A sudden and unexpected rapprochement between the governments of Ethiopia and Eritrea could allow Ethiopian trade to return to the port of Assab, potentially bringing new competition for the transit trade in Ethiopia with Djibouti. Meanwhile, the Djiboutian government rejected the latest arbitration judgment on the long-term dispute with DP World.
The chronic dispute between the two countries focused on the control of the border town of Badme, but Ethiopia has now accepted Eritrean sovereignty. Governments have exchanged ambassadors and links to telecommunications have been restored. There have been unconfirmed reports of troops withdrawing from disputed and militarized border areas.
The new Ethiopian Prime Minister Abiy Ahmed and the Eritrean President Isaias Afewerki have agreed to resume relations with the transport sector. After the talks, the two leaders announced that the war was over and "a new era of peace and friendship" was opened.
It is believed that the government of the United Arab Emirates played an important role in the dialogue, adding another element to the dispute between Djibouti and the United Arab Emirates DP World!
Eritrea has one of the weakest economies in the world, with an authoritarian government and largely isolated from the rest of the world. Assab was the main port for Ethiopian trade when Eritrea was an Ethiopian province. However, secession in 1993 and the subsequent border war of 1998-2000 saw Ethiopia forced to look elsewhere, particularly Djibouti. Ethiopia has also wanted to see more Ethiopian trade go through Lamu in Kenya, Port Sudan in Sudan and Berbera in Somalia.
The agreement has obvious implications for Djibouti, which manages over 90% of Ethiopian trade. Assab and Djibouti are close and are approximately the same distance from Addis Ababa. The competition between the two would be good for long-term Ethiopian traders, but a wholesale exchange towards Assab seems unlikely in the near future.
The Doraleh Container Terminal in Djibouti is a modern structure connected to Addis Ababa by a new electrified railway. Assab no longer plays the lion's share of his affairs after the border war and urgently needs rehabilitation. It would be necessary to develop road and probably railway in order to compete after 20 years.
As was the case, at the beginning of August the International Arbitration Court of London (LCIA) ruled that the Djibouti government acted illegally when it unilaterally concluded the grant of DP World to operate with Doraleh Container Terminal in February of this year. He stated that the concession "remains valid and binding".
Following the unilateral move by Djibouti, several attempts at bilateral mediation failed and the case was again referred by DP World for arbitration.
The Djibouti government rejected the latest ruling, claiming that the court has no jurisdiction over its sovereign rights and that it had the power to cancel the agreement according to a law it approved in 2017. A government statement said: "a fair Compensatory agreement is the only option, which is in line with the principles of international law ".
Djibouti said the continued operation of DP World of Doraleh Container Terminal was "seriously detrimental to the country's development imperatives and to control its most strategic infrastructure" and added that the termination of the contract was "necessary and inevitable and made in accordance with international public law ".
The government wanted to renegotiate the terms of the grant, but a previous LCIA court found that the terms of the original agreement were "fair and reasonable". According to DP World, the terminal has been operating profitably every year since it was built as part of a concession awarded in 2006. The three-berth container terminal has a handling capacity of 1.2 million TEU / year.
DP World responded in a statement: "The Djiboutian government's statement that it does not recognize the decision of the London Court of International Arbitration shows that Djibouti does not recognize the rule of international law.
"The Court's decision confirming the validity of the concession is based on internationally recognized principles and is internationally binding on both the Government of Djibouti.
"In the absence of a time limit expressed in this sense, a contract of English law can not be terminated unilaterally at will. The contract therefore remains fully valid and effective ".