BACKGROUND TO THE ISSUE

• DP World is a global ports operator based in Dubai, United Arab Emirates.

• In February 2006, the company acquired the British firm P&O and its U.S. subsidiary, which manages six major U.S. seaports, for $6.8 billion.

• The U.S. government required DP World to operate U.S. ports with existing American managers as part of the deal.

• Critics argued that the deal raises security concerns and requires further scrutiny, since DP World is a state-run venture of the UAE. The country was the home of two of the al Qaeda hijackers involved in the September 11, 2001, attacks, and money to fund the plot was passed through banks in Dubai.

• The company signed a letter of assurances to assist the Homeland Security Department and maintain port security standards.

• According to the Secretary of State Condoleezza Rice, the agreement went through a vetting process that took about three months.

• P&O's acquisition made DP World the world's third largest ports group.

• The company owns the global port assets of U.S. freight rail company CSX Corp., bought in 2005 for $1.15 billion.

• The company manages 19 container terminals and has operations in 14 countries.

• In January 2006, President Bush nominated a DP World executive, David Sanborn, for the post of the administrator of the Maritime Administration in the U.S. Department of Transportation.

Sources: The Associated Press, Reuters, CNN, The White House

2006, March 3: The sale of P&O Ports to Arab controlled company has created a furore in the U.S.A and two members of the Caribbean Shipping Association’s Group B – Port of New Orleans and the Port of Miami are among the ports at the centre of the controversy.

U.S. House Homeland Security Committee Chairman Peter King, (R-NY), urged the White House to reconsider approving the sale which would give "Dubai Ports World," a United Arab Emirates company, control over significant operations at six U.S. ports. Other U.S. lawmakers have also expressed concerns about the sale's implications for maritime security.

The United Arab Emirates government-owned port operations company won approval for a $6.8 billion deal to buy the London-based Peninsular and Oriental Steam Navigation Co. (P&O) from a secretive U.S. panel. P&O is the world's fourth-largest ports company, which runs commercial operations at shipping terminals in New York, New Jersey, Baltimore, New Orleans, Miami, and Philadelphia.

The mounting criticism over the pending sale has created a serious political crisis for the Bush administration, as more Republicans have come out in opposition. New York State Governor George Pataki and Robert Ehrlich, Governor of Maryland, expressed serious concerns. Governor Pataki directed the Port Authority of NY/NJ to "explore all legal options." Ehrlich issued a similar edict, which might include simply voiding the contract for the Port of Baltimore.

A subsidiary of (U.S.-based cargo handler) Eller & Company, based in Miami, has sued to block the takeover of shipping operations by Dubai Ports World (DP World). It is the first legal salvo against the $6.8 billion sale, which already has Capitol Hill in a heated debate over security risks at the six major U.S. ports affected by the deal.

The Eller subsidiary, Continental Stevedoring & Terminals, which is presently a business partner of P&O Ports, filed a lawsuit in Florida circuit court stating it would become an "involuntary partner" with Dubai's government and that it is seeking more than $10 million in damages. It asked a judge to block the takeover and said it does not believe the company, Florida, or the U.S. government can ensure Dubai Ports World's compliance with American security rules.

U.S. Coast Guard Vice Commandant on Dubai Ports World

According to Vice Admiral Terry Cross, Vice Commandant of the U.S. Coast Guard: “ … the Coast Guard's initial review identified potential intelligence gaps. Since completing its initial intelligence assessment, the Coast Guard has continued its due diligence by auditing all P&O operations in the United States, examining DP WORLD operations outside the United States, obtaining formal assurances from DP WORLD regarding ongoing access to information on personnel and operations, and further evaluating the proposed transaction in conjunction with other elements of the intelligence community.

These additional efforts have reinforced the conclusion of the Coast Guard's initial assessment, and the Coast Guard continues to believe that, 'DP World's acquisition of P&O, in and of itself, does not pose a significant threat to U.S. assets in [continental United States] ports.'

In fact, the Coast Guard will have more information about the affected terminals under DP WORLD ownership than it currently does under P&O's ownership. During the 45-day review period, the Coast Guard will continue to work diligently within the Department of Homeland Security and the intelligence community to ensure that port security concerns are fully raised and objectively analyzed," he stated

Meanwhile, the chairman of Israel's largest shipping firm has strongly backed a deal that would give the United Arab Emirates-based shipping company control of several U.S. port terminals.

That endorsement came as Britain's Royal Court of Justice tentatively approved the $6.8 billion merger between DP World and Britain's P&O, the current operator of terminals at six key U.S. ports.

But pending an appeal by U.S.-based cargo handler Eller & Co., the judge has stayed that approval until 3 p.m. Friday. And DP WORLD has agreed not to assume control of P&O's port operations until a 45-day security review can take place.

In a letter to Sen. Hillary Clinton obtained exclusively by CNN, Israel's Zim Integrated Shipping Services CEO Idon Ofer called state-owned DP WORLD a strong business partner, despite the United Arab Emirates' boycott of Israel.

"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," Ofer said in a letter written February 22. "We are proud to be associated with DP World and look forward to working with them into the future."