The Djibouti Doraleh Port Project – a case study of legal risks Chinese companies face in going abroad

On 14 January 2022, the Hong Kong Court of Appeal dismissed the appeal by China Merchants Port Holdings Company Limited (the “Defendant“) against the decision of Mimmie Chan J, by which the judge dismissed the Defendant’s application to stay the action in Hong Kong on grounds of forum non conveniens in favour of the Civil Chamber of the Court of First Instance in the Republic of Djibouti. The action in Hong Kong was brought by companies associated with DP World Limited (the “Plaintiffs“) against the Defendant on 20 August 2018, alleging the latter intended to, and did, induce or procure the Djibouti Government to breach its agreements with the Plaintiffs which grant the Plaintiffs exclusive right to develop and operate the Djibouti Doraleh Port.

Despite having obtained an indemnity from the Djibouti Government whereby the Government warrants that its partnership agreement with the Defendant, pursuant to which the Defendant participated in the development of the Doraleh Multipurpose Port, was not in breach of the Government’s agreements with the Plaintiffs, the Defendant nonetheless found itself in legal troubles 10 years after signing the partnership agreement. China Merchants Port will now face a legal battle in Hong Kong that is likely to be prolonged, expensive and fiercely fought.

It is advised that Chinese companies considering to invest in overseas infrastructure to partner with Hong Kong law firms with expertise in construction law and dispute resolution to avoid finding themselves in the unfortunate situation that China Merchants Port is now in.

21 January 2022
Key Contact(s):