GMR chair expects arbitration proceedings to be concluded by May

GMR Group Chairman GM Rao expects arbitration proceedings in its dispute with the Government of Maldives to be concluded by May next year, India media has reported.

Rao was quoted whilst commenting on the infrastructure company’s bid to secure an airport development deal in the Phillipines.

A record-breaking US$5oo million deal to re-develop Malé’s Ibrahim Nasir International Airport was cancelled by the Maldives Government in late2012.

On November 27, then-President Dr Mohamed Waheed’s cabinet declared the agreement to be ‘void ab initio’ – invalid from the outset – ordering the developer to leave.

GMR subsequently took the case to a Singapore court of arbitration, claiming US$1.4billion in compensation – a figure that eclipses the Maldives’ state budget.

During the second round of procedural hearings in August this year, the tribunal acceded to GMR’s request to split the proceedings into firstly determining liability, before quantifying the amount of compensation to be paid separately.

Minivan News understands that the tribunal agreed this would simplify examination and quantification of what was effectively three claims being made in the hearing: GMR-MAHB’s claim for compensation as per the termination clause of its concession agreement, its parallel claim for loss of profits over the lifespan of the agreement due to its termination, and the government’s counter-claim for restitution should the tribunal decide in its favour.


Government targets public share sale in airport operator MACL over next seven days

The government has announced its intention to begin publicly selling shares in the state-owned Maldives Airports Company Limited (MACL) – the current operator of Ibrahim Nasir International Airport (INIA).

Although the country’s Finance Ministry today told Minivan News that no timeline had been finalised for the sale owing to “legal process”, the President’s Office confirmed the state had planned to begin offering shares to the public within the next seven days.

India-based newspaper ‘The Hindu’ has meanwhile quoted an unnamed government source as claiming the administration of President Dr Mohamed Waheed was expected to hold most of the shares in the state-owned company on the back of such a sale.

The share sale has been announced despite arbitration hearings pending in Singapore into a US$1.4 billion compensation claim filed by India-based GMR, after a 25 year agreement to develop and manage a new terminal at INIA was declared void by the current government in November 2012.

The government maintains the decision to terminate the World Bank-approved GMR tender was made over allegations of corruption, claims ultimately rejected by the country’s Anti-Corruption Commission (ACC) this year.

President Waheed’s administration last November gave the foreign investors seven days to hand over the unfinished airport to the government-owned Maldives Airports Company Limited (MACL), which later sought to transfer the assets to a newly-created, state-owned entity called Male’ International Airport Limited (MIAL).

The government later abandoned its intentions towards such a transfer by June this year, on the basis that the “the termination of the contract between the government of Maldives and GMR [is] currently in the arbitration stage.”

With the transfer cancelled, Finance Minister Abdulla Jihad told Minivan News today that the cabinet had approved plans to sell shares in MACL to members of the public, although no date had yet been agreed to begin such a sale.

“There is a legal process we have to follow. We are working on the time frame,” he added.

Jihad request that all other questions over the legal implications of the share sale amidst ongoing arbitration should be directed to the office of Attorney General (AG) Azima Shukoor.

President’s Office Media Secretary Masood Imad said he too was aware the government was looking to sell shares over the “coming week”, but said any further queries should be forwarded AG Shukoor or other members of special committee charged with overseeing the airport’s development.

AG Shukoor and Deputy AG Ahmed Usham were not responding to calls from Minivan News at time of press.

Meanwhile, Maldives Airports Corporation Limited (MACL) CEO Ibrahim ‘Bandhu’ Saleem requested Minivan News contact the Ministry of Finance regarding all information on the MACL share sale.

Asset concerns

In May this year, a global body representing the world’s airports, issued a notice advising its members to exercise caution before making any investments relating to INIA, over concerns of the government’s intention of transferring MACL’s assets to MIAL.

In an email obtained by Minivan News dated May 8, Airports Council International (ACI) advised: “due diligence while considering any investment in the Maldives, considering the latest developments, uncertainty of outcome of elections, the legal and financial risks of the current arbitration and the nascent legal framework.”


Comment: Conspiracy of silence over GMR arbitration

Amidst the high decibel of the election campaign, it is easy to completely miss out on some critical issues.

This seems to have happened last week, when the Maldives Airport Company Limited (MACL) recorded an early loss in its legal battle with GMR over [President Dr Mohamed] Waheed’s government’s decision to terminate the Male airport concession agreement. There has been no word or confirmation from the Waheed government on this and his eager-than-ever spokespersons are nowhere to be found. This is especially interesting since they have been more than keen to take any credit they can on the entire airport saga.

Per a report in Minivan News, this is an “early legal skirmish” for GMR in its $1.4Bn claim against Government of Maldives and MACL for illegal termination of its concession agreement in December last year. In one of the earlier comment pieces in this same publication, it has been argued how the termination was a political decision, not an economic decision and how politicisation of the airport by Waheed and his ex-allies is systematically destroying our national asset. This latest news now is all the more concerning and I am certainly surprised to see that it hasn’t been picked up by any of the other newspapers which leads me to believe many people didn’t realize what this may mean for us as a nation.

While Minivan News hasn’t highlighted their source for this judicial order. I wish they had.  In this column I will highlight what I believe are the implications of this order.

Legal setback – arbitration panel leaning away from MACL?

No doubt this is a major setback for Waheed and his Attorney General, Azima Shukoor. Waheed’s government has lost the first round of the battle and the first blood has gone to the other side. The judicial order provides early indications as to which way the arbitration panel may be leaning based on the arguments that they have heard from both parties till now.

Waheed government could not convince the tribunal members on the right way to proceed with the case and this would certainly make one nervous about whether they will be able to convince the panel about their legal position that the contract is void. We have to keep in mind that members of the government and their allies were publicly criticising the deal, protests were being staged against GMR and cries of nationalisation were being made just before Azima suddenly pulled the rabbit out of the hat and claimed that there was no contract all this while!

Details of the political campaign run by members of the government are in the public domain, and they raise questions as to whether the contract was invalid or if the lawyers were asked to find ways of canceling it.

Certainty of compensation by Maldives for termination?

The most important part of the article that the tribunal has discussed is awarding three different types of claims according to which way the panel decides on the legal question of whether the contract was void ab initio or not: “GMR-MAHB’s claim for compensation as per the termination clause of its concession agreement, its parallel claim for loss of profits over the lifespan of the agreement due to its termination, and the government’s counter-claim for restitution should the tribunal decide in its favour”. If one thinks deeply about it, this doesn’t sound like good news at all for Waheed and Azima, or for our nation.

If we lose the legal arguments, we will be faced with a US$1.4 billion claim that we may have to pay for how the airport contract was terminated. However, if Azima wins the legal arguments in the panel then it’s the restitution claims that will be relevant. Otherwise, the contract itself has some termination clauses and this is the third type of claim that may be awarded by the panel based on legal arguments. Let’s look at each of these three claims one by one.

GMR’s US$1.4 billion claim is what it is and we will have to wait and watch if they are awarded this claim. The more interesting aspect is what the panel seems to have said on the other two types of claims.

On the termination payments per the contract, I am all but reminded that in a press conference last year Azima herself said that if the contract is cancelled, we may have to pay GMR anywhere between US$600-700 million in compensation. Given that Azima has been maintaining that Nasheed’s government did not do any due diligence while procuring the contract, whereas she has done extensive due diligence before canceling the contract, I am tempted to take her word on the estimated cost of termination. Hence, in this case, we may have to pay GMR around US$600-700 million.

Now, for the worst part and which Azima has argued in court: in case we win the legal arguments in court, the panel will decide for restitution. If one quickly goes to Wikipedia and understands what restitution refers to in legal terms, it means “orders the defendant to give up his/her gains to the claimant… to restore the benefit conferred to the non-breaching party”.

In essence, if restitution is done in this case, the government will have to give back all the money that GMR brought to Maldives with them to invest and GMR will have to give back what they got from Maldives. Even some quick ‘back-of-the-envelope’ calculations reveal that this would still mean paying around US$240 million to GMR!

If one believes their statements that they have already invested ~US$240 million in the airport, then this money will need to be given back to GMR. At the same time, they have also said that they haven’t taken investment out of the airport and whatever they earned was put back in the airport. Hence, we are still looking at a claim of US$240 million that we may need to give GMR even if we win the legal case!

Conspiracy of silence?

During his controversy-ridden reign in which he has lost allies one by one, Waheed has taken a number of suspect decisions which he has been too happy to slip under the carpet. He perhaps thought that the decision to axe the airport contract was a populist decision and he had probably hoped that it would bring him back to power.

This is why his spokespersons as well as the AG were trigger-happy to announce that nothing will happen in the arbitration before next year – “since there is no valid contract, there can be no compensation”.

Now, this early legal setback– which may cost us millions of dollars in damages even if we win the arbitration– has laid bare all the arguments that Azima gave when the contract was cancelled. The shallowness of her arguments has now left the nation with a US$240 million bill in the best case, and more than a billion dollars at worst! So much for the “legal due diligence and advice of foreign lawyers” that she received.

No wonder that there has been no word from the government on this so far. This may be either because they have nothing to say given the early setback that they have received or they would rather push this under the rug and hope they can get through the elections without making any comment which may jeopardise their chances. At the end of it, they seem to have taken advantage of a tight election schedule to hide without giving any explanations whatsoever!

All comment pieces are the sole view of the author and do not reflect the editorial policy of Minivan News. If you would like to write an opinion piece, please send proposals to [email protected]


Maldives government terminates Nexbis agreement, gives 14 days to vacate

The Maldives government has terminated its agreement with Malaysian security firm Nexbis to install and operate a border control system, giving it 14 days to vacate.

Defence Minister Mohamed Nazim local media that the disputed contract – signed under the previous government of former President Mohamed Nasheed in 2010 – was terminated by the cabinet yesterday over fears it was causing unspecified “major losses” to the state.

The termination was announced as immigration officials today said replacement technology being provided by the US government was not presently functional, with implementation “on hold” pending a legal hearing into the matter.

Department of Immigration Spokesperson Ibrahim Ashraf told Minivan News this morning that he had not personally been made aware of any decision by the government to terminate the agreement.

However, Ashraf confirmed that replacement technology being provided free of charge by the US government was “not 100 percent functional” at present.

“Because of legal issues, the project has been on hold,” he explained.

Immigration officials last month confirmed that “testing” had been underway on the new US-donated system, while Nexbis’ border control technology remained in use to monitor the arrivals and departures of foreign nationals

Ashraf referred further questions on the Nexbis system to Immigration Controller Dr Mohamed Ali, who was not responding to calls at time of press.

Nexbis is the second high profile foreign investment to be suddenly evicted by the administration of President Dr Mohamed Waheed in the past 12 months.

The government last November announced it was terminating a 25-year concession agreement with India-based GMR to construct and operate a new terminal at Ibrahim Nasir International Airport (INIA) in Male, giving the company seven days to vacate the country.

GMR is currently seeking compensation totaling US$1.4 billion from the government as part of arbitration proceedings to be heard in a Singaporean court, damages eclipsing the annual state budget.

Speaking to local media today, Defence Minister Mohamed Nazim was quoted as saying that the government expected to assume control of the country’s borders at the end of the 14 day notice period given to Nexbis.

He claimed that the US system was also “ready to be operational”, although no decision had yet been made to use the technology.

Attorney General (AG) Azima Shukoor added that discussions were presently being held with Nexbis over reaching an out of court settlement for terminating the contract, although she declined to provide any more details to media today.

“We assure you that the burden on the state will be far less with the termination of the agreement rather than continuing with it. We will take this process forward in the best interest of the state,” she was quoted as saying by Haveeru.

Concession agreement

Under the concession agreement signed with the Maldives government, Nexbis levied a fee of US$2 from passengers in exchange for installing, maintaining and upgrading the country’s immigration system.  The company also agreed a fee of US$15 for every work permit card issued under the system.

Both AG Azima and Defence Minister Nazim were not responding to calls at time of press.

Nexbis last month invoiced the Department of Immigration and Emigration for US$2.8 million (MVR 43 million) for the installation and operation of its border control technology in line with a concession agreement signed in 2010 – requesting payment be settled within 30 days.

Nexbis’ lawyers argued that the company had expected the fee to be included in the taxes and surcharges applied to airline tickets in and out of the country, according to local media.  However, lawyers argued these payments had not been made due to the government’s “neglect” in notifying the relevant international authorities.

Minivan News was awaiting a response from Suood, Anwar & Co – the company’s legal representatives in the Maldives – at time of press.

Parliamentary vote

Parliament had voted unanimously to terminate the agreement on 25 December 2012, in line with a recommendation from the Finance Committee alleging foul play in the signing of the agreement with former Immigration Controller Illyas Hussain Ibrahim.

Presenting the Finance Committee report to the floor, Chair MP Ahmed Nazim explained at the time that the “main problem” flagged by the Anti-Corruption Commission (ACC) was that the tender had not been made in accordance with the documents by the National Planning Council authorising the project.

The Finance Committee also recommended terminating the agreement over concerns it contained clauses to waive taxes to the company, Nazim said.

He noted that imposing or waiving taxes was a prerogative of parliament under article 97(d) of the constitution.

Following parliament’s termination of the project in December, Nexbis sought a legal injunction to prevent any cancellation of the agreement while court hearings over the contract were still ongoing.

The company had sought to contest whether the ACC has the power to compulsorily request the government to cease all work in relation to the border control system agreement.

However, in April of this year, the High Court overturned a Civil Court ruling declaring the ACC could not terminate a border control system (BSC) agreement signed by the Department of Immigration with Malaysian mobile security firm Nexbis.

The High Court ruling (Dhivehi) cleared the way for the Civil Court to hear the case filed by the ACC should it be resubmitted.

Nexbis has emphatically denied allegations of corruption, previously speculating that “criminal elements supporting human trafficking” were seeking to sabotage the agreement.


ACC defends report on airport privatisation deal as Sheikh Imran insinuates bribery from GMR

The Anti-Corruption Commission (ACC) has issued a press statement defending its investigative report of the airport privatisation deal signed by the previous government, harshly condemning “false and misleading” remarks by politicians of government-aligned parties.

On June 17, the ACC released a 61-page investigative report concluding that there was no corruption in the awarding of a concession agreement to a consortium of Indian infrastructure giant GMR and Malaysia Airports Holdings Berhad (MAHB) to develop and manage the Ibrahim Nasir International Airport (INIA).

The report was met with strong criticism and bribery allegations from parties in the government coalition.

Insisting that the government’s stand would not change as a result of the ACC findings, President’s Office Spokesperson Masood Imad told the Press Trust of India (PTI) that “if there is a reasonable cause of doubt, this report can be contested by some parties.’

“Many people say here that the ACC Board is not an unbiased organisation. They say it is politically motivated,” he was quoted as saying.

Religious conservative Adhaalath Party President Sheikh Imran meanwhile described the report as “a slap in the people’s face” while President Dr Mohamed Waheed’s Gaumee Inthihaad Party (GIP) Spokesperson Abbas Adil Riza accused ACC members of corruption.

In an appearance on pro-government private broadcaster DhiTV last night (June 23), Imran insinuated that ACC members accepted bribes from GMR offered through former Indian High Commissioner D M Mulay.

The ACC report was “a highly unprofessional, semi-technical and procedural review” that did not amount to either a proper investigation or an audit, Imran said, calling for “a full-fledged investigation.”

In November 2012, the current administration abruptly terminated the US$500 million contract with the GMR-led consortium, declared the concession agreement ‘void ab initio’ (invalid from the outset), and gave GMR seven days’ notice to leave the country.

The decision followed weeks of protest by a self-titled “National Movement” spearheaded by Sheikh Imran and senior government officials – born out of the unofficial December 23 coalition of eight political parties and an alliance of NGOs that rallied at a mass gathering to “defend Islam” in late 2011 – calling on the government to “reclaim” and nationalise the airport.

Last Friday, GMR filed a claim for US$1.4 billion in compensation from the Maldives at ongoing arbitration proceedings in Singapore over “wrongful termination” of the contract.

Meanwhile, former Attorney General Azima Shukoor, who headed the cabinet committee that advised termination of the contract, contended on DhiTV last week that the ACC report was “incomplete” as the commission had overlooked several key factors.

“Did they 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 a judicial case,” she was quoted as saying by newspaper Haveeru.

ACC response

ACCIn its press release on Thursday (June 19), the ACC stated that its investigation was “not based on what politicians say at podiums and in the media.”

“Instead, the case was investigated based on relevant information collected for the investigation, documents and statements taken after questioning those involved in the case,” the ACC said, denying the allegations of undue influence on its members or staff.

The ACC statement added that the commission in concluding investigations adhered to article 25 of the Anti-Corruption Commission Act of 2008, and did not reach its conclusions “after considering the wishes of a particular politician.”

The commission noted that it had not responded to any political rhetoric targeting the ACC in the past, adding that all corruption investigations followed criminal justice procedures, the ACC Act and regulations under the law.

The statement explained that article 25(a)(2) of the Act required the commission to submit cases for prosecution if sufficient evidence to secure a conviction was gathered.

In the absence of evidence to prove corrupt dealings, article 25(a)(1) of the Act stipulates that the commission must declare that the case does not involve corruption.

The report made public last week contained information collected for the investigation, observations and the reasoning for reaching the conclusion “without any omissions or additions,” the ACC added.

“This is the first time that an investigative report of a case investigated by the commission has been made public like this,” the statement continued. “It was released that way to provide details of the case to the public as transparently as possible.”

The ACC further noted that in December 2012 the commission submitted a case to the Prosecutor General’s Office (PGO) requesting criminal prosecution over the previous government’s decision to deduct a court-blocked Airport Development Charge (ADC) from concession fees owed to the state.

The ACC asked the PGO to seek reimbursement of MVR 353.8 million (US$22.9 million) from former MACL Chair Ibrahim ‘Bandhu’ Saleem and former Finance Minister Mohamed Shihab over the alleged misuse of authority the commission contended had led to significant financial losses for the state.

Bribery allegations

Responding to remarks in local media last week by an unnamed ACC member alleging that Imran attempted to influence the outcome of the investigation, the Adhaalath Party President admitted on DhiTV last night that he met commission members while the “National Movement” protests were ongoing.

Imran said he met ACC members after learning of efforts by GMR to bribe politicians through the former Indian High Commissioner Mulay.

Mulay also requested meetings with Imran himself on numerous occasions “through some of our ministers and even by directly calling our office,” he claimed.

Upon hearing of meetings between Mulay and ACC members, Imran said the leaders of the “National Movement” met commission members to “advise against accepting bribes.”

“[ACC members] said, ‘how can we go near that? we have sworn an oath,'” Imran said.

He claimed the ACC members told him that “the roots go deep” in the GMR deal and that former President Nasheed “completed the deal in Singapore.”

ACC members informed Imran that bribes from GMR was deposited to bank accounts in countries near Singapore, he claimed, while the commission members provided assurances that “everything would be made clear” once the investigative report was made public.

Imran said he would reveal further details of the “National Movement’s” meeting with ACC members if the commission responded to the allegations.

“In any case, we were working to liberate the airport on behalf of religion and the nation,” he said, adding that the government eventually decided to terminate the agreement without waiting for the ACC report.

As a result of pressure from the protests, he continued, the government was convinced it was not in the national interest to persist with the contract.

Imran also insinuated that the ACC would receive a portion of the US$1.4 billion compensation figure claimed by GMR.

State Minister for Home Affairs Abdulla Mohamed, who was part of the protests against GMR, meanwhile argued that the ACC releasing its report a few days before an arbitration hearing could not be “a coincidence.”

“Do we really have to comply with a court order from a Singaporean court?” he asked.

He contended that the Maldivian government would not have to compensate GMR despite a decision in favour of the consortium at the ongoing arbitration proceedings.

“Also, we can appeal such a judgment in Maldivian courts, can’t we? That’s not prohibited by Maldivian law. There’s no obstacle to that. So this is not something that the public should be concerned about at all,” he said.


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.


Government halts transfer of airport operations to MIAL, pending arbitration

The government has declared that the Maldives Airports Company Limited (MACL) will continue operating Ibrahim Nasir International Airport (INIA), apparently abandoning efforts to transfer operations to the newly-created Male’ International Airport Limited (MIAL).

The President’s Office said in a brief statement today that while the government had intended MIAL to take over the airport’s operation, the decision to abandon the attempt “was was made as the termination of the contract between the government of Maldives and GMR [is] currently in the arbitration stage.”

The decision follows an increasingly fractious series of emails between MACL and Axis Bank, one of the lenders to the GMR-MAHB airport consortium which had its concession agreement to upgrade and operate the airport summarily terminated by the new administration in December 2012.

While the sudden termination of the agreement is the subject of current arbitration proceedings in Singapore, Axis Bank separately called in US$160 million worth of loans for the project which had been guaranteed by the Maldivian Finance Ministry at the time the deal was signed.

With arbitration ongoing, Axis Bank expressed concern that the creation of MIAL was an attempt to dissipate MACL’s assets ahead of a verdict and turn it into a shell company, and sought a guarantee from the government. That correspondence led to an exchange of heated letters from Singapore-based law firms representing both sides, particularly after Finance Minister Abdulla Jihad appeared to contradict earlier assurances from MACL by informing local media the transfer was expected to be completed by July 1.

MIAL’s appointed CEO Bandhu Saleem however told Minivan News at the time that “until the arbitration is complete, I think it will be very difficult to start a new company.”

Saleem is now to be appointed managing director of MACL, reported Sun Online citing a government official, with MIAL to be abolished ahead of a final decision on the matter.


National political turbulence and uncertainty over the MACL-MIAL transfer in May led the global body representing the world’s airports, Airports Council International (ACI), to caution its members over the government’s potential “sale of equity in this entity to another airport operator.”

“ACI members are advised to conduct due diligence while considering any investment in the Maldives, considering the latest developments, uncertainty of outcome of elections, the legal and financial risks of the current arbitration and the nascent legal framework,” the email stated, warning potential investors that “any leadership changes arising out of the elections [could] have a material impact of the future of the Male’ airport and the decision of expropriation.”


GMR-Maldives arbitration to begin mid 2014: Attorney General’s Office

The Attorney General’s (AG’s) Office has confirmed that an arbitration case concerning the government’s decision to void its concession agreement with Indian Infrastructure giant GMR will begin by the middle of next year.

Deputy Solicitor General Ahmed Usham today told Minivan News that both parties had agreed to commence proceedings by the middle of 2014 and were now waiting on arbitrators to confirm the exact schedule for when their respective cases would be presented.

The initial agreement was reached after representatives for the state and GMR met in London, England on April 10 for a preliminary procedural meeting.  A timetable was agreed upon for holding hearings over the cancellation of a US$511 million contract to develop and manage a new terminal at Ibrahim Nasir International Airport (INIA).

Usham said that the hearing in London last week had been focused solely on establishing a timetable for when arbitration will begin proper in Singapore.

“It is quite straight forward in these procedural hearings.  We discussed the schedule for hearings, such as when cases would be presented, as well as when parties can reply and make counter claims,” he said. “These arbitrators are quite busy, so it can be difficult to manage time in their schedules.”

The AG’s Office has previously claimed that 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). The agreement charged the GMR-MAHB Consortium with the management and upgrading of 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 – meaning the contract was invalid from the outset.

Should the argument of void ab initio fail, the government has claimed the second legal grounds on which it would argue in favour of termination of the contract would be that the contract had been ‘frustrated’.

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

“The government has given a seven day notice to GMR to leave the airport. The agreement states that GMR should be given a 30 day notice but the government believes that since the contract is void, it need not be followed,” said then Attorney General Azima Shukoor.

The awarding of the bid in 2010 was overseen by the World Bank’s International Finance Corporation (IFC), which the Waheed government has accused of being “negligent” and “irresponsible”.

Should the matter be decided in the government’s favour, uncertainty remains as to the potential impact on foreign investor sentiment given the prospect of sudden asset seizure under the ‘void ab initio’ precedent.

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.


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.