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The State of Djibouti has terminated the concession for the Doraleh container terminal, awarded in 2006 to Doraleh Container Terminal (DCT), a company controlled de facto by the minority shareholder DP World.
The implementation of this concession contract has proved to be contrary to the fundamental interests of the Republic of Djibouti. The continuation of the concession contract was seriously prejudicial to the country’s development imperatives and to the control of its most strategic infrastructure.
Several attempts to renegotiate the concession with DP World, initiated by the government, were unsuccessful because of DP World’s repeated refusal to hear the legitimate objections and requests of the Djiboutian State.
This termination, which was therefore necessary and unavoidable, is made in accordance with international public law which recognizes the ability of a sovereign state to unilaterally terminate a contract on public interest grounds, subject to payment of fair compensation to the other party. The termination was decided in the context of a transparent procedure. It finds its legal basis in a law enacted by the Djiboutian Parliament on November 8, 2017, aimed at protecting the fundamental interests of the Nation, completed by a decree dated February 22, 2018.
DCT, at DP World’s request, nevertheless decided to oppose it and initiated arbitration proceedings before the LCIA (London Court of International Arbitration) with the aim, publicly announced by DP World, of resuming as soon as possible its rights on the concession and thus the operation of the Doraleh container terminal.
Logically, the Republic of Djibouti did not participate in this procedure, considering that LCIA would only judge this dispute on the basis of the terms of a contract contrary to Djibouti’s fundamental interests.
On 31 July 2018, the sole arbitrator appointed under the aegis of LCIA rendered a partial arbitral award, which the Government of the Republic of Djibouti has become aware of.
The sole arbitrator has concluded that the concession contract could not be terminated by the Government of the Republic of Djibouti under the law passed by the Djiboutian Parliament on November 8, 2017 and considered that the contract was still in force.
The Republic of Djibouti does not recognize this arbitral award which consists in qualifying the law of a sovereign State as illegal.
Indeed, the arbitral award seems to consider that the terms of the concession contract entered into between the Port of Djibouti and DCT, are above Djiboutian law. It disregards the sovereignty of the Republic of Djibouti and takes no account of public international law rules.
Following the arbitral award’s reasoning, it is also understood that a sovereign State would not have the right to terminate a contract the implementation and performance of which is considered contrary to its fundamental interests, but would however authorize the other party to it (DP World) to terminate the said contract to protect its commercial interests…
In other words, a contract would have a higher value than a law adopted in the name of a sovereign nation.
Moreover and in any case, DP World’s approach which consists in trying to oppose the will of a sovereign State is unrealistic and doomed to failure. The concession contract has been terminated, the staff and assets of the concession were transferred to a public company specifically created for this purpose and which now manages this infrastructure.
That is why, in this case, only an outcome consisting in the payment of a fair compensation in accordance with the principles of international law can be envisaged.