Maldives government denies US$160 million arbitration talks with Axis Bank

The Attorney General (AG’s) Office has denied receiving any notice of arbitration from Axis Bank, one of the lenders backing a US$511 million airport development project voided by the government late last year.

In November 2012, President Dr Mohamed Waheed’s government declared void a concession agreement signed by the previous government with Indian firm GMR, to manage and build a new terminal at Ibrahim Nasir International Airport (INIA), and ordered the company to leave the country within seven days.

Following the decision – later cleared by Singapore’s Supreme Court – project lender Axis Bank announced its intention to seek a repayment of loans taken out for the project, which were guaranteed by the Ministry of Finance and approved by the AG’s Office under the former government.

“Arbitration process”

The India-based Financial Express publication reported yesterday (April 5) that Axis Bank had initiated an arbitration process with the Maldives government as part of efforts to recover loans granted to GMR with an estimated value of US$160 million (MVR 2.4 billion).

Ahmed Usham, Deputy Solicitor General for the AG’s Office, told Minivan News today that although some discussions had been held with Axis Bank, there had been no notice of arbitration given to the state by the finance group over the loan issue.

“We have requested some documents from [the bank] and we are set to meet with them after receiving these,” he said.  “There has been no talk of arbitration.”

Usham added that the documents requested from Axis Bank by the AG’s Office pertained to loans taken from GMR as part of the INIA development.

Acting Minister of Finance Ahmed Mohamed said he too was not aware of any arbitration hearings concerning Axis Bank, or even if talks had been held on the matter.

“All I am aware of is that there was a teleconference held Thursday (April 4),” he stated.

GMR arbitration

The government meanwhile is set to participate Wednesday (April 10) in the preliminary hearing of a separate arbitration case with GMR over the decision to void its airport concession agreement .

Authorities have previously told local media that the meeting, scheduled to take place in London, was not an official arbitration hearing, but rather a means to outline the timeline for both parties to present their case. Once the process for the arbitration is agreed, official hearings are expected to begin in Singapore.

According to the Attorney General’s office, the Maldives will be represented by Singapore National University Professor M Sonaraja, while former Chief Justice of the UK, Lord Nicholas Addison Phillips, will represent GMR.

The arbitrator mutually agreed by both GMR and the government is retired senior UK Judge, Lord Leonard Hubert Hoffman.

Concession agreement

In 2010, GMR-Malaysia Airports Holdings Berhad (MAHB) consortium, the government of former President Mohamed Nasheed and Maldives Airport Company Limited (MACL) entered into a 25-year concession agreement worth US$511 million (MVR 7.787 billion) – in which the GMR-MAHB Consortium was contracted with the management and upgrading of Ibrahim Nasir International Airport (INIA) within the 25 year contract period.

However in November 2012, the government of President Dr Mohamed Waheed Hassan Manik declared the developer’s concession agreement void and ordered it to leave the country within seven days.

A last minute injunction from the Singapore High Court during arbitration proceedings was overturned on December 6, after Singapore’s Chief Justice Sundaresh Menon declared that “the Maldives government has the power to do what it wants, including expropriating the airport.”

GMR is seeking US$800 million in compensation for the sudden termination, while the Maldivian government is contending that it owes nothing as the contract was ‘void ab initio’, or invalid from the outset.

If decided in GMR’s favour, the outcome of the case could potentially see the Maldives facing sovereign bankruptcy, with millions of dollars in additional debt emptying the state’s already dwindling reserves, crippling the country’s ability to obtain further credit, and potentially sparking an economic or currency crisis.

If decided in the Maldives’ favour the case risks setting a legal precedent for effective nationalisation of foreign investments signed under previous governments, and placing existing investors further at the mercy of the country’s turbulent politics.

Kuwaiti interest

Discussing the future of INIA on Thursday, President Waheed was reported in local media as stating that authorities in Kuwait had expressed an interest to “assist in the development” of INIA, following a recent official visit to the country.

“Kuwait is really interested in the airport. It’s because we have received a great deal of assistance from the Kuwait Fund to develop the airport so far. They are well aware of it,” he was quoted in newspaper Haveeru as saying.

“They really believe that we have managed to develop the airport with the assistance of Kuwait. So there is a lot of interest. They are very happy that the government has now taken the initiative to develop the airport.”

President’s Office Media Secretary Masood Imad said he was in a meeting and unavailable for comment when contacted by Minivan News.


12 thoughts on “Maldives government denies US$160 million arbitration talks with Axis Bank”

  1. "Minister of Finance Ahmed Mohamed said he too was not aware of any arbitration hearings concerning Axis Bank, or even if talks had been held on the matter.

    “All I am aware of is that there was a teleconference held Thursday (April 4),” he stated."

    Oh dear, we are in a sorry state aren't we when the minister in charge of finance is unaware of arbitration related to its finances. What is happening in this country? None of the ministers seem to be aware of what they are supposed to be!

  2. arbitration there, arbitration here and arbitration everywhere !!! ha ha...

  3. Who will be paying the arbitrator if Ministry of Finance has not heard about it?

  4. “Kuwait is really interested in the airport. It’s because we have received a great deal of assistance from the Kuwait Fund to develop the airport so far. They are well aware of it,” so says Mr Waheed who practically never remembers anything.

    Kuwait will be very interested in this place, naturally. Why? Kuwait NEVER EVER gave once cent free to develop this god forsaken airport. The Kuwaiti money are loans carrying hefty interest rates. This interest is being accrued every day including today and is being repaid every year. God knows how long it will take to repay all the past loans; it will practically take a generation or two or three!

    Secondly, out of those loans, vast amounts were siphoned off to enrich the pockets of the glorious dictator of 30+ years, his family, friends and allies. It's no surprise then that the regime which is backed by the same dictatorship are looking at the same old ways of siphoning more money in the name of "development".

    Thankfully, Maldivians are much more savvy today.

  5. I am totally against this coup regime. And I am totally against our airport being given to a giant company in India without any authority for us to intervene if we feel that the operations are not to the benefit of both parties. So even our first democratically elected President who was illegally removed, manages to win the elections this year, he should renegotiate the entire agreement amending the concerned issues making this vebture a balanced and a fair venture instead of how it was given last time: We cannot be so subservient

  6. GMR will pay for the loan that they had taken and Maldives does not need to pay GMR loan.

    If the loan is taken to by GMR, then the contract will be made between GMR and the bank and not with the bank and Maldives.

    If Bank had signed the loan agreement between the Maldives and bank and if they have allow the draw down to GMR, then bank is in clear violation.

    So bank can not sue Maldives and Bank can only sue GMR and then GMR can sue Maldives if that is possible in the agreement between Maldives and GMR and not otherwise.

    All these games are played by India and Nasheed to threaten the country and its people .

    Please do not think we are fools and we know nothing and we are stupid to learn the things.

    There is no way that bank can sue Maldives directly.

  7. Look, the reason GMR failed is because the courts ruled the Passenger Tax levied by GMT was illegal. This in caused it to cost the government as opposed to being a sourec of income as the government had to pay the difference (as per the contract).

    Now I read last week, the present government is to increase the passenger tax to $30. WTF!!!

    This is not Anni's doing. If we'd stuck to the contract in it's original form, we would have money coming in for YEARS!!!

  8. Now that Kuwait is willing to help out Maldives, can they just pay up the amount to GMR/Axis bank etc. post arbitration and move over. Hopefully Maldives govt. will like it when Kuwait simply sub-contract whole work to an Indian company (just as they do for almost all their work).

  9. Maldives does not need to pay GMR and GMR done a dodgy deal with Nasheed.

    Maldives does not need to pay off the money that GMR paid to Nasheed and his cronies and GMR need to get the refund from Nasheed.

    Don't think that GMR is only the company who can run the airport and there are number of other companies who are more than willing to invest and offer much better terms to Maldives.

    But of course those companies will not be willing to pay huge sum of money under the table like GMR.

    GMR is gone case and they will never be able to come to operate the airport.

    The increase of passenger fee was not put by the givermnet and it was done by a corrupt MP who should have been bought by GMR to show a different picture.

    People like Andre who are the real people behind Nasheed corruption will have chance to spread the propaganda using that as tool.

  10. @kuribee-
    Dude, I notice you got the symptoms. I think you need to see a doctor ASAP. Your welcome.

    verbal diarrhea-
    A serious disease which, once it has control of a person, causes them to spew forth incoherent babble

  11. it is the same old story the cheats wiil allways cheat some one is investing in your country with his money the contract was signed with your govt proprely through proper channel and yu cheat him it is well known that maldivians are cheats the cheat the expatriats of their hard earned money do yu people have seen so much money what have you got in your island who will give you the loan what will kuait do they themselves dont have money all their oil well are dried up after sadam hussain attacked it yu people have tu beg this is the future of yu all think in reality


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