Government pays GMR US$ 4 million in arbitration fees

The Maldives Airports Company Ltd (MACL) has paid US$4 million to Indian infrastructure giant GMR as compensation for legal costs of arbitration proceedings in Singapore.

Following an 18-month arbitration process, a Singapore tribunal ruled last month that a concession agreement with the GMR-led consortium to manage and develop the Ibrahim Nasir International Airport (INIA) was “valid and binding” and held the government and MACL “jointly and severally liable in damages” for losses caused by the premature termination of the contract in December 2012.

The Singapore Court of Appeal ordered the Maldivian government and the 100 percent government-owned airports company to pay GMR US$4 million within 42 days for the cost of arbitration proceedings.

Finance Minister Abdulla Jihad told Sun Online last week that the US$4 million was paid out of the MACL’s revenues and not the state budget.

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GMR wins arbitration case, tribunal deems airport deal was “valid and binding”

Additional reporting by Zaheena Rasheed

Indian infrastructure giant GMR has won its arbitration case against the Government of Maldives (GoM) for the premature termination of its airport development agreement in 2012.

In a letter sent to the Bombay Stock Exchange, the company explained that the tribunal has said the 18 month tribunal found the agreement to have been “valid and binding”.

“GoM and MACL [Maldives Airports Company Ltd] are joint and severally liable in damages to GMIAL for loss caused by wrongful repudiation of the agreement as per the concession agreement,” read today’s letter.

“It has always been our firm belief that the cancellation of our  concession agreement amounted to wrongful repudiation by the Government of Maldives and the Tribunal has upheld this standard,” wrote GMR Company Secretary C.P. Sounderarajan.

The determining of liability – the first of two phases of arbitration – will now be followed by the determining of compensation owed, with the Indian company seeking US$1.4billion – a figure which exceeds the Maldives annual budget.

Current Attorney General Mohamed Anil has recently expressed his belief that the government was liable only for GMR’s initial outlay of US$78million, plus any costs for construction work completed after the 2010 deal was agreed.

The President’s Office has said that the attorney general will provide a briefing on the case later today.

With the compensation fee yet to be decided, the impact of the tribunal’s decision is still unclear, although the World Bank has previously noted that it would place severe pressure on the country’s already “critically low” foreign reserves.

Hamid Abdul Ghafoor, spokesman for the opposition Maldivian Democratic Party  – under whose tenure the deal was brokered has described the decision as a “major breakthrough”.

Void ab initio?

As well as ordering the Maldives to pay GMR’s Malé International Airport Limited (GMIAL), US$4 million within 42 days for cost of proceedings, GMR have revealed further details of the award.

According to GMR the private arbitration proceedings – disclosed in line with its regulatory requirements – deemed the deal “not void for any mistake of law or discharged by frustration”.

The decision to cancel the deal was made in November 2012 by the administration of President Dr Mohamed Waheed, with then Attorney General Azima Shukoor declaring the deal void ab initio – meaning that the contract was invalid from the outset.

Shukoor further cited English contract law of ‘frustration’, which acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible, or radically changes the party’s principal purpose for entering into the contract.

GMR have today revealed the tribunal’s finding that the collection of Airport Development Charge and Insurance Surcharge – contentious points preceding the contracts termination – to have been lawful under Maldivian law.

The US$511 million agreement to develop Ibrahim Nasir International Airport (INIA) – signed during the tenure of former President Mohamed Nasheed – represented the largest foreign direct investment in the Maldives history.

Legal and political wrangling regarding the deal began before GMR had even assumed management of the airport, however, with the then opposition attacking the deal as part of an increasingly fervent anti-government movement which would eventually lead to the controversial resignation of Nasheed in February 2012.

Concession and compensation

The previous December a case filed in the Civil Court  by opposition parties ruled that the Airport Development Charge – key to the agreement’s financial viability – was deemed illegal.

Following the ruling, the Nasheed government reached an agreement with GMR to deduct the lost revenue – anticipated to have been US$25 million per year –  from concession payments owed to the government.

This decision resulted in further tensions after the fall of the Nasheed government, with GMR contract’s detractors – now in office –receiving a series of bills as the lost ADC revenue eclipsed any concession payments owed.

The ADC matter was subsequently referred to the Singapore arbitration court – as agreed in the initial concession agreement – while senior figures in the government pleaded with Indian PM Manmohan Singh to cancel the agreement, citing growing anti-Indian sentiment in the country.

In today’s letter, GMR revealed that the tribunal had ruled both the charge, and the subsequent adjustment was also “lawful and binding on MACL and GoM”.

The termination of the contract was accompanied by a cooling of relations with neighbour India as well as questions regarding foreign investor confidence in the Maldives – both issues that incumbent President Abdulla Yameen has sought to address since his election in November.

Future investment

Yameen – whose Progressive Party of Maldives has distanced itself from termination of the GMR deal, despite being the largest party in the coalition government at the time –  has pledged to create an environment conducive to further foreign investment.

As well as introducing plans for special economic zones within the country, Yameen’s government has embarked on a drive for foreign investors – suggesting that even GMR would be welcomed back to work on new projects.

“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,” said the president in April.

Projects outlined at a landmark Singapore Investment Forum included the further development of Malé International Airport, though Yameen has said that overall management would remain in Maldivian hands due to its national commercial and security importance.

New plans for redevelopment of the airport will include foreign investors – an issue that continues to cause controversy – under the management of the state-owned MACL.

MDP Spokesman Hamid today suggested that the tribunal’s decision would deter further investment and foreign financing in the Maldives and – depending on the compensation amount – could result in the state’s bankruptcy.

Hamid reiterated his party’s recent calls for GMR’s reinstatement, stating the the MDP would be considering further legal action following the tribunal’s decision.

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INIA passes inspection to remain part of EU supply chain

Ibrahim Nasir International Airport (INIA) has been awarded ‘Regulated Agent from a third country’ status (RA3) by the EU, meaning that it can continue to act as part of the supply chain for imports into the European Union.

RA3 three status means that INIA will be able to continue to receive air cargo en route to the EU after July 1st, when new regulations will require all EU cargo to be transported through an EU validated supply chain.

The new EU procedures follow the October 2010 attempt to sabotage two planes travelling to the EU from Yemen.

“This is a huge milestone achieved as Maldives exports tons of Cargo EU countries every month,” read an MACL press release.

A small ceremony was held at the cargo department today after a three day validation process. The official report was handed over to MACL Managing Director Ibrahim Saleem by the EU aviation validator Sander De Man.

“MACL has brought major infrastructure changes to the cargo facility and had done mandatory trainings to adhere to the EU required standard,” added today’s press release.

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MACL deny jet terminal outsourcing rumours

Maldives Airports Company Ltd (MACL) CEO Ibrahim ‘Bandhu’ Saleem has denied reports suggesting plans to sell the private jet terminal at Ibrahim Nasir International Airport.

“We are not aware that such discussions have taken place even. Our company has definitely not conferred on selling of the jet terminal or any other business with our share in it,” Saleem told Haveeru.

Saleem’s comments come in response to a press release from tour operators organisation MATATO earlier this month, expressing concern over rumoured plans to outsource both the terminal and aeronautical services facilities.

Saleem said he had no idea where the rumours had come from, though he told Haveeru that discussions at the government level were nothing to do with him.

MACL is a 100 percent state-owned company governed by a Board of Directors appointed by the president of the Maldives.

Prior to MATATO’s statement on June 11, Minivan News had learned that the cabinet’s economic council is currently discussing a deal with billionaire Thai businessman William Heinecke.

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MACL can sue former chairman over GMR airport charge decision, says Civil Court

The Civil Court has ruled the Maldives Airports Company (MACL) can sue its former chairman for allowing the disputed Airport Development Charge (ADC) to be deducted from Indian infrastructure giant GMR’s concession payments during it’s ill-fated agreement.

MACL alleges ‘Kuda Bandhey’ Ibrahim Saleem’s decision to be an act of ‘Ultra Vires’ – meaning that Saleem had acted beyond his permitted authority.

The ruling came following a procedural issue taken by Saleem said he was being wrongfully charged claiming the lawsuit was filed in violation to Article 18 (c) of the Contract Act and Article 74 Company Act.

The Contract Act states a clause requiring a party to refer to arbitration any dispute arising from the contract shall be valid, while the Company Act says the court has a right to issue orders holding personally liable the directors of the company to commit an offense in the name of the company.

But the Civil Court ruling stated that the Company Act does not prohibit the company chairman from being sued personally.

The airports company sued Saleem after he signed a letter sent to GMR on January 5 2012 stating that the ADC and the insurance surcharge fee had been deducted from GMR’s concession payments.

In late 2011, the then-opposition Dhivehi Qaumee Party (DQP) had filed a successful Civil Court case blocking GMR from charging US$25 charge for outgoing passengers – stipulated in its agreement with the government – on the grounds that it was a tax not authorised by parliament.

Former President Mohamed Nasheed’s administration subsequently chose to honour the original contract, instructing GMR to deduct the ADC revenues from the concession fees due to the state-owned MACL while it sought to appeal the Civil Court ruling.

However, with the Nasheed’s controversial resignation coming just one month later, the opposition soon inherited the contractual problem.

Dr Mohamed Waheed’s government then received a succession of bills from the airport developer throughout 2012, despite its insistence that the January 5 letter from MACL outlining the new arrangement was no longer valid.

In December 2012, the Anti-Corruption Commission (ACC) filed a case with the Prosecutor General’s Office over Saleem’s decision to allow GMR to deduct the ADC from concession fees owed to the state.

As part of the filed case (Dhivehi), the ACC was seeking reimbursement of MVR 353.8 million (US$22.9 million) from Saleem and former Finance Minister Mohamed Shihab over the alleged misuse of authority it claimed had led to significant financial loses for the state.

These losses were used as justification for the contract’s eventual termination in December 2012, for which GMR is currently seeking compensation via a Singapore court of arbitration.

According to the case filed by the ACC, former Finance Minister Shihab stands accused of misusing his ministerial authority to benefit a third party by allowing GMR to deduct the charges between October 2011 and September 2012.

The ACC has also accused Saleem violating the company’s rules. According to the ACC’s case, normal procedure for MACL would be to have the company’s board of directors pass a resolution allowing for consent to be given to deduct the ADC.

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China’s Sinohydro to build airport apron

China’s state-owned engineering and construction company, Synohydro, is to build a US$ 9 million parking apron at the Ibrahim Nasir International Airport (INIA).

The agreement was signed between the Maldives Airports Company (MACL) and Sinohydro on May 8.

MACL Managing Director ‘Bandhu’ Ibrahim Saleem said the new apron – to be built on the northern tip of the runway – will be 350 meters long and 75 meters wide. Four Boeing 777 airplanes can park on the apron.

The project is to be completed within 12 months.

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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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MH370 sightings in Maldives are not true, reports Malaysian Defence Minister

Malaysian Minister of Defence Hishamuddin Hussein has been informed by Maldivian authorities that rumoured sightings of Malaysian flight MH370 over Kudahuvadhoo are false.

“Regarding reports that the plane was sighted in the Maldives, I can confirm that the Malaysian Chief of the Defence Force has contacted his counterpart in the Maldives, who has confirmed that these reports are not true,” Hishamuddin told the press today.

The defence minister’s comments come after eyewitness reports emerged yesterday of a low-flying aircraft in Dhaal atoll just hours after the Malaysian jet’s disappearance on March 8.

“I saw a flight flying very low and it had a red straight line in the middle of it. The flight was traveling north-west to south-east,” Adam Saeed, a teacher at Kudahuvadhoo school, told Minivan News.

Maldivian authorities have acknowledged the reports, with police taking the lead in investigating the sightings – though both the Maldives Airports Company (MACL) and the Maldives National Defence Force (MNDF) have maintained that no irregular radar activity has been noted.

“The Maldives National Defence Force has been monitoring Maldivian territory with special attention since the disappearance of Malaysian Airlines’ MH370 airplane,” read an MNDF press release last night.

“In the search so far, no military radar has seen the flight. And the MH370 airplane has not been seen from the photos and information of radars established in Maldivian airports.”

“The Maldives National Defence Force has been providing all necessary cooperation to the efforts of the Maldives Police Service as well as international agencies concerning [the disappearance of the flight],” concluded the statement.

Police have announced the start of their investigations, with Kudahuvadhoo officer Mohamed Imad confirming that a team of investigators was being dispatched from the capital Malé to assist with the ongoing local investigations.

A spokesman for the MACL yesterday said that there had been no “credible” sightings or radar evidence of the missing flight, while some witnesses interviews by Minivan News expressed skepticism over the veracity of their neighbours claims.

Local news outlet Haveeru – which broke the story yesterday – said that similar reports had been received as early as March 9, but had been dismissed as lacking credibility.

Regarding communications with Malaysian authorities, Minivan News was unable to obtain a response from either the MNDF or the Ministry of Defence at the time of press.

Yesterday’s reports all described a low-flying plane, heading in a south-easterly direction between 6:15am and 8am (Maldives time).

Malaysian Defence Minister Hishamuddin has today confirmed, however, that the search will continue to focus on the two previously identified corridors.

The two arcs – one stretching between Thailand and Kazakhstan, the other south between Indonesia and the southern Indian Ocean – have been determined by locational ‘pings’ detected by a satellite revealing the flight’s last known location at 8:11am Malaysian time (5:11am Maldives time).

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Kudahuvadhoo islanders spotted low-flying mystery aircraft in hours after MH370 disappearance

With additional reporting by Ahmed Nazeer and Ahmed Rilwan

Residents of Kudahuvadhoo in Dhaal atoll have reported seeing a low flying aircraft heading in a south-easterly direction in the morning of March 8, prompting speculation that it could have been the missing Malaysian Airlines flight MH370.

“It was about 6:30am in the morning, I heard a loud noise and went out to see what it was,” Adam Saeed, a teacher at Kudahuvadhoo school, told Minivan News.

“I saw a flight flying very low and it had a red straight line in the middle of it. The flight was traveling north-west to south-east.”

While Saeed’s sighting has been corroborated by a number of witnesses, others remain skeptical that the aircraft could have been the missing jet, whilst aviation authorities maintain that they have no “credible” evidence to support the claims.

Police have confirmed they are looking into the reports without providing further comment.

Co-author of the original story Ahmed Naif explained that Haveeru had been receiving similar reports since March 9, but had been concerned about the credibility of the sightings.

“Later we were getting so many comments that we contacted the island and they said it was true,” explained Naif.

One islander, who identified himself as Hamzath, told Minivan News that had also seen a low-flying plane heading from north-west to south-east, though he remained wary of jumping to conclusions.

“People started talking about it when they realised that the flight that we saw had the same characteristics as of the missing plane,” he said. ”We are still not saying it is the same plane, we just wanted to report it just in case.”

Another witness – who wished to remain anonymous – confirmed a similar height and direction but did not see the plane’s colours, while another suggested that the reports had been exaggerated.

“A plane did fly near the island,” said the anonymous witness. “It wasn’t that big, as big as people say.”

“These days people will be out fishing every morning. Around thirty people would always be there in the morning – but no one talked about it then. If it was that noticeable, loud and big, people would talk.”

Caution urged

Investigators are currently searching an area spanning 2.24 million nautical miles, with two corridor arcs – one stretching between Thailand and Kazakhstan, the other south between Indonesia and the southern Indian Ocean.

The arcs were determined locational ‘pings’ detected by a satellite revealing the flight’s last known location at 8:11am Malaysian time (5:11am Maldives time). Witness reports received by Minivan News and Haveeru put the time of the sighting between 6:15am and 8am.

While the Maldives appears to have been ruled out of the ever-widening search for the missing Boeing 777 and the 239 people on board, reports this morning brought further mention of the Indian Ocean archipelago.

A simulator featuring five airports in the Indian Ocean region was discovered in the home of flight Captain Zaharie Ahmad Shah today, as investigators remain convinced the plane’s disappearance was deliberate. A senior Malaysian police officer told Reuters, however, that such simulators are likely to feature hundreds of runways.

Ibrahim Nasir International Airport was featured on the simulator, as were three runways in Indian and Sri Lanka, as well as the US military base in Diego Garcia.

Although the Maldives receives over one million tourists every year, visitors to isolated islands are normally transported by seaplane from Malé’s airport.

When asked about the possibility of a plane of this size landing on an isolated airstrip in the atolls, Maldives National Defence Force spokesman Major Hussain Ali said this was not possible.

“If you are asking are there any landing strips outside of the main commercial airports, the answer is no,” said Hussain.

Contacted following the emergence of the Kudahuvadhoo sightings, neither Hussain not the President’s Office were responding to calls at the time of press.

Spokesman for the Maldives Airports Company Limited (MACL) Hassan Areef has urged caution regarding the reported sightings in Kudahuvadhoo.

“We have no credible information about the plane in terms of radar or sightings,” said Areef.

“There are so many conspiracy theories – we have no credible information that the plane has come to us.”

One such conspiracy theory has the base at Diego Garcia – which lies around 700 miles south of Kudahuvadhoo – as a potential landing site for the plane, though Malaysian authorities are said to have dismissed this rumour.

Haveeru today quoted a local aviation expert, who considered it unlikely that a commercial carrier would have been flying over the island at that time.

While some witnesses at first assumed that the flight must have come from Maamagili airport, 55 miles to the north, MACL’s published schedule shows no flights from the airport until 7:20am on Saturdays, with all subsequent flights headed to the capital Malé – north-east of Maamigilli.

Maamigili airport is the hub for the domestic carrier Flyme which operates a fleet of 75ft, 50 seater ATR 42-500 aircraft. The Boeing 777 model of the missing Malaysian jet is around 200 feet long with a carrying capacity in excess of three hundred.

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