The controversy pertained to management contracts of six major United States ports. The purchaser was DP World (DPW), a state-owned company in the UAE. The contracts had already been foreign-owned, by Peninsular and Oriental Steam Navigation Company (P&O), a British firm taken over by DPW (completed in March 2006). Although the sale was approved by the executive branch of the United States Government, various United States political figures argued that the takeover would compromise U.S. port security.
U.S. President George W. Bush argued vigorously for the approval of the deal, claiming that the delay sends the wrong message to U.S. allies. Legislation was introduced to the United States Congress to delay the sale. On March 8, 2006, the United States House Committee on Appropriations voted 62–2 to block the deal. Despite President Bush's previous intention to veto the legislation, DP World announced on March 9, 2006 that they will drop the deal and transfer operations to a U.S. entity to defuse the situation.[1] Dubai Ports World eventually sold P&O's American operations to American International Group's asset management division, Global Investment Group, for an undisclosed sum.[2] The company is now known as Ports America.[3]
DP World is a company owned by the government of Dubai in the United Arab Emirates, via a holding company. This holding company is under the direct control of the Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, who is also Vice President and Prime Minister of the UAE.
Chronology
U.S. Senator from New York, Chuck Schumer, brought the case to national attention.
In mid-October 2005, DP World approached the Committee on Foreign Investment in the United States (CFIUS) to clear regulatory hurdles for a possible acquisition of the British firm P&O. The CFIUS is the multi-agency federal panel that passes judgment on deals with foreign corporations that raise antitrust or national security questions. Soon after, DPW began negotiating the terms of the takeover with P&O.[4] They were advised by former President Bill Clinton to submit to a 45-day review of the acquisition.[5]
In December 2005, Coast Guard intelligence officials raised the possibility of significant security risks associated with the management of some U.S. port operations by a Dubai company, stating in a report that broad intelligence gaps prevented them from assessing the risks.[6]
After P&O stockholders approved the deal, the arrangement was reviewed by the CFIUS headed by the U.S. Treasury Department. The transfer of leases was approved.
When the deal appeared in the business press, it was noticed by Eller & Company, a Florida firm. Eller has two joint ventures with P&O and it feared becoming an "involuntary partner of DP World," said Michael Kreitzer, Eller's lawyer.[7] According to Kreitzer, Eller hired semi-retired lobbyist Joe Muldoon as a last-ditch effort to persuade Congress to block the deal. Soon, Muldoon and Kreitzer got the attention of Democratic New York Senator Charles E. Schumer and an Associated Press reporter. Within days, Schumer held a press conference calling for a review and the AP ran the story nationally.[7]
Congressional politicians were quick to respond after Schumer's press conference and the AP story put the Dubai Ports deal in the national spotlight. Both Democratic and Republican members of Congress started to question the approval. Republican leaders Dennis Hastert and Bill Frist, who usually work closely with the office of the President, publicly questioned the deal. Frist said "If the administration cannot delay the process, I plan on introducing legislation to ensure that the deal is placed on hold until this decision gets a more thorough review."[8]
On February 22, 2006, President Bush threatened to veto any legislation passed by Congress to block the deal, a veto that would be his first. In a statement to reporters, Bush claimed, "It would send a terrible signal to friends and allies not to let this transaction go through."[9] DP Worlds Chief Operating Officer, Ted Bilkey engaged a number of high-profile lobbying firms to garner congressional support for the deal.[7]
The controversy created a public and unusually high-profile dispute within the Republican Party, and between the Republican-controlled Congress and the Republican-controlled White House.
On February 23, 2006, DPW volunteered to postpone its takeover of significant operations at the ports to give the White House more time to convince lawmakers that the deal poses no increased risks from terrorism.
Former Senate Majority Leader and 1996 Republican presidential candidate Bob Dole was hired by Dubai Ports World to lobby Congress on its behalf against bipartisan criticism of the deal. Mr. Dole was a special counsel in the Washington office of the law firm of Alston & Bird. DP World hired the firm in 2005 to help shepherd its purchase of the British-based firm P&O.[10]
On March 8, 2006, the House Panel voted 62–2 to block the deal, and Senator Charles Schumer added amendments to a Senate bill to block the deal, causing an uproar in the Senate.[11]
On March 9, 2006, Dubai Ports World released a statement saying they would turn over operation of U.S. ports to a U.S. "Entity".[12] Later that same day, American Enterprise Institute scholar Norm Ornstein reported on PBS's "News Hour" that DP World was considering selling its U.S. operations to Halliburton.[13]
Dubai Ports World eventually sold P&O's American operations to American International Group's asset management division, Global Investment Group for an undisclosed sum.[2] The company is now known as Ports America.[14] In New Jersey, it operates as Port Newark Container Terminal (PNCT). Highstar Capital is shopping the company.[15] In 2017, a Turkish company sought to buy Ports America, which would bring it full circle to 2006.[16]
Opinions and comments
Qingdao Qianwan Container Terminal
Qingdao New Qianwan Container Terminal
Qingdao Qianwan United Container Terminal
Qingdao Qianwan United Advance Container Terminal
Tianjin Orient Container Terminal
Yantai International Container Terminal
DP World Hong Kong
Terminal Petikemas Surabaya
ATI Batangas
Port of Manila - South Harbor (MNS)
Pusan Newport Company
Laem Chabang International Terminal (LCIT)
Saigon Premier Container Terminal (SPCT)
DP World Chennai
DP World Cochin
DP World Kulpi
Mundra International Container Terminal MICT
DP World Nhava Sheva
Visakha Container Terminal
DP World Karachi
Terminales Rio de la Plata
Empresa Brasileira de Terminais Portuários (EMBRAPORT)
Intelligence and security officials opposed to the deal with Dubai Ports World said ports are vulnerable to the entry of terrorists or illicit weapons because of the large number of containers that enter U.S. territory, regardless of who manages them.[17]
[A] careful review of the 'assurances letter' reveals that DP World is not, in fact, bound to provide the U.S. government with the information it would need to close the intelligence gaps the Coast Guard identified...The language is weak... Indeed, the assurances appear to amount to little more than a restatement of what the FBI or other law enforcement agenc[ies] could gather anyway in the course of an investigation.[19]
After the DP World announced its decision to transfer the U.S. port operations to a U.S. entity, the BBC quoted Daniel T. Griswold, director of the Cato Institute's Center for Trade Policy Studies, as saying that the affair would "send a chilling signal":
It is just assuming that if a company is from the Middle East it is de facto disqualified from investing in the United States, and I think that is a terrible message to send.[20]
Opposition
The objections to approving the sale centered on arguments about who controls U.S. ports, especially after the September 11, 2001 attacks. Some opposed to the sale have argued that no foreign government should be permitted to own such strategic assets while others argue that port security should remain in the hands of American firms under American control at the very least. Few had offered similar objections to the P&O's ownership, until the proposed DPW takeover brought attention to the situation. Over 80 percent of the terminals in the USA are already controlled by foreign owners.
The objections commonly raised in public discourse differ from those lodged by Eller & Company, the Florida firm responsible for bringing national attention to the deal. Eller has two joint ventures with P&O and it feared becoming an "involuntary partner of DP World".[7] For them, business rather than security or concerns over the approval process were the overriding factors driving their lobbying efforts to sink the deal.
Several additional arguments have circulated among critics of the deal, including:
Review and approval of the acquisition by CFIUS was not sufficiently transparent and thorough, and never reached the proper level within the administration.
Personal ties between the Bush administration and DP World, such as the appointment of David C. Sanborn to the Transportation Department's Maritime Administration portray a conflict of interest.
Former President Bill Clinton advised top United Arab Emirates officials on how to address growing U.S. concerns over the acquisition[29] but later stated "He told them that he didn't know the details about the deal."[citation needed] In a press conference, his spokesman Jay Carson stated Clinton "felt that any ports deal should be subject to the full scrutiny process and should also take steps to make ports safer, not maintain the status quo."[30] However, his wife Senator Clinton was publicly opposed to the deal. Clarified in the same interview: "Like Senator Clinton and many others, he is concerned about foreign state ownership of our ports, and, to this end, he is supportive of her legislation,"[citation needed] Carson told CNN.
Former Senate Majority Leader and 1996 Republican presidential candidate Bob Dole was a special counsel in the Washington office of the law firm Alston & Bird. DP World hired the firm in 2005 to help shepherd its purchase of the British-based firm Peninsular and Oriental.[31] His wife, North Carolina Republican Senator Elizabeth Dole, has also raised questions about the Dubai-based company.[32] The chairman of the North Carolina Democratic Party, Jerry Meek, publicly called on Senator Dole to remove herself from "any congressional oversight" of the Dubai port deal and stated, "The fact that Dubai is paying her husband to help pass the deal presents both a financial and ethical conflict of interest for Senator Dole."[33]
The Bush administration and other supporters of the deal made the following arguments:
The UAE has proven itself a strategic partner by allowing the U.S. military access to its land, ports and airspace for basing and operations in Iraq and Afghanistan;
"During our long association with DP World, we have not experienced a single security issue in these ports or in any of the terminals operated by DP World... We are proud to be associated with DP World and look forward to working with them into the future." Zim Integrated Shipping Services Chairman of the Board, and main shareholder, Idan Ofer, February 22, 2006.[34][35]
The controversy came shortly after the World Trade Organization's Doha Round of global trade talks. At which many member states called for the U.S. to open up its ports to international competition, in the same way that other industrialized nations have pushed poorer countries into opening up their service sectors (e.g. water, telecoms, etc.)[36]
Aftermath
In 2018, another UAE-based port operator, Gulftainer, won 50-year exclusive rights to operate and develop a port in the U.S. state of Delaware.[37] The deal was seen as a breakthrough in UAE–US business relationships and that the "tide has turned" for UAE investors who wish to invest in the U.S.[38]
Hapag-Lloyd AG is a German international shipping and container transportation company, the 4th biggest in the world. It was formed in 1970 through a merger of Hamburg-American Line (HAPAG) and Norddeutscher Lloyd.
Port Newark–Elizabeth Marine Terminal, a major component of the Port of New York and New Jersey, is the principal container ship facility for goods entering and leaving the New York metropolitan area and the northeastern quadrant of North America. Located on Newark Bay, the facility is run by the Port Authority of New York and New Jersey. Its two components, Port Newark and the Elizabeth Marine Terminal sit side by side within the cities of Newark and Elizabeth, New Jersey, just east of the New Jersey Turnpike and Newark Liberty International Airport.
The Committee on Foreign Investment in the United States is an Executive Branch, inter-agency committee of the United States government which reviews the national security implications of foreign investments in U.S. companies or operations, using classified information from the United States Intelligence Community.
P&O was a British shipping and logistics company dating from the early 19th century. Formerly a public company, it was sold to DP World in March 2006 for £3.9 billion. DP World currently operate several P&O branded businesses, P&O Ferries, Istithmar P&O Estates, and P&O Maritime Logistics. It also operates P&O Heritage, which is the official historic archive and collection of P&O.
The Economy of Somaliland largely relies on primary production and agriculture, where livestock is the main export of the country, which it ships to neighbouring Djibouti and Ethiopia, as well as to Gulf states, such as UAE, Saudi Arabia and Oman. Somaliland has a GDP per capita of $852 and a gross domestic product GDP of $3,782,000,000 as of 2022, most of which it receives in remittances from Somalis working abroad. The COVID-19 pandemic has restricted Somaliland's trade flows with decreased demand in the agriculture sector, a significant source of tax revenue.
DP World is an Emirati multinational logistics company based in Dubai, United Arab Emirates. It specialises in cargo logistics, port terminal operations, maritime services and free trade zones. Formed in 2005 by the merger of Dubai Ports Authority and Dubai Ports International, DP World handles 70 million containers that are brought in by around 70,000 vessels annually. This equates to roughly 10% of global container traffic accounted for by their 82 marine and inland terminals present in over 40 countries. Until 2016, DP World was primarily a global port operator, and since then, it has acquired other companies up and down the value chain.
A port operator is a port authority or company that contracts with the port authority to move cargo through a port at a contracted minimum level of productivity. They may be state-owned or privately run.
Sultan Ahmed bin Sulayem is an Emirati businessman. He is the chairman and chief executive officer (CEO) of DP World and the chairman of the Ports, Customs & Free Zone Corporation.
China Merchants Group Limited is an international state-owned enterprise (SOE) of the People's Republic of China. The company is operating under the auspices of the Chinese Ministry of Transport.
The Port of Qingdao is a seaport on the Yellow Sea in the vicinity of Qingdao (Tsingtao), Shandong Province, People's Republic of China. It is one of the ten busiest ports in the world.
The United Arab Emirates has quite a close and friendly relationship with the US, being described as the United States' best counter-terrorism ally in the Gulf by Richard A. Clarke, the U.S. national security advisor and counter-terrorism expert. In terms of defense, the United Arab Emirates Armed Forces has been nicknamed "Little Sparta" by United States Armed Forces generals and former U.S. Secretary of Defense James Mattis for its active role against extremists in the Middle East. The United Arab Emirates also hosts the only United States border preclearance in the Middle East.
DP World London Gateway is a port within the wider Port of London, United Kingdom. Opened in November 2013, the site is a fully integrated logistics facility, consisting of a semi-automated deep-sea container terminal which is on the same site as a land bank for the development of warehousing, distribution facilities, and ancillary logistics services.
The Port of Tilbury is a port on the River Thames at Tilbury in Essex, England. It is the principal port for London, as well as being the main United Kingdom port for handling the importation of paper. There are extensive facilities for containers, grain, and other bulk cargoes. There are also facilities for the importation of cars. It forms part of the wider Port of London.
The Kochi International Container Transshipment Terminal (ICTT), locally known as the Vallarpadam Terminal, is the first transshipment terminal in India and the first container terminal to operate in a SEZ. It is part of the Cochin Port in Kochi, Ernakulam district, Kerala.
Qingdao Qianwan Container Terminal is a port of China, located at Qianwan, Qingdao, Shandong province. Qingdao Port ranked 10th in 2008 world's busiest container ports with 10,320 thousands TEU, current projects were expected to raise the capacity to 15,000 thousands or more.
Port of Jebel Ali, also known as Mina Jebel Ali, is a deep port located in Jebel Ali, Dubai, United Arab Emirates. Jebel Ali is the world's ninth busiest port, the largest man-made harbour, and the biggest and by far the busiest port in the Middle-East. Port Jebel Ali was constructed in the late 1970s to supplement the facilities at Port Rashid.
Gulftainer is a port operator with its corporate head office in the United Arab Emirates. It was established in 1976.
The following lists events that happened during 2006 in the United Arab Emirates.
Mohammed Sharaf is an Emirati businessman, who was the Group CEO of Dubai Ports World, an Emirati ports operator. He was the Group CEO of DP World until December 2015.
The Port of Doraleh is an extension of the Port of Djibouti, located 5 km west of Djibouti City. The multipurpose port has terminals for handling oil, bulk cargo, containers and livestock. It was partially owned and operated by DP World and China Merchants Holdings, until its container facility was seized by the government of Djibouti in February 2018. There is a Chinese naval base directly adjacent to the port. China’s first overseas military base is in close proximity to the port.
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