Chennai port plans to terminate contract with DP World
Dubai Ports (DP) World is embroiled in a legal dispute with Chennai port authorities regarding the Dubai-based company's contract to operate a container terminal at the port.
The Chennai port informed DP World of their desire to terminate the contract signed in 2001, leading DP to approach the high court to obtain a stay on the port's plan to end their contract.
DP World also resorted to proceedings under the Arbitration and Conciliation Act in order to resolve the issue.
Chennai's desire to terminate the contract lies in DP World's failure to honour one of the clauses regarding transhipment for the past three years.
According to non-negotiable terms in the contract, DP World agreed that within three years of commencing operations, mainline vessels would call at the port to haul cargo directly without being transhipped to other ports in the region.
Furthermore, the contract stipulated that 20 percent of all cargo handled by DP World had to be shipped on mainline vessels direct to destinations within the first three years, 25 percent in the fourth year, 30 percent in the fifth year, and so on until expiration of the contract.
The move was intended to save time and costs, increasing India's competitiveness in the global market.
Chennai's aim is to become a hub port for container cargo on the eastern coast of India.
DP World insists they fulfilled their contractual obligations and the port authorities have incorrectly interpreted the contract.
Chennai has stated that the shipping services from the port to destinations including the US east coast, Europe, the Mediterranean, Red Sea ports, northern Chinese ports, Shanghai and Bangkok do not comply with the stipulated levels of cargo stated in the contract.
DP World has already paid a fine of US$16 million to the port for non-compliance with the contract for the first three years.
DP World was earlier involved in litigation over a port project in India when it was forced to legal recourse last year to prevent the Adani Group from terminating a May 2003 contract to operate a container terminal at Mundra Port in Gujarat for 28 years.
DP World has invested around $1.5 billion in four Indian container-handling facilities, located at Navi Mumbai, Chennai, Visakhapatnam and Mundra.
Investment of a further $500 million is planned to establish new facilities at Cochin Port and at Kulpi in Bengal.
The Chennai port informed DP World of their desire to terminate the contract signed in 2001, leading DP to approach the high court to obtain a stay on the port's plan to end their contract.
DP World also resorted to proceedings under the Arbitration and Conciliation Act in order to resolve the issue.
Chennai's desire to terminate the contract lies in DP World's failure to honour one of the clauses regarding transhipment for the past three years.
According to non-negotiable terms in the contract, DP World agreed that within three years of commencing operations, mainline vessels would call at the port to haul cargo directly without being transhipped to other ports in the region.
Furthermore, the contract stipulated that 20 percent of all cargo handled by DP World had to be shipped on mainline vessels direct to destinations within the first three years, 25 percent in the fourth year, 30 percent in the fifth year, and so on until expiration of the contract.
The move was intended to save time and costs, increasing India's competitiveness in the global market.
Chennai's aim is to become a hub port for container cargo on the eastern coast of India.
DP World insists they fulfilled their contractual obligations and the port authorities have incorrectly interpreted the contract.
Chennai has stated that the shipping services from the port to destinations including the US east coast, Europe, the Mediterranean, Red Sea ports, northern Chinese ports, Shanghai and Bangkok do not comply with the stipulated levels of cargo stated in the contract.
DP World has already paid a fine of US$16 million to the port for non-compliance with the contract for the first three years.
DP World was earlier involved in litigation over a port project in India when it was forced to legal recourse last year to prevent the Adani Group from terminating a May 2003 contract to operate a container terminal at Mundra Port in Gujarat for 28 years.
DP World has invested around $1.5 billion in four Indian container-handling facilities, located at Navi Mumbai, Chennai, Visakhapatnam and Mundra.
Investment of a further $500 million is planned to establish new facilities at Cochin Port and at Kulpi in Bengal.