Road-belt case goes to High Court

Top News | Staff reporter 11 Feb 2019

China Merchants Port, a subsidiary of state enterprise China Merchants Group, has been taken to Hong Kong's High Court by United Arab Emirates' DP World, accused of causing the Djibouti government to revoke its exclusive right to run the country's ports.

It is the first court case involving a One Belt and One Road Initiative here.

Under the deal with the Republic of Djibouti, DP World was granted exclusive rights over the port and free zone facilities in Djibouti, including container handling facilities, a media report said.

The agreement took effect in February 2004 for a period of 30 years with the option of two 10-year renewals.

DP World is seeking damages, interest and a declaration that China Merchants unlawfully procured and/or induced Djibouti's breaches of its agreements with DP World.

DP World constructed, developed and managed a state-of-the-art container terminal at Doraleh, which was jointly owned by DP World and state-owned Port of Djibouti SA - PDSA. In 2013, China Merchants bought 23.5 percent of PDSA from Djibouti.

These exclusive rights were violated when the Djibouti International Free Trade Zone was launched in July 2018, an ambitious project backed by China Merchants, Dalian Port Authority and the investment company IZP Technologies.

Following the official opening, DP World called it "another clear example by the Djiboutian Government of violating its contractual obligations and the rights of foreign investors," a report said.

DP World, which operates 78 ports in more than 40 nations, said that its concession agreement over the terminal remains in force and warned that the "illegal seizure of the facility does not give the right to any third party to violate the terms of the concession agreement."

China, which has the only foreign military base near the Red Sea terminal, developed and financed the free trade zone as it considers Djibouti an important part of its US$1 trillion (HK$7.8 trillion) Belt and Road global investment initiative.

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