Government ordered to pay MVR349 million in damages for terminated transport contract

The Civil Court has ordered the Maldives government to pay MVR348,995,154.60 (US$22.5million) to Dheebaja Investment Pvt Ltd for the abrupt and unlawful termination of a contract to establish ferry services in four northern atolls.

The verdict, dated October 23, said President Dr Mohamed Waheed Hassan’s administration had terminated a contract with Dheebaja on 30 May 2013 claiming the company had failed to fulfill terms by suspending ferry services to Baa Atoll Fulhadhoo and Fehendhoo Islands.

The transport services contract had been signed under former President Mohamed Nasheed in February 2010. Dheebaja was to provide ferry services in Noonu, Raa, Baa and Lhaviyani Atolls in exchange for 47 plots of land to build ferry terminals and tourism development.

The Civil Court found that the Waheed administration’s termination of the contract was unlawful, stating the government had violated the contract first by failing to hand over promised plots of land to Dheebaja.

The court ordered the Maldives government to pay nearly MVR349 million in damages to Dheebaja for it’s unilateral decision to terminate contract with only five days of notice. The amount is to be paid back within six months.

The Maldives is also currently facing a potentially crippling payout to India’s GMR infrastructure for the abrupt and unlawful termination of a contract to develop Ibrahim Nasir International Airport.

President Waheed had declared the US$511 million contract “void ab initio” (invalid from the outset) in November 2012 and gave GMR a seven-day ultimatum to leave the country.

However, a Singaporean arbitration court in June declared the agreement to be “valid and binding” and said the government and Maldives Airports Company Pvt Ltd (MACL) are liable to GMR for damages.

The arbitration tribunal is in the process of determining a compensation figure. Although GMR had initially sought US$1.4 billion – a figure that exceeds the Maldives’ annual budget – government sources say the figure will be between US$300million and US$600million.

The World Bank in 2013 said the payout would place severe pressure on the country’s already critically low foreign reserves.

Since President Nasheed’s controversial ouster in 2012, President Waheed and incumbent President Abdulla Yameen’s administration have terminated or renegotiated several contracts signed under Nasheed.

The government, on October 22, terminated an agreement made with India based Tatva Global Renewable Energy to provide waste management services in Malé and renegotiated a housing contract with India’s TATA group.

The US$190 million housing project had been delayed for more than two years.

Indian companies blamed the government of creating “undue challenges” for political gain to derail their substantial investments in the Maldives in a 2012 report in India’s Business Standard.

Nasheed’s government had been ousted after months of a vitriolic nationalist and anti–India campaign.

Several of Yameen’s ministers also served in Waheed’s cabinet. They include Tourism Minister Ahmed Adeeb, Defense Minister Mohamed Nazim, Finance Minister Abdulla Jihad, Minister of Housing and Infrastructure Dr Mohamed Muizzu, and Minister of Islamic Affairs Dr Mohamed Shaheem Ali Saeed.

Incumbent Foreign Minister Dunya Maumoon served as Waheed’s State Minister for Foreign Affairs while Vice President Dr Mohamed Jameel Ahmed held the position of Home Minister.

Since assuming power, Yameen has strengthened trade and political ties with China and the Maldives is now a partner in China’s flagship Silk Route.