GMR compensation claim of US$1.4 billion eclipses annual state budget

Indian infrastructure giant GMR has filed a claim for US$1.4 billion in compensation from the Maldives, following the government’s sudden termination of its concession agreement to manage and upgrade Ibrahim Nasir International Airport (INIA).

According to Indian media, the 75 page claim for “wrongful termination” of the concession agreement includes payments to subcontractors and loss of profits over the lifespan of the 25 year agreement.

Both the government and the state-owned Maldives Airports Company Limited (MACL) will be invited to respond, with a final court order in the case expected in March 2014.

In separate Singapore-based arbitration proceedings one of the project’s lenders, Axis Bank, is also seeking payment of US$160 million for a loan guaranteed by the Maldivian Finance Ministry.

Axis Bank recently raised concerns with MACL and the government, after President Mohamed Waheed moved to create a state-owned airport company and transfer to it MACL’s management responsibilities.

The prospect of MACL’s assets being dissipated led Airports Council International (ACI), the global body representing the world’s airports, to advise its members to exercise caution before making any investment in the Maldives relating to INIA, warning of “legal and financial risks”.

The government subsequently dropped the attempt, after its Attorney General Aishath Bisham warned that President Waheed had exceeded his authority in appointing board members to the new entity.

The lead up to eviction

GMR, in consortium with Malaysia Airports, narrowly won the International Finance Corporation (IFC)-managed bid for the airport in 2010, and signed the agreement with MACL under the former government of Mohamed Nasheed

The then-opposition, including the Progressive Party of the Maldives (PPM), People’s Alliance (PA), Dhivehi Qaumee Party (DQP) and Adhaalath Party (AP), opposed the agreement primarily on nationalistic grounds, and alleged corruption in the bidding process.

Other concerns raised by the opposition at the time included the prospect of GMR allowing Israeli military aircraft to stop over in the Maldives and refuel “after bombing Arab countries”.

The DQP then filed a civil court case, managing to block the developer’s charging of an Airport Development Charge (ADC) stipulated in the concession agreement, on the grounds it was a tax and therefore required parliamentary approval.

Backing the concession agreement, the Nasheed government permitted the airport developer to deduct the ADC from its share of the revenue as a stopgap measure, while it sought to appeal.

However shortly afterwards the Nasheed government was deposed during February 7 2012’s controversial transfer of power, and the opposition parties assumed control of the government – and the prospect of paying GMR for the development of the airport.

The government received US$525,355 from the airport for the first quarter of 2012, compared to the US$8.7 million it was expecting, at time it was facing a crippling budget deficit, a foreign currency shortage, plummeting investor confidence, spiraling expenditure, and a drop off in foreign aid.

In the second quarter GMR presented MACL with a bill for US$1.5 million, and in the third quarter, US$2.2 million.

“The net result of this is that the Maldivian government now has to pay GMR for running the airport,” wrote DQP Leader and newly-appointed Special Advisor to President Mohamed Waheed, Dr Hassan Saeed, in a self-described “candid” letter to Indian Prime Minister Manmohan Singh.

A subsequent report by the government’s own Auditor General (AG) found concession revenue due the government had plummeted fourfold as a result of the court verdict sought by Saeed’s own party while it was in opposition.

According to the report, net concession revenue to the government had fallen to just US$6,058,848 in 2012, compared to US$25,424,877 in 2011.

Rather than appeal the Civil Court verdict obstructing the ADC, “The new government took the view that it would not be proper for it to intervene in the legal process for the benefit of a private concern,” the report noted, and instead, on April 19 2012, the informed the developer it was “retracting the previous agreement [to offset the ADC] on the grounds that the then Chairman of MACL did not have the approval of the MACL board to make the agreement.”

GMR asserted that this decision was a political event as defined within its concession agreement, and warned that this would amount to a breach of the agreement by the government.

“The government did not accept this argument,” noted the AG.

Seeking a way out of the agreement but wary of the heavy penalties in the termination clause, the government accused the World Bank’s IFC of “irresponsibility” and “negligence” in its conduct of the bidding process.

“The government must also consider how much money has to be paid back as compensation if terminating the agreement,” said Attorney General at the time, Azima Shukoor, during a prescient press conference in September 2012.

“It is clear to all of you that the Maldives financial and economic situation is at a critical level, and in this situation [termination] is not an easy thing to do,” Shukoor said.

In August 2012, with the new terminal and refurbishment 25 percent complete according to the government’s outside engineering assessment, the government ordered a halt to construction pending new ‘regulatory approvals’, and demanded a second runway not included in the original agreement.

GMR agreed to construct an emergency runway and proposed exempting Maldivian nationals from paying the ADC as a compromise. The company received no response to the offer.

Dr Hassan Saeed meanwhile issued a pamphlet calling for the cancellation of the agreement, likening it to “taking bitter medicine to cure a disease” or “amputating an organ to stop the spread of cancer.”

In his letter to Indian Prime Minister Manmohan Singh, dated September 19 2012 and obtained by Minivan News, Saeed further claimed that “GMR and India ‘bashing’ is becoming popular politics”, and warned that “as a result, “the Maldives is becoming fertile ground for nationalistic and extremist politicians.”

“I want to warn you now that there is a real danger that the current situation could create the opportunity for these extremist politicians to be elected to prominent positions, including the Presidency and Parliament on an anti-GMR and anti-India platform,” Saeed informed Singh.

Saeed went on to accuse GMR of extensive bribery, including the payment of “millions of dollars to buy MPs to get a parliamentary majority for the then ruling Maldivian Democratic Party”.

He claimed that “politicians and MPs who end up in GMR’s pocket keep silent but no one – with the exception of former President Nasheed and his key associates – have defended the indefensible GMR deal in public.”


In late 2012 the government declared the concession agreement ‘void ab initio’ (invalid from the outset), and gave GMR seven days’ notice to leave the country.

The move swiftly followed the Singapore Supreme Court’s lifting of an injunction blocking MACL from taking over the airport pending arbitration proceedings, on the grounds the arbitration court had no jurisdiction to prevent the Maldives as a sovereign state from expropriating the airport.

The full verdict however did not exempt the government from compensation for this maneuver. In fact, according to the verdict document, Financial Controller for the Ministry of Finance Mohamed Ahmed “affirmed in an affidavit that the Maldives government would honour any valid and legitimate claim against it. He also stressed that the Maldives government had never defaulted on any of its payments.”

Moreover, lawyer representing MACL, Christopher Anand Daniel, “also accepted that if the arbitration tribunal found that the Appellants were wrong in their asserted case that the Concession Agreement was void ab initio and/or had been frustrated, but the Appellants had by then already gone ahead with the taking over of the airport, they would at least be liable to compensate the respondent for having expropriated the airport” (emphasis retained).

ACC exonerates airport deal

The Auditor General’s report acknowledged allegations of corruption in the deal, but finding the evidence “not conclusive on this point”, deferred to the judgement of the Anti-Corruption Commission (ACC).

That arrived on June 17, 2013, in the form of a 61 page investigative report that concluded that the bidding process was conducted fairly by the IFC, and that the GMR-MAHB consortium won the contract by proposing the highest net present value of the concession fee.

The ACC further concluded that the awarding of the contract did not contravene amendments brought to the Public Finance Act requiring parliamentary approval for such agreements.

Furthermore,  “Considering the situation (2008, 2009 and 2010) when the decision was made to privatise the Male’ International Airport,” the ACC’s calculations showed that MACL would make a profit of about US$254 million in 25 years if the airport was operated by the government-owned company.

Conversely, the government would receive about US$534 million in the same period from the GMR consortium if the airport was privatised, the ACC found.


Following publication of the ACC’s report, the government has backed away from allegations of corruption and instead declared to evict the developer was made due to its impact on state finances.

“Back before the government took back control of the airport from GMR, the reason we gave was that the deal was bleeding the country’s economy. We were paying GMR to keep them here,” President’s Office Spokesperson Masood Imad told Minivan News last week.

Azima Shukoor meanwhile labelled ACC’s report “incomplete” and “lacking professionalism”, in an interview with local media.

“There’s no contradiction between the government’s decision and the ACC report. We never levelled any corruption charge in terminating the agreement,” said the former Attorney General, in an interview with local media.

“Did [the ACC] omit the factors deliberately or unknowingly or simply just overlooked them? But a lot of factors have been overlooked and omitted from the report. The state will suffer great losses because of it. Especially when the country is tied up in [arbitration proceedings],” Shukoor was reported as saying.

“The state did a thorough investigation of the contract, including what happened during and after the signing of the agreement. So the government’s legal position doesn’t and shouldn’t change due to the report. We made a very firm decision,” she said.

Speaking at a campaign rally on the island of Thimarafushi in Thaa Atoll, former President Nasheed observed that the figure sought by GMR as compensation amounted to more than the annual state budget of the Maldives.

“Even today in my view it is one of the most important duties of the People’s Majlis to renew the contract, find a way to hold discussions with the company over [renewal], and save the Maldives from the great misfortune our people are about to face,” he said.

Former President Maumoon Abdul Gayoom’s PPM have meanwhile laid the blame for the airport debacle on President Waheed, accusing him of “ignoring advice”.

“We told the next President Mr Waheed that he should hold discussions with the GMR Group and the Indian government to arrive at an acceptable solution, after which the government was free to act on its own,” he said. “Unfortunately, this was not done and suddenly there was this unhappy ending,” Gayoom was reported as saying in the Hindu, following a visit to India and a meeting with Prime Minister Singh.

Following the PPM’s apparent turnaround on the GMR issue, Parliamentary Group Leader of the Waheed-aligned Dhivehi Rayithunge Party, Dr Abdulla Mausoom, said it was in fact senior figures in the PPM who were among the most vocal supporters for terminating the GMR agreement.

“It is ironic that we are hearing these statements from the PPM, whose leader has been witnessed supporting rallies demanding the cancellation of the [GMR] agreement,” he said.


18 thoughts on “GMR compensation claim of US$1.4 billion eclipses annual state budget”

  1. “Even today in my view it is one of the most important duties of the People’s Majlis to renew the contract..."?

    Why? None of us (well sane ones anyway) likes the way the GMR contract was torn up by the hate mongers. However, it still remains a glaringly obvious fact that GMR was actually doing more harm than good.

    Don't tell me about the massive profits they were generating. These were not profits! These were extortion charges GMR levied on airlines and passengers. That's not a particularly great business model to talk about. Any idiot can run a monopoly and point a gun at their customers. GMR did exactly that.

    For better or worse, GMR deal is over. Kaput! MDP should get over it; it was an "erroris a principio"!

  2. Well we have to accept that the PPM was sincere in their claimed purpose for evicting GMR - keeping the airport under firm Maldivian control. The GMR agreement was terminated at the behest of the PPM because they couldn't resume their practice of bleeding the airport revenues dry with GMR in charge of the books.

    If this debacle isn't enough to convince the people of the motives of these vindictive, reckless, snivelling iniquitous bandits, then nothing will.

  3. Ahmed,

    If the alternative were to fork up $1.4 billion and another possible $260 million, then by all means we should.

    And no, we have proven since the 1960's that 'any idiot' cannot point a gun at customers and manage an airport. We are close to having a million affluent unique visitors/year coming into the country and we can't even offer them protection from the elements, much less offer value added services to generate revenue.

    GMR was within the legal rights to levy the charges, and they were willing to negotiate. Even before any negotiations had begun they were willing to exempt locals from the fee.

    You are right though, the deal is likely off for good, it is highly unlikely for the GMR board to decide to jump right back into this unruly rats' nest.

  4. Hey, I have been listening and thinking about this GMR vs Mordis debate.

    It has given me a headache. I want compensation for the headaches and time lost. I will sue both GMR and Mordis, for 4.5 trillion dollars.

    GMR must pay half. The Mordis govt must pay the rest! So there!

  5. There's no such thing as a binding contract in Maldives. Contracts only require the foreigner to uphold their responsibilities, while Maldivians are free to do as they please (god's will). The contract "protection" for foreign workers, investors, etc. is just a bunch of words on paper. Just about as worthless as Ruffiya.

  6. This may not be the best of deals for the Maldives.

    If GMR had performed according to what was required in the bid papers and won the bid, and if they have a valid agreement, they do have a case!

    And if they win the case, no matter what, we will have to pay it!

    The clowns who blew this up will have to end up behind bars and will have to pay us back! If they are left to roam on the streets free to dangle their xxxxx; the people do also have a right!

    This would be my Adhaalath!

  7. I am certain GMR's claim is inflated. But I am also certain GMR's case is very solid. Nationalism might be a good thing, but mixing it with emotions, business and hate-mongering is an explosive mix. Unfortunate for Maldives, the people behind the fiasco will be safely eating their pudding in some foreign land in few months, while the common people will be made to pay through nose.

  8. @peasant on Sat, 22nd Jun 2013 6:20 PM

    "And no, we have proven since the 1960′s that ‘any idiot’ cannot point a gun at customers and manage an airport...
    GMR was within the legal rights to levy the charges, and they were willing to negotiate. Even before any negotiations had begun they were willing to exempt locals from the fee."

    Well, I agree that Maldivians cannot run an airport. As you point out, history provides the evidence. Even before the first piece of tarmac was laid down at Hulhule, there was a fully functioning international airport at Gan. Let Hulhule rot in camel dung for good and let Maamigili and Gan rise as the major international hubs of the Maldives.

    On your second point, GMR probably had so many rights to do umpteen things. This is mainly because of loopholes left in their contract. Their willingness to negotiate is debatable since we don't know all the dealings that took place. It is clear that the Maldivian government capitulated on many of the "concessions".

    I believe the reason for British Airways stopping direct flights had to do with the increased levies from GMR!

  9. GMR can charge any damn amount they want. In the modern world of war, it's not 'eye for an eye'. It's 'eye, tongue, liver, kidney and left leg for an eye'.

    I hope the illegal occupational regime chokes on this debt and dies.

  10. I do agree that this agreement with GMR wasn't done for the best interest of the country in some manners. But before we take any action to terminate the agreement did we ever look in to the real state of this MOU or did we prepare ourselves good enough legally?
    As far I have seen, once the new government came to power (whether legally or illegally)there were interested to threw out GMR no matter what the result is, can anyone see where we are today?
    During the time they just went through the agreement only to find the loopholes but not for the point where GMR can be stronger than us. There best interest was to find the blunders made by Nasheed government and that was the main reason why we don’t have any evidence against them so far to prove that they have pay us rather then we have to pay them. And then called that this agreement is “Void ab Initio” so there will no compensation that Maldivian government has to pay GMR but GMR has to pay back MACL the balance of the quarterly payments from which they deducted the amount for (25$) development charges which they were restrained to take from the passengers by order of the government.
    Eventually people were very happy to do anything to throw GMR out & terminate this agreement. But the public never knew the game which the government was playing behind them until GMR claim for the compensation, a sum of 1.4 billion dollars.

  11. @Patriot
    I agree with you. Someone should take responsibility for this blunder. This should start from Nasheed who gave the contract to GMR using illegal means.

    We have to first investigate whether any of our laws were broken by Nasheed during the bidding process.

  12. Makes you wonder whether Maldives can even afford to operate a modern international airport.
    As the holy descendants of Arabs.....just don't tell the arabs.....maybe you should invest in large dhows for inter atoll travel and trade.
    You can even offer your tourists day trips on a dhow with lunch.

  13. @Ibbe

    I cannot agree any more than you do that someone should take responsibility, not only for this!

    But what is disturbing is why start so directly and very particularly with Nasheed!
    This is questionable, and funny as well!
    Almost jutting out of proportion! Is it not?

    But.... Yes, if Nasheed was involved in anything fraudulent with regards to this or otherwise, he cannot evade justice.

    Whatever the case may be, prove him guilty beyond doubt!
    If guilty, serve him due punishment! No matter what!

    If he has robbed, chop his hands off!
    If he has fornicated, whip him!
    If he has murdered, behead him!


    If Nasheed is found guilty beyond doubt, I do not think he will be a coward to evade justice as some of the mightier people who have ruled this country is doing after all that they have done!

    We have witnessed the governance by a "whatever you may call it" government who have governing this country for 30 long years where heads of Parliament and Judiciary heads were appointed by the President!

    Laws were being passed as the President pleased.
    The Parliament had more than two third of its majority under his control and obeying him!
    Apart from this the President had 8 appointees in parliament
    who worked for him!
    And there was no law that could find him guilty even if were guilty to the highest magnitude!

    My question to you is:
    1. Was this right, just or democratic?
    2. Is this what the people of Maldives deserve then, or even now?

    Out of curiosity, just let me know one good reason why "Nasheed" needs to be pinned (by any means I guess!) as you seem to state, and others who had broken laws and done more damage before him breaking laws and licking out the coffers be set free to jingle and dangle all the way!!!!

  14. Few months is left before we lost to GMR
    were is that politican/gayoom/mullas/gasim. who were dancing againg who will pay the money to GMR.
    we all poor maldivian have to pay. and
    now they are blaming Dr.waheed.this type of politics gayoom have learn from Egypt.
    pl sake of the maldives pl you all united ask beg help from india they have good heart i am sure india will help us.
    “Even today in my view also it is one of the most important duties of the People’s Majlis to renew the contract, find a way to hold discussions with the company over [renewal], and save the Maldives from the great misfortune our people are about to face,” he said.

  15. The reason for terminating the GMR agreement was to allow Champa Afeef and Gasim (all financiers and players in the coalition) to establish International airports of their own. But now the Maldives has to face the dire consequences of cutting short an IMF endorsed agreement between a multi billion dollar conglomerate and our poor debt ridden government. This is still a win situation for Champa Afeef and the old guards, their wealths will not be affected whatever happens. The poor the country, the more desperate the government, the more influence they will have!

  16. You hit it on the dot @ Hassan Hameed on Sun, 23rd Jun 2013 1:38 PM.
    It may have not been the best of deals though!
    But now we suffer and the Champas and Gasims are happier than ever before!

  17. Hmmm, now all of a sudden some of the commentors here are talking about a not so good deal by GMR when all what was heard before was rot in hell for terminating the contract!Why the little change, questions their motive!Seems like they are going through a personality disorder!??
    As for me all the politicians related to this deal is rotten as no opinion of the public mattered!?Now we'll have to see what happens next!

    @Hassan Hameed
    IMF does really good deals for the poor?????With their Impunity BulS***, i would rather stick to camel dung in the Arabian desert!Thought the European organizations were democratic, transparent???

    Bea Edwards: Corruption and fraud at IMF, the World Bank

  18. Hey Shimy, get back to work. You have a debt to pay. 🙂

    Yes, we’ll be expropriating the adhaalath paateys’ swiss bank accounts too. So don’t panic.


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