Doraleh Container Terminal SA v. Republic of Djib.
| Decision Date | 15 February 2023 |
| Docket Number | Civil Action 20-02571 (TFH) |
| Parties | DORALEH CONTAINER TERMINAL SA, Petitioner, v. REPUBLIC OF DJIBOUTI, Respondent. |
| Court | U.S. District Court — District of Columbia |
Petitioner Doraleh Container Terminal SA (“DCT”) brings this action against Respondent the Republic of Djibouti (“Djibouti”) seeking confirmation of two arbitration awards issued in 2019 by the London Court of International Arbitration (“LCIA”) in favor of DCT. DCT seeks to confirm the awards under the Federal Arbitration Act, 9 U.S.C. § 201, et seq., which codifies the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).
Djibouti opposes confirmation of the awards, arguing that this Court lacks subject matter jurisdiction over the Petition and that confirmation must be denied pursuant to the New York Convention.
On January 26, 2023, this Court heard the parties' arguments on the Petition and issued a bench ruling confirming the arbitration awards. Consistent with that ruling, this Memorandum Opinion provides further explanation for this Court's decision.
DCT is a joint venture between Djibouti's port authority, Port de Djibouti SA (“PDSA”), and DP World Djibouti (“DP World”). Pet. to Confirm Foreign Arbitration Award ¶ 1 [ECF No. 1]. Upon the venture's formation, DP World held a minority 33.34% share interest in DCT, but had the right to appoint a majority of the members of DCT's board of directors and exercised control over the entity. Id. DCT was incorporated by a statute passed by Djibouti's Parliament. Id. ¶ 11. Djibouti is a foreign state within the meaning of 28 U.S.C. § 1330. Id. ¶ 3.
In October 2006, Djibouti and DCT entered into a Concession Agreement to build and develop a new international container terminal on the Red Sea in Doraleh, Djibouti. Id. ¶ 12. In exchange for building the terminal, the Agreement granted DCT the exclusive right to handle container shipping in Djibouti, and required Djibouti to pay royalties for any ships that did not dock at the terminal. Id. ¶ 12. Article 20 of the Agreement provides for arbitration of any dispute between the parties under LCIA Rules if it cannot be amicably settled. Id. ¶ 13. The Concession Agreement was ratified by Djiboutian Parliament on December 18, 2006. Id. ¶ 12. DCT completed the terminal on schedule in accordance with the agreement in December 2008. Id. ¶ 14. Pursuant to the Agreement, DP World managed the day-to-day operations of the terminal. Id.
In 2014, Djibouti commenced the London Arbitration, LCIA No. 142732, against DCT, DP World, and Dubai International, claiming, among other things, that the Concession Agreement should be rescinded because it had been procured through bribery and corruption. Id. ¶ 15. DCT and DP World brought counterclaims against Djibouti for failure to pay certain royalties and for breach of their exclusivity rights under the Concession Agreement. Id. ¶ 17.
The arbitration hearing was conducted under LCIA rules before a tribunal of arbitrators in the Fall of 2016. Id. ¶ 16. On February 20, 2017, the tribunal issued the first of four awards, dismissing the claims brought by Djibouti to invalidate the Concession Agreement in their entirety, and finding that Djibouti was obligated to pay costs and legal fees. The tribunal issued the Second Partial Final Award on June 29, 2017, awarding DCT costs and fees totaling £7 Million. Id. This award has been paid. Id.
The First and Second Awards did not address DCT's two counterclaims, which were stayed at the end of the 2016 hearing to allow for commercial settlement discussions between the parties. Id. ¶ 17. The counterclaims were instead addressed in the Third and Fourth Awards, which are the awards at issue in this litigation. Id. During 2017 and into 2018, the parties unsuccessfully attempted to resolve the counterclaims. Id. ¶ 18.
Prior to the eventual arbitration hearing, in 2017, Djibouti enacted a law permitting the Djiboutian government to demand re-negotiation of “strategic infrastructure contracts” and unilaterally terminate them should such negotiation fail. Id. ¶ 19. In December 2017, the Djiboutian government invoked this law to re-negotiate the Concession Agreement, but DCT and DP World refused to engage. Id. In response to Djibouti's demands, in February 2018, DCT issued a notice of dispute to Djibouti, and commenced a second and separate arbitration proceeding to confirm the Concession Agreement. Id. ¶ 19.
Two days after DCT brought the second arbitration, “in apparent retaliation,” the President of Djibouti issued an executive order claiming to terminate the Concession Agreement, and Djibouti took physical control of the container terminal. Id. ¶ 20. Despite Djibouti's law and executive decrees purporting to terminate the Concession Agreement, the tribunal in the second arbitration found that it “remains valid and binding.” Id.
In September 2018, Djibouti applied to the Djibouti Court of First Instance in an ex parte proceeding seeking the appointment of an administrator over DCT due to “tensions” between the shareholders, DP World, and PDSA, a division of the Djiboutian government. Id. ¶ 21. The Djiboutian court appointed Chantal Tadoral as the provisional administrator of DCT. Id.
On November 9, 2018, the original London tribunal held an arbitration hearing on DCT's counterclaims. Id. ¶ 23. Though Djibouti had initiated the proceedings in 2016, it did not appear. Id. Instead, on November 18, 2018, Ms. Tadoral, claiming to represent DCT, applied to stay the arbitration. Id. ¶ 21. On January 3, 2019, the tribunal rejected the application for a stay because it had already proceeded to the hearing stage without any challenges from the counterclaimants. Id. ¶ 22.
On May 3, 2019, the arbitration tribunal issued its Third Partial Final Award, granting declarations that Djibouti breached the Concession Agreement and awarding total damages and legal costs to DCT in the amount of $474,388,673, not including interest. Id. ¶ 23. On July 1, 2019, the tribunal issued the Fourth Partial Final Award awarding interest on the unpaid royalties and legal fees to DCT. Id. ¶ 24. Total damages amount to $485,755,717.80, excluding interest on the exclusivity claims and the royalty claims since April 11, 2019. Id.
On September 14, 2020, DCT filed in this Court a Petition to Confirm Arbitration Awards against the Republic of Djibouti. See generally Pet. After a lengthy dispute over service of process, Djibouti entered a stipulation in which it agreed to respond to the Petition by November 22, 2021. Stipulation [ECF No. 25]. On November 22, 2021, Djibouti filed its Answer, generally denying the allegations in the Petition, and asserting seven affirmative defenses. Answer [ECF No. 28]. After DCT objected to various discovery requests from Djibouti, on January 24, 2022, DCT filed a notice letter advising the Court that Djibouti's Answer was “an improper response to the Petition” under the Federal Arbitration Act (“FAA”), its discovery requests were “premature and improper,” and that the Petition was ripe for resolution on the merits. Notice Letter [ECF No. 30-1]. On February 3, 2022, Djibouti filed a Motion to Compel Discovery and Response to Petitioner's Notice Letter. Mot. to Compel [ECF No. 31]. The Court held a motion hearing on November 14, 2022, denied the Motion to Compel, and ordered the parties to submit a stipulated briefing schedule to resolve the Petition on the merits. Minute Entry (Nov. 14, 2022). On January 3, 2023, Djibouti submitted its Response in Opposition to DCT's Petition. Resp., ECF No. 37. On January 24, 2023, DCT submitted its Reply in Support of the Petition. Reply, ECF No. 39.
This Court heard arguments on the Petition on January 26, 2023, and confirmed the arbitration awards. This opinion sets forth the Court's reasoning for that decision, consistent with the findings it made during the hearing.
Djibouti argues that this Court should deny the Petition for two reasons: first, that this Court lacks subject matter jurisdiction to hear the Petition under the Federal Arbitration Act; and second, that two grounds for denying confirmation of the award under the New York Convention apply.
Under D.C. Circuit precedent, “[w]here jurisdiction is sought over a foreign sovereign for the enforcement of an arbitral award.. .two conditions must be satisfied: ‘First, there must be a basis upon which a court in the United States may enforce a foreign arbitral award; and second, [the foreign sovereign] must not enjoy sovereign immunity from such an enforcement action.'” Diag Human, S.E v. Czech Republic-Ministry of Health, 824 F.3d 131, 134 (D.C. Cir. 2016) (quoting Creighton Ltd. v. Gov't of the State of Qatar, 181 F.3d 118, 121 (D.C. Cir. 1999)).
Consistent with the Circuit's decision, this Court will review those conditions in reverse order. See id.; see also Belize Bank Ltd. v. Gov't of Belize, 191 F.Supp.3d 26, 31-32 (D.D.C. 2016) (). Both are satisfied here, and this Court has subject matter jurisdiction over the Petition.
First Djibouti has waived sovereign immunity under the Foreign Sovereign Immunities Act (“FSIA”). The FSIA is “the sole basis for obtaining jurisdiction over a foreign state in the courts of the United States.” Belize Soc. Dev. Ltd. v. Gov't of Belize, 794 F.3d 99, 101 (D.C. Cir. 2015) (quoting Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989)). Under the statute, “a foreign state is...
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