Commercial Court Injunction issued in relation to DP World’s dispute with the Republic of Djibouti

24/09/18

Doraleh Container Terminal SA (“DCT”) is a joint venture company incorporated by statute under Djibouti law owned by a subsidiary of DP World (the Dubai based international port operator) and Port de Djibouti SA (PDSA) (itself a Djibouti company ultimately owned by the Republic of Djibouti and China Merchants Port Holdings Company limited of Hong Kong, a competitor of DP World).

DP World benefits from clauses in a Joint Venture Agreement and provisions in the Articles of Association of DCT which ensure that, despite being the minority shareholder, DP World controls DCT by being entitled to nominate two of the three directors.

DCT was granted a concession by the Republic to build and operate the Doraleh Container Terminal. In February 2018, the Republic of Djibouti passed legislation purporting to terminate the Concession Agreement prematurely, claiming that the contract was contrary to its sovereign interest, and ejecting DCT from the terminal and seizing its assets in Djibouti.

In July 2018, a London-seated arbitration determined that the Concession Agreement, which is governed by English law, remains binding. The Republic promptly issued a Press Release refusing to abide by the Award. DCT has claims for damages against the Republic of Djibouti and PDSA under the Concession Agreement which are due to be determined by a separate arbitration in November 2018.

In July 2018, PDSA purported to terminate the JVA under Djibouti law for “serious breach” by DP World. In August, it informed DP World of a shareholders meeting to be held on 9 September 2018 at which it proposed resolutions to remove DP World’s directors and substitute its own nominees.

The dispute whether the JVA was terminated, and (if so) what effect, if any, it would have on the Articles of Association of DCT, was required to be determined by London seated arbitration according to LCIA Rules.

On 31 August 2018, at an ex parte hearing without notice to PDSA, Bryan J. granted DP World an interim injunction under section 44(3) Arbitration Act 1996 to preserve assets. The Judge considered the doubts expressed by Males J. in Zim Integrated Shipping Services Ltd v European Container KS [2013] 2 CLC 800 as to whether the disputed contractual rights in that case were properly regarded as assets for the purpose of section 44(3) but considered that it was proper to protect DP World’s express rights to control DCT pending resolution of the dispute relying on principles established in Cetelem v Roust Holdings Ltd [2005] 1 WLR 3555 (CA). The Judge referred to Flaux J.’s finding in Republic of Djibouti v Boreh [2016] EWHC 405 (Comm) [862] that DP World and others investing in the port had only been prepared to invest on the basis that management control of DCT rested with DP World and that there was no interference from the government.

In any event, in the light of evidence suggesting that PDSA may wish to take control of DCT to compromise DCT’s contractual rights with the Republic under the Concession Agreement and/or to position itself to take control of money in DCT’s London bank account, or even to wind up DCT, the injunction served to protect DCT’s assets and DCT itself.

Among other things, the injunction prohibited PDSA, until the return date of 13 September, from voting to remove DP World’s directors. Early in the morning, on 9 September 2018, the President of the Republic issued an emergency ordinance to transfer PDSA’s shares in DCT to the State. The Shareholders’ Meeting was postponed.

PDSA did not appear on the return date by which time no changes had been made to the board of directors of DCT or to the register of its shareholders. DCT’s Articles of Association (which themselves were approved by Decree and had not been amended) require certain formalities to be effected before shares can be transferred (even by operation of an Ordinance).  

Teare J. was persuaded to continue the injunction and extend it to prevent PDSA from transferring its shares otherwise than in accordance with the terms of the JVA and the Articles both of which require PDSA's transferee to have executed a Deed of Adherence to the JVA.

Unless application is made to discharge it in the meantime, the Injunction will continue until the arbitration panel decide otherwise, or until the dispute is resolved.

The judgment is here.

A press release from the Government of Djibouti is here.

Press coverage of the case can be found here and here.