DP World, already involved in a heated legal dispute with Djibouti, is suing China Merchants for building an international free zone on a Djibouti Container Terminal, where DP World claims a half century exclusive right for building terminals in Djibouti.

The 51-page legal brief by DP World was filed in Honk Kong requesting that the courts order the Chinese company to compensate DP World for damages it incurred as a result of the construction of the free zone along with interest. DP World, which operates over 78 ports across the world, has also requested the courts declare the agreement between China Merchants and Djibouti illegal.

The contract between DP World and Djibouti for the development of Djibouti Port was signed in 2000. In the agreement, Djibouti gave DP World exclusive rights over the port and free zone facilities, including container handling facilities, construction, development and terminal management.

Following this deal, the two parties signed another agreement in 2004 to develop Doraleh Container Terminal. DP World controls 33.3pc ownership, while Djibouti’s state-owned entity, Port of Djibouti (PDSA), holds a 66.6pc stake.

In 2013 China Merchants, a Chinese state-owned conglomerate based in Hong Kong and operating under the State-owned Assets Supervision & Administration Commission of the State Council, bought 23.5pc of PDSA from Djibouti. China developed and financed the free trade zone, considering Djibouti as an important part of its trillion dollar global investment initiative “Belt & Road”.

Meanwhile, DP World and the government of Djibouti became embroiled in a heated dispute last February. The controversy started when Djibouti annulled DP World’s concession at Djibouti Container Terminal. Djibouti unilaterally awarded the concession to the Singapore-based Pacific International Lines. This triggered DP World to take its case to a London-based arbitration tribunal.