Port De Djibouti SA v DP World Djibouti FZCO 2023 EWHC 1189 Comm - 22 May 2023
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.