Procedural Posture

This document is the Third Partial Final Award issued by a London Court of International Arbitration (LCIA) Tribunal in a dispute between the Republic of Djibouti (along with the Djibouti Ports and Free Zone Authority and Port de Djibouti SA) as Claimants, and DP World Djibouti FZCO, Dubai (International) Djibouti FZE, and Doraleh Container Terminal SA (DCT) as Respondents. Following the Tribunal's dismissal of the Claimants' claims for rescission of the 2006 Concession Agreement (CA) in a prior award, this phase of the proceedings addressed the Respondents' counterclaims. The Claimants ceased participating in the arbitration prior to the hearing on these counterclaims.

Principal Legal Issues

The Tribunal was tasked with determining two primary counterclaims: first, whether the Claimants were liable for unpaid royalties under Article 7.1.2(i) of the CA for container traffic handled at the Old Port and subsequently diverted to the newly constructed Doraleh Multipurpose Port (DMP); and second, whether the Claimants breached the exclusivity provisions of the CA (Articles 3.6.2 and 3.6.3) by developing the DMP and the proposed Djibouti International Container Terminal (DICT) without the consent of DCT or offering DCT the right of first refusal.

Tribunal's Analysis and Findings

On the royalties counterclaim, the Tribunal interpreted the phrase "all the revenues" in Article 7.1.2(i) according to its natural meaning to mean gross revenues, rejecting the Claimants' prior expert position that it meant net revenues. The Tribunal found that the Respondents were entitled to unpaid royalties for container traffic handled at the Old Port and later at the DMP, calculating the owed amount based on historical tariffs and traffic volumes.

Regarding the exclusivity counterclaim, the Tribunal held that the Claimants unequivocally breached Articles 3.6.2 and 3.6.3 of the CA by proceeding with the development of the DMP and DICT in partnership with third parties without offering DCT the opportunity to develop the facilities. In assessing quantum, the Tribunal accepted the damages model presented by the Respondents' quantum expert, which calculated lost profits based on projected container traffic and applied a 10.9% weighted average cost of capital (WACC) discount rate. The Tribunal rejected the Claimants' earlier arguments that the DMP would only handle a limited volume of specific mixed cargo.

Decision and Relief

The Tribunal issued declarations that the Claimants breached the CA's exclusivity and royalty provisions. It ordered the Claimants to pay the Respondents US$ 148.8 million for unpaid royalties and US$ 385.7 million in damages for the breach of exclusivity concerning the DMP. Furthermore, the Tribunal awarded 3% simple interest on the exclusivity damages and compound interest on the unpaid royalties, while ordering the Claimants to bear the Respondents' legal fees and the costs of the arbitration.