Tag: GMR arbitration

Government will honor arbitration verdict, says attorney general

President Abdulla Yameen’s administration will honor a Singaporean tribunal’s ruling on compensation owed to Indian infrastructure GMR for the terminated airport development deal in order to uphold investor confidence, Attorney General Mohamed Anil said.

The Rt Hon Lord Hoffman’s Tribunal on Wednesday found the contract termination to be wrongful and ordered the Maldives government and Maldives Airports Company Pvt Ltd (MACL) to compensate GMR for losses.

The exact figure is to be set in the next phase of arbitration.

Speaking to reporters this morning, Anil said he is certain the figure will not amount to GMR’s initial claim of US$ 1.4 billion – the figure eclipses the country’s annual budget.

“According to the agreement, [we] mostly have to compensate for the investments made. We said we do not have to pay the amount GMR has claimed. We always said we will have to pay compensation, and that this compensation has to come through the agreement,” explained the AG.

“That is why the compensation amount has been limited. This amount will not go up to the US$1.4 billion GMR is claiming,” Anil said.

He called the limitation of damages a success for the government of Maldives.

In April, Yameen predicted GMR would only be owed US$300 million in compensation.

Minivan News understands the concession agreement allows MACL to terminate the agreement for reasons of public interest and imposes a cap on losses.

A lawyer familiar with the case said the government must thank the Maldivian Democratic Party (MDP) – under which the GMR won the concession – for its foresight in inserting the clause.

The lawyer further said that the government had chosen to terminate the agreement “in the worst possible way” despite the existence of provisions for lawful termination.

“And in the process, it affected foreign investor confidence in the Maldives, the country’s reputation and it strained our relationship with India,” he added.

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 agreement’s abrupt termination saw cooling of relations with neighbor India and questions regarding foreign investor confidence in the Maldives – issues Yameen has sought to address since his election in November.

The World Bank in December said GMR compensation will place severe pressure on the country’s already “critically low” foreign reserves.

As of April 2014, the Maldives’ gross foreign reserve stood at US$ 434.8 million. Meanwhile, the total outstanding external debt at the end of 2013 stood at US$ 793.6 million dollars. Debt amounts to 34.6 percent of the country’s GDP.

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GMR arbitration verdict to take up to two months

The government has confirmed that arbitration proceedings regarding the terminated GMR contract – expected to be concluded this week – may take up to two months to reach a verdict.

President Abdulla Yameen had recently stated that the government had failed to reach an out of court settlement with the Indian infrastructure giant, which is seeking US$1.4billion in compensation after the premature annulment of its 25-year concession agreement.

“But the thing is, the GMR is seeking a huge amount as compensation. This government, however, does not believe that we can – or indeed that we need to – pay such a large amount as compensation,” Yameen stated prior to his departure to Japan earlier this week.

“So their [GMR’s] decision now is to wait until the arbitration case is concluded. So we will carry on after the arbitration case is completed,” he continued.

Yameen revealed his intention to seek further foreign investment in the development of Ibrahim Nasir International Airport (INIA), with Japanese, Singaporean, and Middle Eastern investors all being courted.

The president confirmed that the arbitration case had commenced and that both Minister of Defence and National Security Mohamed Nazim and former Attorney General Azima Shakoor had attended the hearing as witnesses from the state.

“Those from our government who were handling the matter at the time have attended the first session’s hearing and provided the necessary information,” Yameen said.

New facilities

“We are not seeking just one single investor for the airport. This is because development of the airport will be a huge project,” Yameen told the media on before his departure on Sunday (April 13).

“What we are speaking about is a new airport. We want it to be an iconic building with additional runway, an additional terminal and new terminal facilities.”

The Maldives Airport Company Limited (MACL) has today confirmed that a second runway will form a crucial part of any new development – the need for which has come to the fore again this week as the state of the airport’s runway partly to blame for the bursting of landing aircraft’s tire in December 2011.

United Arab Emirates’ General Civil Aviation Authority found that the burst tire of a landing Emirates flight was partly caused by the accumulation of standing water on the runway.

The reports advised the Maldives Civil Aviation Authority to “ensure that Operators utilising Male’ airport are fully aware of the runway condition until the runway enhancements are finalised”.

Demands for a second runway – not included in the initial agreement – were among the criticisms levelled at the US$500million GMR concession agreement, before the deal was declared void ab initio (‘invalid from the outset’) by the Dr Mohamed Waheed government.

With speculation about excessive foreign influence accompanying the anti-GMR campaign prior to the contract’s termination, President Yameen has assured that overall  management of the airport will stay in the hands of MACL.

New investors

“We are also thinking about making the airport into one that can carry over 5 million passengers. We want the airport to be one that can cater to tourism growth within the next 50 years,” Yameen explained this week.

“Therefore, this is a project worth at least 600 to 800 million dollars. Of the various components of the airport, we are approaching Japan to invest in terminal facilities and a terminal building. So this trip [to Japan] is not one where we are seeking a single party to develop the whole airport.”

He further stated that Vice President Dr Mohamed Jameel Ahmed had held positive discussions with Kuwait over airport development assistance while he had personally met with Saudi Arabia’s infrastructure giant Bin Laden Group, who also expressed interest in the project.

While the Minister of Economic Development Mohamed Saeed and Minister of Tourism Ahmed Adeeb are working on a concept design of the airport, the senior management of Singapore’s Changi airport were being mooted as consultants for the development.

Yameen will travel to Singapore later this month to inaugurate the Maldives Investment Forum, a government initiative to showcase ‘high level’ investment opportunities in the country, including the development of INIA.

The president has previously assured foreign investors that future investments will in the Maldives are safe, and will soon be protected by enhanced legislation.

“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,” he told potential developers earlier this month.

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