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.