The Maldives Tourism Promotion Board (MTDC) has agreed to an out of court settlement with Yacht Tours Maldives (YTM) after a long-running dispute over Herathera Island Resort.
MTDC claimed that YTM had been running Herathera Island Resort without paying rent and took the company to court. In May last year YTM was ordered to pay US$8 million in outstanding rent to MTDC.
Managing Director of MTDC Mohamed Mihad said if necessary, the board would withdraw the funds from the US$10 million bank guarantee YTM had paid to to secure the resort during the bidding process to sublease the island.
YTM stopped paying rent in December 2008, claiming MTDC had failed to fulfil a contractual obligation to build a channel between Herethere Resort and Hulhudhoo, an adjoining inhabited island, by 30 November 2008.
MTDC responded by terminating the company’s contract and giving Yacht Tours seven days to hand over the resort. In response, Yacht Tours lodged a civil case to sue MTDC for US$47 million in compensation for the incomplete channel and projected losses.
“Yacht Tours doesn’t have the right to stay on the island and do business without paying rent… We have sent them a letter asking them to leave as soon as possible,” Mihad told Minivan News at the time, adding that MTDC would file a court case if YTM refused to hand back the island.
YTM claimed it was unable to pay the rent because the occupancy of the island was low, due to the financial crisis. At one point YTM CEO Ahmed Mohamed claimed 600 staff were working at the resort despite there only being 28 guests.
In October 2009 the court gave MTDC control of the resort, which it claimed to have spent US$55 million developing.
At a press conference held today, journalists expressed confusion when the chairman of MTDC, Ibrahim Saleem, said that the organisation would now pay YTM would US$3.5 million over 24 months including including a US$1 million down payment.
Saleem said the decision was “a commercial decision” and “the best way we found to solve the problem.”
“If we continue disputing this we might have to continue for two or three years. It’s taken too long to solve this problem,” he said.
MTDC would earn a substantial profit from running the Herathera Island Resort while courting interest from foreign investors, he said.
YTM and MTDC sent a letter to the court saying both parties considered the problem resolved.
CEO of YTM Ahmed Mohamed was unwilling to comment to Minivan News regarding the matter.
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