GMR wins arbitration case, tribunal deems airport deal was “valid and binding”

Additional reporting by Zaheena Rasheed

Indian infrastructure giant GMR has won its arbitration case against the Government of Maldives (GoM) for the premature termination of its airport development agreement in 2012.

In a letter sent to the Bombay Stock Exchange, the company explained that the tribunal has said the 18 month tribunal found the agreement to have been “valid and binding”.

“GoM and MACL [Maldives Airports Company Ltd] are joint and severally liable in damages to GMIAL for loss caused by wrongful repudiation of the agreement as per the concession agreement,” read today’s letter.

“It has always been our firm belief that the cancellation of our  concession agreement amounted to wrongful repudiation by the Government of Maldives and the Tribunal has upheld this standard,” wrote GMR Company Secretary C.P. Sounderarajan.

The determining of liability – the first of two phases of arbitration – will now be followed by the determining of compensation owed, with the Indian company seeking US$1.4billion – a figure which exceeds the Maldives annual budget.

Current Attorney General Mohamed Anil has recently expressed his belief that the government was liable only for GMR’s initial outlay of US$78million, plus any costs for construction work completed after the 2010 deal was agreed.

The President’s Office has said that the attorney general will provide a briefing on the case later today.

With the compensation fee yet to be decided, the impact of the tribunal’s decision is still unclear, although the World Bank has previously noted that it would place severe pressure on the country’s already “critically low” foreign reserves.

Hamid Abdul Ghafoor, spokesman for the opposition Maldivian Democratic Party  – under whose tenure the deal was brokered has described the decision as a “major breakthrough”.

Void ab initio?

As well as ordering the Maldives to pay GMR’s Malé International Airport Limited (GMIAL), US$4 million within 42 days for cost of proceedings, GMR have revealed further details of the award.

According to GMR the private arbitration proceedings – disclosed in line with its regulatory requirements – deemed the deal “not void for any mistake of law or discharged by frustration”.

The decision to cancel the deal was made in November 2012 by the administration of President Dr Mohamed Waheed, with then Attorney General Azima Shukoor declaring the deal void ab initio – meaning that the contract was invalid from the outset.

Shukoor further cited English contract law of ‘frustration’, which acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible, or radically changes the party’s principal purpose for entering into the contract.

GMR have today revealed the tribunal’s finding that the collection of Airport Development Charge and Insurance Surcharge – contentious points preceding the contracts termination – to have been lawful under Maldivian law.

The US$511 million agreement to develop Ibrahim Nasir International Airport (INIA) – signed during the tenure of former President Mohamed Nasheed – represented the largest foreign direct investment in the Maldives history.

Legal and political wrangling regarding the deal began before GMR had even assumed management of the airport, however, with the then opposition attacking the deal as part of an increasingly fervent anti-government movement which would eventually lead to the controversial resignation of Nasheed in February 2012.

Concession and compensation

The previous December a case filed in the Civil Court  by opposition parties ruled that the Airport Development Charge – key to the agreement’s financial viability – was deemed illegal.

Following the ruling, the Nasheed government reached an agreement with GMR to deduct the lost revenue – anticipated to have been US$25 million per year –  from concession payments owed to the government.

This decision resulted in further tensions after the fall of the Nasheed government, with GMR contract’s detractors – now in office –receiving a series of bills as the lost ADC revenue eclipsed any concession payments owed.

The ADC matter was subsequently referred to the Singapore arbitration court – as agreed in the initial concession agreement – while senior figures in the government pleaded with Indian PM Manmohan Singh to cancel the agreement, citing growing anti-Indian sentiment in the country.

In today’s letter, GMR revealed that the tribunal had ruled both the charge, and the subsequent adjustment was also “lawful and binding on MACL and GoM”.

The termination of the contract was accompanied by a cooling of relations with neighbour India as well as questions regarding foreign investor confidence in the Maldives – both issues that incumbent President Abdulla Yameen has sought to address since his election in November.

Future investment

Yameen – whose Progressive Party of Maldives has distanced itself from termination of the GMR deal, despite being the largest party in the coalition government at the time –  has pledged to create an environment conducive to further foreign investment.

As well as introducing plans for special economic zones within the country, Yameen’s government has embarked on a drive for foreign investors – suggesting that even GMR would be welcomed back to work on new projects.

“We are going to open up the Maldives in a huge way to foreign investors. Our thirst cannot be quenched. The opportunity to foreign investors is going to be enormous,” said the president in April.

Projects outlined at a landmark Singapore Investment Forum included the further development of Malé International Airport, though Yameen has said that overall management would remain in Maldivian hands due to its national commercial and security importance.

New plans for redevelopment of the airport will include foreign investors – an issue that continues to cause controversy – under the management of the state-owned MACL.

MDP Spokesman Hamid today suggested that the tribunal’s decision would deter further investment and foreign financing in the Maldives and – depending on the compensation amount – could result in the state’s bankruptcy.

Hamid reiterated his party’s recent calls for GMR’s reinstatement, stating the the MDP would be considering further legal action following the tribunal’s decision.


28 thoughts on “GMR wins arbitration case, tribunal deems airport deal was “valid and binding””

  1. I don't support the terms and conditions of the agreement in which the airport was leased to GMR, and I also don't support the way in which the Government of Maldives very unprofessionally and in a very obviously politically motivated move kicked GMR out of Maldives. So I believe the ruling by the Singapore Arbitration is fair. Both MDP and Waheed's Government and coalition which included DRP, PPM, JP and Adhaalath, are to blame for this mess and what's now going to cost us average Maldivians, and businesses millions of dollars. In the end, it's once again us average people who lose out. What a shame on our so called responsible leaders in all the political parties, who have all acted on their personal interest.

  2. Woe to the perpetrators of this crime to Maldives! Political arrogance has cost Maldives its legitimacy!

  3. As dumb as the whole agreement with GMR was in the first place,
    the manner of termination was ridiculous. And the short sighted fools could not understand the potential consequences of it. It could have been handled better, and instead of a termination, there could have been a renegotiation which favors both parties unlike the first agreement which favored GMR. Now we are in a bigger mess than actually being in the contract with GMR with those terms which may be deemed disadvantageous for us.

  4. why did they bring GMR into this country.
    The airport was operating fine for many years, but someone had to bring this GMR into the country.

  5. This is the problem here in Maldives may be a large or small company, public or private, group or individual, written or verbal the contract agreement is not followed by mostly the Maldivian. When ask, in case there is a breach of contract they(maldivian) will just answer "what contract? nonononono" a good example is a Bangladeshi expat; came here for work, promised for high/average salary & the contract is acceptable but right after arriving in the airports arrival the passport is collected by a representative of employer or recruitment agency for the reason that the expatriate will not run off. run of what? then give a salary of US$100-150 for a hard labor & not even close in the contract or average salary of an expatriate. GMR was right to bring the case in international court instead here in Maldives. No doubt the GMR won the case.

  6. It seems global warming has come early to the Maldives.....he he he.
    You guys had better leave quickly for your global jihad to Syria and Iraq before the compensation assessors call.

  7. The government won't pay a laari. These guys walk away from debts every day, no matter how big or small.

  8. Look at IGMH. Repair. Repair. Repair. Water leaking everywhere. I don't want the same thing to happen with the airport. That's all.

  9. its not decided that we have to pay 1.4 billion .

    We will ended up paying may be 150 million maximum. So what?

    We would have lost over 3 billion if GMR was allowed to run the airport for contracted period ? Instead of loosing 3 billion dollars over 25 years , it is better to pay even 150 million and then retain the entire profit for next 25 years.

    This contract was give n to GMR because Nasheed is and his gangs had taken huge cut from GMR and nothing else.

    Maldives will continue to improve our lives and country economy will continue to grow and we do not need GMR to have positive growth in our economy.

    We don't need corrupt company like GMR to invest thier money in this country and we have received people like black-stone who had invested much more than what GMR had done . They never used our money to invest and they use their money to invest in this country.

  10. Yes, it's always better that Maldives retains the profit than GMR, but of course, the question is WHO is going to be lucky enough to benefit from this huge profit that Maldives retains? If the people of Maldives as a whole benefited from any profit that the government earns, well then inequality between Male' and the atolls wouldn't be growing and we won't have to be rushing off to India or Sri Lanka for the most basic medical needs, and we won't have to worry about the educational standard of our kids and etc etc. So yes, someone will benefit besides GMR but definitely not Maldivians as a whole, maybe some lucky corrupt individuals and those with wealth and power :)But yes, the average Maldivian will indeed suffer from any compensation that we have to pay, be it 150 million dollars.

  11. @missindia.
    we are not worried at all we have over brother Chinese to give air port there waiting to take over that it will be happiest day for the Maldivian. insha allah this will happen very soon.

  12. Mr. president yameen.
    pl give air port to our brother Chinese. they are honest reliable.

  13. Mr.president Yameen. whole nation wanted you to give naval base project to china they will build a base in one year. we don't want to wait for another 50 years to complete. we all have seen ign hospital we don't want see another nightmares.

  14. Hey Hero.

    Your kind are the ones who has to pay the money. Not us. We didn't go around screeching "GMR GO HOME". Now please take some anesthetic medicine and lie down on the operating table.

  15. We will still go and majority of people do not want GMR to be here in Maldievs.

    Go for a public referendum if you want , you will see 90% of the people will say no to GMR.

    look now what Nasheed is saying. Nasheed had said that sending of GMR is a huge loss to MDP ? Yes its right , GMR had stopped giving money to Nasheed and MDP now where as the money was flowing freely to Nasheed to buy the parliament and make him stay in power for years to come.

    Knowing what kind of idiot Nasheed was, GMR used him to pave the paths to rob the country by signing once sided contract legally.

    As far as Arbitration is concerned , there was a contract made between Gov. and Gmr and that is binding and that is what the decisions was about.

    Next hearing is going to tell how much compensation is to be given and they have even given a formula to calculate the compensation amount .

    We know it is not going to cost that much but will only have to pay a fraction of what they claimed.

    Even if we have to pay 500 million , still the saving is much much higher than keeping them in Maldives.

    No matter what MDP and Nasheed tries to twist the out come and they can threaten to take the Gov. to courts but Nasheed will never succeed.

  16. Gov. also should take Kuda Bandhe and Mohamed Shihab who has signed addendum allowing GMR to deduct additional airport Tax which has costed us to pay over 70 million dollars to GMR to manage the airport.

    Airport was making huge profit at the time of giving airport and then how come we ended up paying millions of dollars from GOv. to GMR run the airport .?

    GOv. now take actions against the people who signed the contract , namely Nasheed, Bandhe, Shihab Raaazee .

    These are the guys who had given airport for free to GMR which could have costed Maldives over a 3 billion over the contracted period ?

    Those guys just did the contract to make them rich and never did it for the country.


    The Government of Maldives has to be absolutely embarrassed with this ENTIRE process! They absolutely deserve this verdict! You shot on your own feet!

    In the FIRST place, the agreement to lease out our SINGLE International Airport should NEVER have been done. SEcondly, NO LEGITIMATE Government should ever negate and cancel an agreement WITHOUT proper compensation. Of course the Government has the SOVEREIGN right to make ANY Contract on their soil , NULL & VOID, BUT there are massive consequences to the same and they have to take the hit!

    Here what the Maldives, WE THE PEOPLE was trying to do was to "eat the cake and keep it too!!".

    In International business practices, it does NOT work that way and we Maldivians have to STOP thinking that the entire world is a BANANA REPLUBLIC like the Maldives!!

    I actually congratulate GMR for taking the Government of Maldives to COURT, as once and for all this MANIA to throw out any foreign company will STOP once & for all AND these great Corporates like Four Seasons, HPL, Six Senses, Conrads can continue with their HARD work and hence us getting more and more lucrative & awarding jobs!

    SHAME On the entire GOVERNMENT MACHINERY OF MALDIVES (PARLIAMENT, GOVERNMENTS of MDP,Mr.Waheed AND the current Govt.) for reaching this terribly embarrassing situation, thanks to some SCREECHING MALDIVIANS who ran the streets AMOCK "GO GMR GO" AND ABUSING INDIAN NATIONALS , as if EACH OF these Indians were working for GMR!!

  18. @Hero

    stupidity at its best.Its laughable.What to do,peasent stock,u can never grasp what investment is and what not is

  19. Ms. Mariyam, with due respect I say, please call a spade a spade.

    When you say that you don't agree with the terms and conditions of GMR contract, but, you agree that the agreement was terminated wrongly, you sounded more like: the enemy of my enemy is my friend!

    Ok, when you say that the contract was terminated due to "personal interest" of the present politicians, have you considered how the majority have felt about giving the airport to GMR? I am sure, most people would not have liked the fact of selling their "izzathu-nnafsu" to the Indian people. Ms. Mariyam, have you condidered this fact?? I know, there was and is no money in the treasury. You sounded so desperate that you would resort to prostitution if you have no money!(The same principle/ethics applies here). But, mind you, MOST Maldivians would not!!! No matter they have to go to Sri Lanka and India for the most basic medical needs, like you've said. Their thinking has not developed that much, YET. They are stubborn. And besides, the Maldivians knew how sloppy a workmanship Indian companies displayed in building IGMH. It is a never ending repair and repair and repair.

    So, what Anni did not understand was the PULSE of the people! If the airport was given to a Singaporean company or an English company, then, people would have reacted favourably (or more differently, perhaps). Maldivians do not trust Indian workmanship, because of the very bad workmanship shown in IGMH.

    Therefore, Ms, Mariyam do not say that the people are suffering because of the present politicians. It is the WISH of the people. And the people were given what they ASKED FOR. I respect Anni as much as I honour Mandela, but, this time Anni was not able to understand the feelings and the pulse of the general Maldivians.

    Giving the airport to GMR is like selling the soul and body of the Maldivian people for prostituton! Not everything is for sale! Besides, to a "person" whom you don't like.

    Ms. Mariyam, you may disagree with me, like the medical malpractice case you argued about. I just cannot understand how a Doctor's deliberate malpractice have to be faced by the Ministry of Health (even if facilities were provided or not). Where did you learn law?

  20. where is those idiots Nasheed,Umer naseer and Gasim. know who is going to pay to gmr.
    we don't want Naseed on over lands. pack and send him to gmr. also send that stupid Umer naseer and Gasim to Pakistan. they are fit to live in Pakistan not on over peace loving peoples lands.

  21. Dear Dr analyist no good. see how Maldive past gov building dirty building noo good.. Seee Airport now .. oso so no good. and things falling head and water falling head. you analyist no good.. IGMH built good. but gov noo repair and do nothing. India building Maldives National University now .. looks wow.. Dr.Raamee you no good analysit

  22. Dr Ramee, please do read my comments again. I can actually disagree with the terms and conditions of the agreement, and also disagree with the way the contract was terminated. In the first instance I am saying the terms and conditions were not in the best interest of Maldives, got it? And in the second instance I am saying, the whole episode of terminating the contract could have been handled a lot better than the way it was, within the laws and regulations and within the framework of the agreement, cos like it or not it was a binding and valid agreement. I don't see what's contradictory in that. Yes, the contract was terminated for political reasons more than for the interest of the people. Of course using the people is always very politically smart, like using Islam, cause we fall into that trap so easily. No doubt the contract with GMR had to be changed or even terminated, BUT there's a certain way for governments to do things don't you think? When governments start behaving like hooligans and calling names to Indians, just because of GMR well that's really too much for me, even though you may see it differently. I would expect the GoM to be run by politicians who understand the value of FDI and the value of international relations and bilateral relations for that matter, NOT to be run by politicians who listen to nonsense in the name of religion and the people of Maldives. Please don't get confused between whether or not the people of Maldives wanted GMR here and on HOW a legally valid and binding contract was terminated. These agreements do not change with election results or with changes in government. If that was the case then how many foreign investors do you see investing here in long term projects beyond 5 years?!!!! I would hope that you can atleast see the sense in that.
    And I see you are still upset that I am asking the MoH to be held accountable for the actions of doctors. Sorry my dear but I still see it as such. When the regulators don't do their job, why shouldn't they be held accountable?

  23. Dear Bodu Kashili,
    GMR meehun kon kameh kuree 3 aharu theryga. Emeehunnah kameh kuran beynun nama kuraahaa vaguthu ves libunu. Evves kameh nukure ey bunaahaa varah ves kameh nukurey. University akee grant eh.

  24. hah hah hah Dr.Raamee very well said!!!!!! I really believe your saying, "Giving the airport to GMR is like selling the soul and body of the Malivian people for prostitution".

    Dr. Raamee you sounded like a politician. Why don't you become a politician? You have got the correct thinking.

  25. The fact of the matter is the contract had to be awarded to an overseas investor because no company in the Maldives had the skills to bring the airport up to international standards.

    People seem to forget that if the airport wasn't updated the International Aviation Federation would have revoked permissions for airlines to operate flights to the Maldives.

    After 30yrs of non-investment and corruption from the government the world bank oversaw the contract bidding, that saw GMR win the rights.

    Without GMR input your tourism would have ceased under international law.

    Time to pay up for not understanding the obligations of contract law and fulfilling the requirements to sustain safety standards of an international airports.

  26. government should take over and sell all property belong to nasheed, his family,and his cronies, before paying to gmr. this stupid idiot bring disasters to country and its peoples.hell with nasheed.

  27. @hassan ahmed

    Hah. A coward to the end, stealing to pay your own debts? How fitting - after all, that's what your Saudi buddies are doing.

    Should you choose to sell the flesh of Maldivians, I will arm them with the means for self defense. A pack of machete-wielding heroin peddlers like you are nothing compared to an armed, angry mob.


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