Tag: GMR Arbitration Case

GMR is only owed reimbursement, not compensation, says AG

Indian infrastructure giant GMR is only owed reimbursement for expenses, not compensation for the abrupt termination of the concession agreement to develop Malé International Airport (INIA), Attorney General Mohamed Anil has said.

Clarifying President Abdulla Yameen’s previous statement that GMR is owed a payment, Anil said the government believes the company is only owed reimbursement for a US$ 78 million upfront concession fee and any other expenses.

“When the agreement was first signed, US$78 million was given to the Maldivian government. In addition to that, we can see that they have spent some amount. So in the worst case scenario, if we are to revert to the state before the agreement was signed, everyone believes that they are owed [what they spent]. That is not as compensation for losses caused by the cancellation of the agreement,” he said.

GMR has said it will stick to a US$ 1.4 billion compensation claim – an amount that exceeds the annual state budget.

“The forceful takeover of the airport by Maldives government amounts to repudiation of a valid contract and therefore damages, including loss of future profit has to paid,” the company said in a statement on April 26.

Anil said GMR’s claim is unclear, as the company had not submitted documents detailing the assertion.

In response, GMR’s legal team member Uz. Fayyaz Ismail told Minivan News details of how GMR arrived at the figure will only be revealed in the second part of the arbitration process.

The arbitration tribunal in August 2013 had acceded to GMR’s request to split the proceedings in two – firstly determining liability, before quantifying the amount of compensation to be paid separately.

“GMR is claiming it to be a wrongful termination, and if the tribunal awards a verdict for that during the first part of this bifurcation arbitration [two part arbitration process] only then would the [compensation] amount be decided through second part of the arbitration. We are very confident the rightful compensation would be received,” Ismail said, adding that the figure may be subject to minor variations.

Yameen in early April said the Maldives government will not be able to pay GMR’s claim, but conceded “some sort of financial compensation must be paid.” He estimates the figure to be a “manageable” US$ 300 million.

The GMR in consortium with Malaysia Airports (MAHB) 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 opposition at the time, including Yameen’s Progressive Party of the Maldives (PPM), then began a vitriolic nationalist campaign to evict GMR.

Following Nasheed’s ouster in 2012, President Mohamed Waheed’s administration terminated the agreement claiming it was ‘void ab initio’- invalid from the outset.

When the Singaporean High Court’s injunction blocking the Maldivian government from voiding the agreement was overturned by the Supreme Court in Singapore in June 2013, GMR initiated an arbitration process.

The first part of the arbitration took place in Singapore from April 10 – 16. Minivan News understands the arbitration tribunal considered GMR’s claim of wrongful termination, parallel claim for loss of profits over the lifespan of the agreement, and the Maldive’s counter-claim for restitution.

A verdict is expected soon, at the latest by mid- June. Depending on the verdict, the second process of arbitration will begin on a mutually agreed upon date.

Although Anil said the second half could take months to begin or even year for a ruling, Ismail has refuted the claim.

Despite the pending arbitration decision, expansion and development of INIA was among the five mega-projects for which the government was seeking investors at the Maldives Investment Forum held in Singapore’s Marina Bay Sands in late April.

Meanwhile, Nasheed has warned of a sovereign debt crisis if the Maldives is forced to pay the full US$ 1.4 billion and reiterated his Maldivian Democratic Party’s (MDP) call to reverse the decision to cancel the contract.

In a press release last week, Nasheed insisted that international best practices were followed in the bidding process – which was overseen by the World Bank’s International Finance Corporation (IFC) – while the Anti-Corruption Commission (ACC) has since ruled out corruption in the airport deal.

“The Maldives is now known around the world as a country that doesn’t keep its promises or honour the contracts. The airport fiasco will hit each and every Maldivian because banks won’t lend money and companies won’t invest in our country without demanding much higher rates of interest,” Nasheed said.

“By now, Maldivians should have been looking forward to a world-class, new airport, to rival Kuala Lumpur, Singapore, and Hong Kong. Instead we have nothing but an abandoned building site. The actions of President [Abdulla] Yameen and [Dr Mohamed] Waheed have caused this crisis and Maldivians will be paying for their recklessness for decades to come” he added.

Likes(0)Dislikes(0)

Preliminary hearing on GMR-Maldives arbitration case scheduled for April 10 in London

The preliminary hearing of the arbitration case concerning the government’s voiding of its concession agreement with Indian Infrastructure giant GMR is scheduled to take place on April 10 in London, reports local media.

On February 3, the parties announced the appointment of arbitrators for the case.  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.

Speaking to the newspaper, Deputy Solicitor General Ahmed Usham said that the meeting will take place at the presence of three arbitrators appointed to hear the case along with lawyers representing the government of Maldives, Maldives Airports Company Limited (MACL) and GMR.

“It is not an official hearing of the arbitration case. It is a hearing in which a date for the commencement of the hearings would be agreed and to agree as to how the case should proceed. Decisions concerning how the proceedings should take place will be agreed,” Usham told Haveeru.

He also said that although the preliminary hearing was to take place in London, the official hearings of the case will be heard in Singapore.

In 2010, GMR-Malaysia Airports Holdings Berhad (MAHB) consortium, 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 – meaning the contract was invalid from the outset.

Should the argument of void ab initio fail, the government have claimed that its second legal ground 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 Attorney General Azima Shukoor at the time of announcement of the contract.

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.

In December 2012, the Maldives government paid back US$50 million to the State Bank of India, after it refused to extend the period of the treasury bonds issued by the bank during the previous government. India has called in further installments of US$50 million, forcing the government to draw on the state reserves.

Finance Minister Abdulla Jihad has said the government is yet to come to an arrangement to pay the next US$50 million installment to SBI, explaining that the money will have to come from the Maldives Monetary Authority (MMA).

“The US$50 million due in February will have to be paid from the reserve. We have been ordered to pay the amount. There has been no change to the order so far. So it must be paid,” Jihad told local media at the time.

At the start of 2013, state reserves had shrunk to MVR 4.9 billion (US$317.7 million), according to the MMA.

“Gross international reserves at the MMA have been declining slowly, and now account for just one and half months of imports, and could be more substantially pressured if major borrowings maturing in the next few months are not rolled over,” an International Monetary Fund (IMF) delegation observed during a mission to the Maldives in November last year.

Moreover, one of GMR’s lenders, Axis Bank, is also seeking the repayment of loans for the airport project, which were guaranteed by the Ministry of Finance and approved by the Attorney General’s Office under the former government.

Attorney General’s office was not available for a comment at time of press.

Likes(0)Dislikes(0)