Port De Djibouti S.A. v DP World Djibouti Fzco
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henshaw |
| Judgment Date | 22 May 2023 |
| Neutral Citation | [2023] EWHC 1189 (Comm) |
| Docket Number | Case No: CL-2021-000471 |
| Court | Queen's Bench Division (Commercial Court) |
[2023] EWHC 1189 (Comm)
THE HONOURABLE Mr Justice Henshaw
Case No: CL-2021-000471
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN AN ARBITRATION CLAIM
Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
Ricky Diwan KC, Georgios Petrochilos KC and Thomas Sebastian (instructed by Three Crowns LLP) for the Claimant
Graham Dunning KC and Catherine Jung (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Defendant
Hearing dates: 8 and 9 March 2023
Further written submissions received: 17 March, 30 March and 5 April 2023
Draft judgment circulated to the parties: 11 May 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 22 May 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
| (A) INTRODUCTION | 3 |
| (B) BACKGROUND | 5 |
| (1) The parties and the key contracts | 5 |
| (2) The arbitration agreements | 6 |
| (3) Key provisions relating to shareholders and share transfers | 7 |
| (4) Subsequent events | 10 |
| (C) DP WORLD'S CLAIMS IN THE ARBITRATION | 11 |
| (D) PDSA'S JURISDICTION OBJECTION BEFORE THE TRIBUNAL | 13 |
| (E) THE TRIBUNAL'S CONCLUSIONS | 17 |
| (1) JVA Termination Claim | 17 |
| (2) Share Transfer Claim | 18 |
| (3) Breaches Claims | 20 |
| (F) JURISDICTION OVER THE SHARE TRANSFER CLAIM | 21 |
| (G) JURISDICTION OVER BREACHES CLAIMS | 30 |
| (H) WHETHER PDSA CEASED TO BE A SHAREHOLDER | 38 |
| (1) PDSA's submissions | 39 |
| (2) Analysis | 42 |
| (I) LOSS OF THE RIGHT TO OBJECT | 45 |
| (J) CONCLUSIONS | 48 |
(A) INTRODUCTION
The Claimant, Port de Djibouti SA (“ PDSA”) brings this jurisdictional challenge under section 67 of the Arbitration Act 1996, in respect of certain determinations made by Professor Dr Maxi Scherer, sitting as a sole arbitrator, in her final partial award of 7 July 2021 (the “ Award”). The arbitration was seated in London and conducted under the 2014 LCIA Rules.
On PDSA's case, the jurisdiction issue arises from the arbitrator's determination that, on the proper construction of the arbitration agreements, PDSA remained a “ Shareholder” (under the applicable contract terms) in the parties' joint venture company, Doraleh Container Terminal S.A. (“ DCT”), after a Presidential Ordinance of 9 September 2018 by which the Republic of Djibouti (“ the Republic”) took ownership of PDSA's shares in DCT.
In brief outline, PDSA submits that:
i) Presidential Ordinance No. 2018-001/PRE dated 9 September 2018 (the “ Presidential Ordinance”) immediately, automatically and compulsorily transferred to the Republic ownership of PDSA's shares in DCT. As was common ground before the arbitrator, under the applicable Djibouti law that meant that PDSA no longer owned equity in the share capital of DCT, such ownership having been vested in the Republic.
ii) The arbitration agreements in the parties' Joint Venture Agreement (“ JVA”) and in DCT's Articles of Association (“ the Articles”) were, by their terms, limited to disputes between “ Shareholders”.
iii) Under the contractual definitions, a person/entity could not be or remain a “ Shareholder” unless it (a) actually owned equity in the share capital of DCT and (b) (unless it was an original signatory party to the JVA) had signed a deed of adherence and thereby agreed to be bound by the obligations of the JVA.
iv) Even though the Republic signed no deed of adherence, and therefore did not itself become a “ Shareholder”, PDSA ceased to be a Shareholder upon the Presidential Ordinance because it removed PDSA's equity ownership.
v) As a result, under the JVA terms, PDSA had no further rights or obligations under the JVA (including the arbitration agreement), save that it remained liable for any allegation of breach that occurred before it ceased to be a Shareholder (for which purposes the arbitration agreements would remain an applicable right and obligation).
vi) Consequently, the arbitrator had no jurisdiction to rule on contentions of contractual breach post-dating the Presidential Ordinance, nor on the question of whether PDSA remained a Shareholder thereafter. The arbitrator's contrary conclusion was a jurisdictional finding and was wrong.
Again in brief outline, the Defendant DP World Djibouti FZCO (“ DP World”) submits that:
i) It is undisputed that PDSA was a party to the arbitration agreements in the JVA and Articles, and that DP World validly commenced the arbitration against it by invoking those arbitration agreements.
ii) Properly analysed, PDSA has accepted that the arbitrator had substantive jurisdiction to determine the claims on which DP World actually succeeded in the Arbitration. Those include DP World's claim that the transfer of ownership effected by the Presidential Ordinance was made in breach of the JVA and Articles, both of which contained provisions stipulating that signature of a deed of adherence by the putative transferee (i.e. the Republic) was a “ condition of any transfer of Shares”.
iii) PDSA's challenge falls outside the scope of section 67, because it does not concern an issue going to the arbitrator's “ substantive jurisdiction” (as that term is defined in the Arbitration Act). PDSA's real objection is not to the arbitrator's substantive jurisdiction but to the relief that the arbitrator awarded in respect of DP World's claims.
iv) In reality, what PDSA is in fact seeking to do is to challenge the arbitrator's findings on the merits of the dispute.
v) In any event, PDSA has lost the right to pursue its challenge, pursuant to section 73(1) of the Arbitration Act. PDSA was given the express opportunity by the arbitrator, before the Award was issued, to clarify the scope of the jurisdictional objection it pursued. Not only did PDSA fail to raise any objection to the claims on which DP World succeeded and the relief DP World sought in respect thereof, but it in fact positively confirmed that the arbitrator enjoyed jurisdiction.
vi) In any event, PDSA's challenge would fail as a matter of substance, because:
a) PDSA did not cease to be a Shareholder for the purposes of the JVA and Articles, despite the transfer of ownership to the Republic as a matter of property law; and
b) even if it did, the arbitrator retained jurisdiction to determine all the claims on which it found in DP World's favour, including the claim that PDSA remained a Shareholder following the Presidential Ordinance.
I have concluded that the arbitrator did have jurisdiction in relation to all the matters she dealt with, and that PDSA's claim must therefore be dismissed.
(B) BACKGROUND
(1) The parties and the key contracts
PDSA is a Djiboutian company and legal successor to Port Autonome International de Djibouti (“ PAID”). As of 14 November 2016, 76.5% of its shares were indirectly owned by the Republic.
DP World is a UAE company which operates ports in various countries.
In 2004 the Republic granted DP World the exclusive right inter alia to develop, build and operate a container terminal in the port of Dolareh, Djibouti (the “ Terminal”).
DCT, a Djiboutian company, was established in 2006 to hold the rights to develop and operate the Terminal. PAID and then PDSA held 66.66% of the shares in DCT and DP World held the remaining 33.34%.
On 30 October 2006, DCT entered into a 30-year concession agreement with the Republic to develop and operate the Terminal (the “ Concession Agreement”).
As recorded in the Award, various contracts were concluded in 2007 to progress the venture. On 22 May 2007, the Republic, DCT and PAID entered into a Port Services Agreement. Also on 22 May 2007, PAID and DP World (but not the Republic) entered into the two contractual instruments in issue in these proceedings, namely the JVA and the Articles.
According to DP World at least, although it was the minority shareholder in the joint venture, it was agreed – and insisted upon by the international financial institutions financing the construction of the terminal – that DP World would have the right to appoint a majority of the directors on the board of DCT, so that it (rather than the Republic) would control and manage DCT. Those and other protections were expressly incorporated into the JVA and Articles; and, in order to ensure that they were preserved, both contracts also incorporated detailed share transfer provisions, including a requirement that any transferee of shares enter into a deed of adherence binding it to the terms of the JVA.
The JVA and the Articles are governed by Djibouti law. However, it is common ground that on this jurisdictional challenge, the court is to apply English principles of interpretation on the basis that PDSA did not invoke any principles of Djiboutian law in its Part 8 arbitration claim form and indicated in its responsive evidence that it was not itself relying upon any principles of foreign law (as recorded in a judgment of HHJ Pelling KC dated 30 March 2022).
(2) The arbitration agreements
Clauses 19 and 20 of the JVA include the following provisions:
“19.1 This Agreement shall commence on the date of execution of this agreement and, unless terminated by the written agreement of the parties to it, shall continue for so long as two or more parties continue to hold Shares in the Company but a Shareholder will cease to have any further rights or obligations under this Agreement on ceasing to hold any Shares except in relation to those provisions which are expressed to continue in force and provided that this Clause shall not affect any of the rights or liabilities of any parties in connection with any breach of this...
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