Indian infrastructure giant GMR has claimed US$803 million in damages from the government of Maldives for its abrupt and wrongful termination of a concession agreement to develop Ibrahim Nasir International Airport (INIA).
The claim comes after a Singaporean arbitration court in June found the government of Maldives and state owned Maldives Airports Company Pvt Ltd (MACL) “jointly and severally liable in damages” to GMR for the termination of a “valid and binding” concession agreement.
In a letter to the Bombay Stock Exchange, GMR’s subsidiary GMR Malé International Airport Private Limited (GMIAL) said it had “submitted its claim for damages amounting to US$803 million.”
“In addition, a plea for award of further damages for loss of reputation caused to GMR as a consequence of wrongful repudiation of the concession agreement has also been made to the Arbitral Tribunal, the quantification of which is subject to expert evidence.”
The arbitration has proceeded in two phases, the first phase which ended in June determined liability while the second will determine compensation.
President Abdulla Yameen’s administration called the first phase verdict a success, claiming the arbitration court had capped the compensation amount, and have said the government would not be required to pay GMR’s initial claim of US$1.4 billion – a figure that eclipses the annual budget.
Minivan News understands the concession agreement does allow MACL to terminate the agreement for reasons of public interest and imposes a cap on losses in such circumstances.
Tourism Minister Ahmed Adeeb has on several occasions declared that the government is confident it can pay back any losses incurred, while Attorney General Mohamed Anil has said the government will honor the verdict to uphold investor confidence.
Yameen has previously said the compensation claim will amount to a “manageable” US$ 300 million. In a speech in August, he appeared to blame GMR for the company’s eviction, claiming it had failed to undertake a political risk assessment.
“At a time when you had a very heightened political environment in Maldives, at a time when the parliament was polarised, it was a pity that political risk assessment was not undertaken by GMR. Whenever we hear about GMR, the issue that comes right to the limelight is their inability to assess political risk at the time,” he said.
GMR won the 25-year concession agreement to develop and manage Ibrahim Nasir International Airport under former President Mohamed Nasheed. The US$511 million deal was the country’s single largest foreign investment.
The opposition at the time attacked the deal as part of a vitriolic anti- government campaign, which eventually led to Nasheed’s ouster in February 2012.
In December 2012, new President Dr Mohamed Waheed declared the agreement void ab intio – or invalid from the outset – and gave GMR seven days to leave the country.
The World Bank in December said GMR compensation will place severe pressure on the country’s already “critically low” foreign reserves.
The MDP has called on the government to reinstate the contract, while Nasheed has warned of an “imminent sovereign debt crisis” should Maldives be forced to pay the initial US$1.4 billion.
The government has recently revealed that a new agreement with China’s Beijing Urban Group and MACL to develop INIA were proceeding smoothly, with work expected to begin next year.
GMR were reported in the Indian media to have expressed surprise that the government of Maldives had entered into the new agreement, penned during the visit of China’s President Xi Jinpeng in September.
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