Doraleh Container Terminal in
the face of the Government’s blatant disregard for the rule of law and respect
for binding commercial contracts.

 

A DP World spokesperson, said: “This
is yet another in a series of rulings — all in favour of DP World — that
demonstrate Djibouti’s continuing disregard for the rule of law. We underline
our belief that companies intending to operate in such a country or already
operating there need to seriously consider their dealings with this Government
in the face of such behaviour.”

 

The
2006 Concession Agreement that the Government awarded to DP World is governed
by English law.  It provides that all disputes
relating to the Agreement are to be resolved through binding arbitration at the
LCIA with two such LCIA proceedings already completed.

 

In the
first proceeding, the Government filed an arbitration against DP World seeking
to rescind the Concession Agreement, claiming its terms were unfair to the
Government and were procured through bribery. 
The LCIA tribunal (comprising Sir Richard Aikens, Lord Hoffmann, Peter
Leaver QC) ruled against the Government, finding the terms were fair and there
was no bribery.  Certain counterclaims
raised by DCT and DP World in relation to DP World’s exclusive right to
container handling facilities in Djibouti remain to be decided by the
Tribunal. 

 

In a
separate proceeding, another LCIA Tribunal (comprising Professor Zachary
Douglas QC) held that the 2006 Concession Agreement was valid notwithstanding
the Government’s attempts to terminate it through special legislation and
decrees.  DP World’s claims for damages
against the Government will now be determined in these proceedings.

 

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