Notable Victories Detail Banner
All Notable Victories

May 2017: Victory in Billion-Dollar Port Concession Arbitration

May 2017

The firm achieved a complete victory in the London Court of International Arbitration on behalf of its client, DP World, against the Republic of Djibouti. Djibouti, a tiny country on the Horn of Africa across the Red Sea from Yemen, is situated in one of the most strategic shipping lanes on the planet. In the mid-2000s, DP World and Djibouti signed a suite of contracts under which DP World designed, built, and now manages a state-of-the art container terminal in exchange for 33% ownership of the terminal and a management fee. The terminal is worth in the vicinity of $2 billion and earns tens of millions in profit each year. In the arbitration, Djibouti sought either to rescind the main concession agreement and take full ownership of the terminal, or to terminate the agreement and receive hundreds of millions of dollars in damages.

The matter was tried over three weeks in September and October 2016 before a distinguished panel of arbitrators, consisting of Sir Richard Aiken, Lord Hoffmann, and Peter Leaver QC. Djibouti’s primary contention was that DP World had bribed Djiboutian businessman Abdourahman Boreh—whom the Djiboutian government had appointed as its chief negotiator—by entering into various consulting arrangements and other business dealings with Boreh around the time that the contracts were signed. Djibouti claimed that these transactions between DP World and Boreh entitled it to rescind or terminate the concession agreement because English law governed the agreement, and under English law, when two parties negotiate a contract, a payment by one party to the agent of its counterparty—even a completely legitimate payment—automatically creates a conflict of interest that entitles the counterparty to rescind or terminate the contract.

In response, our firm pointed out that although the contract may be governed by English law, the agency relationship between Djibouti and Boreh was still governed by Djiboutian law. The relationship between Djibouti and Boreh took place entirely in Djibouti and dated back many years before the concession agreement. Moreover, nothing in the concession agreement purported to override the law governing their agency relationship. Under Djiboutian law, Boreh owed Djibouti only a duty of probity and not a duty to avoid conflicts of interest, and Boreh had fully satisfied his duty of probity by negotiating good deals for Djibouti.

In February 2017, the arbitration panel issued its decision, which rejected all of Djibouti’s claims. The panel ruled that Djiboutian law governed the relationship between Djibouti and Boreh, that Boreh had satisfied his duty of probity by obtaining the best possible terms for Djibouti in the suite of contracts, and that he did not owe a duty to avoid conflicts of interest. Because any payments by DP World to Boreh did not breach a duty Boreh owed to Djibouti, there was no ground for Djibouti to rescind or terminate the contracts.

For good measure, the arbitration panel added that even if English law did govern the agency relationship between Djibouti and Boreh, all of the business dealings between DP World and Boreh were completely legitimate and did not create a conflict of interest, and, in any event, Djibouti had affirmed the concession agreement because it knew all the material facts years before it initiated the arbitration, yet it chose not to seek rescission or termination at that time.

The arbitration panel also awarded our client full costs (including attorney’s fees) on an indemnity basis because Djibouti had made allegations of widespread and repeated fraud by DP World and those allegations were entirely rejected. The total amount of costs will be decided by the panel following further submissions by the parties.

This was a complete victory for our client, which retains its partial ownership of a $2 billion port, maintains its position as manager of the port, and avoids the severe damage to its reputation that would have flowed from an adverse judgment. Quinn Emanuel continues to represent DP World in this and other matters.