Comment: Conspiracy of silence over GMR arbitration

Amidst the high decibel of the election campaign, it is easy to completely miss out on some critical issues.

This seems to have happened last week, when the Maldives Airport Company Limited (MACL) recorded an early loss in its legal battle with GMR over [President Dr Mohamed] Waheed’s government’s decision to terminate the Male airport concession agreement. There has been no word or confirmation from the Waheed government on this and his eager-than-ever spokespersons are nowhere to be found. This is especially interesting since they have been more than keen to take any credit they can on the entire airport saga.

Per a report in Minivan News, this is an “early legal skirmish” for GMR in its $1.4Bn claim against Government of Maldives and MACL for illegal termination of its concession agreement in December last year. In one of the earlier comment pieces in this same publication, it has been argued how the termination was a political decision, not an economic decision and how politicisation of the airport by Waheed and his ex-allies is systematically destroying our national asset. This latest news now is all the more concerning and I am certainly surprised to see that it hasn’t been picked up by any of the other newspapers which leads me to believe many people didn’t realize what this may mean for us as a nation.

While Minivan News hasn’t highlighted their source for this judicial order. I wish they had.  In this column I will highlight what I believe are the implications of this order.

Legal setback – arbitration panel leaning away from MACL?

No doubt this is a major setback for Waheed and his Attorney General, Azima Shukoor. Waheed’s government has lost the first round of the battle and the first blood has gone to the other side. The judicial order provides early indications as to which way the arbitration panel may be leaning based on the arguments that they have heard from both parties till now.

Waheed government could not convince the tribunal members on the right way to proceed with the case and this would certainly make one nervous about whether they will be able to convince the panel about their legal position that the contract is void. We have to keep in mind that members of the government and their allies were publicly criticising the deal, protests were being staged against GMR and cries of nationalisation were being made just before Azima suddenly pulled the rabbit out of the hat and claimed that there was no contract all this while!

Details of the political campaign run by members of the government are in the public domain, and they raise questions as to whether the contract was invalid or if the lawyers were asked to find ways of canceling it.

Certainty of compensation by Maldives for termination?

The most important part of the article that the tribunal has discussed is awarding three different types of claims according to which way the panel decides on the legal question of whether the contract was void ab initio or not: “GMR-MAHB’s claim for compensation as per the termination clause of its concession agreement, its parallel claim for loss of profits over the lifespan of the agreement due to its termination, and the government’s counter-claim for restitution should the tribunal decide in its favour”. If one thinks deeply about it, this doesn’t sound like good news at all for Waheed and Azima, or for our nation.

If we lose the legal arguments, we will be faced with a US$1.4 billion claim that we may have to pay for how the airport contract was terminated. However, if Azima wins the legal arguments in the panel then it’s the restitution claims that will be relevant. Otherwise, the contract itself has some termination clauses and this is the third type of claim that may be awarded by the panel based on legal arguments. Let’s look at each of these three claims one by one.

GMR’s US$1.4 billion claim is what it is and we will have to wait and watch if they are awarded this claim. The more interesting aspect is what the panel seems to have said on the other two types of claims.

On the termination payments per the contract, I am all but reminded that in a press conference last year Azima herself said that if the contract is cancelled, we may have to pay GMR anywhere between US$600-700 million in compensation. Given that Azima has been maintaining that Nasheed’s government did not do any due diligence while procuring the contract, whereas she has done extensive due diligence before canceling the contract, I am tempted to take her word on the estimated cost of termination. Hence, in this case, we may have to pay GMR around US$600-700 million.

Now, for the worst part and which Azima has argued in court: in case we win the legal arguments in court, the panel will decide for restitution. If one quickly goes to Wikipedia and understands what restitution refers to in legal terms, it means “orders the defendant to give up his/her gains to the claimant… to restore the benefit conferred to the non-breaching party”.

In essence, if restitution is done in this case, the government will have to give back all the money that GMR brought to Maldives with them to invest and GMR will have to give back what they got from Maldives. Even some quick ‘back-of-the-envelope’ calculations reveal that this would still mean paying around US$240 million to GMR!

If one believes their statements that they have already invested ~US$240 million in the airport, then this money will need to be given back to GMR. At the same time, they have also said that they haven’t taken investment out of the airport and whatever they earned was put back in the airport. Hence, we are still looking at a claim of US$240 million that we may need to give GMR even if we win the legal case!

Conspiracy of silence?

During his controversy-ridden reign in which he has lost allies one by one, Waheed has taken a number of suspect decisions which he has been too happy to slip under the carpet. He perhaps thought that the decision to axe the airport contract was a populist decision and he had probably hoped that it would bring him back to power.

This is why his spokespersons as well as the AG were trigger-happy to announce that nothing will happen in the arbitration before next year – “since there is no valid contract, there can be no compensation”.

Now, this early legal setback– which may cost us millions of dollars in damages even if we win the arbitration– has laid bare all the arguments that Azima gave when the contract was cancelled. The shallowness of her arguments has now left the nation with a US$240 million bill in the best case, and more than a billion dollars at worst! So much for the “legal due diligence and advice of foreign lawyers” that she received.

No wonder that there has been no word from the government on this so far. This may be either because they have nothing to say given the early setback that they have received or they would rather push this under the rug and hope they can get through the elections without making any comment which may jeopardise their chances. At the end of it, they seem to have taken advantage of a tight election schedule to hide without giving any explanations whatsoever!

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Parliament probe into CoNI report meeting government resistance

A probe by parliament’s Executive Oversight Committee into the Commission of National Inquiry (CoNI) report is meeting resistance from high level government officials, members have claimed.

Attorney General (AG) Aishath Azima Shakoor issued a letter to the Majlis Speaker Abdulla Shahid stating that the probe into the Commonwealth-backed report was a violation of the Parliamentary rules of procedure, local media reported.

“The work carried out by the Parliament’s Government Accountability Committee is out of the mandate assigned to it under the Parliament rules of procedure,” Shakoor told Haveeru.

“I stress that the committees do not possess the authority to deal with this report in any other manner.”

According to Maldivian Democratic Party (MDP) Spokesperson MP Hamid Abdul Ghafoor, the committee has been a bipartisan effort following the “house rules” of Parliamentary procedure.

Nine of the 11 members, including MPs of the government-aligned Dhivehi Raiythaungee Party (DRP) and Progressive Party of the Maldives (PPM), were present on Tuesday (January 15).

The committee has been conducting a “normal” probe since December 2012 to determine whether former President Mohamed Nasheed’s resignation was made under duress, Ghafoor said.

“It is rather bizarre that after two weeks of committee meetings the Attorney General is suddenly opposed to business as usual. These allegations have arisen after hearings with people involved in the coup, such as Commissioner of Police Abdulla Riyaz, Minister of Defence Mohamed Nazim, and Chief of Defence Force Major General Ahmed Shiyam.”

Shiyam and Nazim refused to cooperate with the Committee, as advised by their lawyers. In response, the Committee filed a motion on Wednesday (January 16) requesting the Prosecutor General forward charges against them for violating the constitution with their non-compliance.

Meanwhile, President Mohamed Waheed refused to provide the interviews, tapes and statements given to the CoNI as per the Committee’s request, local media reports. The Committee made two previous requests in December 2012 before it adjourned for 10 days.

“Parliament’s job is oversight over the executive [branch] rather than the executive having oversight over us. Dr Waheed does not understand that basic concept of democracy,” Ghafoor told Minivan News.

“The Attorney General is doing the same, she has the general concept [of democracy] wrong. I don’t see what mandate she has to comment on procedures of parliament or question the powers of the committee,” he added.

According to Ghafoor, the committee will continue to conduct the CoNI probe – as they believe they are operating “by the book” – and compile the report. Their findings will then be sent to the Parliament floor, where the Majlis will accept or reject it.

Attorney General Shukoor was not responding to calls at time of press.


Government “cynically used xenophobia, nationalism and religious extremism” to attack foreign investor: former President

Additional reporting by Neil Merrett and Mohamed Naahii

The Waheed government’s decision to void the GMR contract and issue the developer a seven day ultimatum will “put off potential investors for decades,” former President Mohamed Nasheed has said.

“Waheed’s government has cynically used xenophobia, nationalism and religious extremism to attack GMR, the country’s largest foreign investor. Waheed is leading the Maldives down the path to economic ruin,” Nasheed said, following Attorney General Azima Shukoor’s issuing of the ultimatum on Tuesday (November 27) evening.  The ultimatum was made while arbitration proceedings are pending in the Singapore courts.

The government’s party to the 25 year concession agreement – the 100 percent state-owned Maldives Airports Company Limited (MACL) – issued a statement on Wednesday declaring that the company was “now working with stakeholders to take over the operations of Ibrahim Nasir International Airport (INIA) on or before the expiry of the seven days period provided to [GMR] to handover possession of the INIA pursuant to the notice issued by the government of the Maldives and MACL.”

GMR meanwhile yesterday denounced the move as “unilateral and completely irrational”.

“We have no plans to go. We have 23 more years here,” GMR’s Head of Corporate Communications Arun Bhaghat told Minivan News.

CEO of INIA, Andrew Harrison, told Minivan News that the airport’s 1700 staff were “quite concerned” and “not exactly jumping for joy”.

The company had held several meetings with staff following the announcement and called on them to ensure continued smooth operation of the airport while the legal team was working to resolve the issue.

“People who have seen their businesses improve since GMR took over have been calling me up expressing support,” Harrison noted.

The company had received no communication from the government apart from the notice issued yesterday, he added.

The Indian government was quick to back GMR yesterday following the announcement by its Maldivian counterpart, noting that the company was awarded the deal “through a global tender conducted by the International Finance Corporation (IFC), a member of the World Bank.”

“The IFC has stated that it has complied with Maldivian laws and regulations and followed international best practices at each step of the bidding process to ensure the highest degree of competitiveness, transparency and credibility of the process,” said the Ministry of External Affairs.

The Indian government added that it was prepared to take “all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives.”

Surprisingly, GMR’s stock showed an upward trend following the government’s announcement.

Traders on one broker’s website predicted that stock was reacting positively due to the Indian government’s quick defence of the company and the prospect of significant compensation for the infrastructure developer following arbitration proceedings.

“Stock will definitely react in a positive manner as it has now become a matter of national prestige,” predicted one trader on Indian finance portal, Moneycontrol.

The Maldives’ decision was widely derided in the Indian media. Forbes India suggested that “the decision to send the Indian consortium packing has brought into focus the risk of doing business in emerging markets with rapidly changing political landscapes.”

“India Inc has had its share of relatively minor `law and order’ problems in its journey into Africa and a few brushes with shifting goalposts in places like Indonesia and Russia. But being thrown out after signing a 25-year, supposedly iron-clad international contract, is a first,” Forbes observed.

Locally, the Progressive Party of the Maldives (PPM) of 30 year autocrat Maumoon Abdul Gayoom praised the government’s move as “important for protecting the rights of Maldivian citizens”.

“It is PPM’s hope that the government’s decision to terminate the agreement with GMR will not affect the historic friendship between the governments and people of the Maldives and India,” the PPM said in statement.

The largest party in the ruling coalition, the Dhivehi Rayyithunge Party (DRP), was more reserved.

“The government should act responsibly and according to the legal contract,” said DRP MP Dr Abdulla Mausoom. “The consequences of government decisions should not adversely affect the lives of the Maldivians.”

The 2191-member Dhivehi Qaumee Party (DQP), which during the Nasheed administration filed the Civil Court case outlawing the airport development charge (ADC) stipulated in GMR’s concession agreement which deprived MACL of airport revenues and cost the government several million dollars, praised President Waheed as a national hero.

“[The] decision will be noteworthy in the history of this country,” DQP Leader and President Waheed’s Special Advisor, Dr Hassan Saeed, was reported as saying in local media.

“No one would expect such a decision to be made by a country that heavily relies on India. But Waheed has decided what is best for his country,” said Saeed. “President Waheed will be remembered in the years to come.”

Saeed earlier wrote to Indian Prime Minister Manmohan Singh urging him to terminate the Maldives’ airport development contract with GMR, warning of rising fundamentalism and anti-Indian sentiment should he fail to do so.

“I want to warn you now that there is a real danger that the current situation could create the opportunity for these extremist politicians to be elected to prominent positions, including the Presidency and Parliament on an anti-GMR and anti-India platform,” Saeed informed Singh.

“That would not be in the interests of either the Maldives or India. You are well aware of the growing religious extremism in our country,” Saeed warned the PM.

Seven day stand-off

GMR has shown no interest in complying with cabinet’s direction and has expressed confidence in the professionalism of the Maldives National Defence Force (MNDF) and its assignment to protect the airport, raising speculation as to how far the government would be willing to go to enforce its decision to void the concession agreement and reclaim INIA.

President’s Office Media Secretary Masood Imad told Minivan News on Wednesday that the government’s role had “solely been to advise MACL to take control of the site.”

“We are not engineering any handover [of the airport],” he said. “What we have done is just given our opinion after being advised that [terminating the contract] was the proper thing to do.”

GMR has responded that it did not recognise a legal basis for the government’s decision while the arbitration is still ongoing in the Singaporean courts, stating that it would continue to manage and oversee development at the airport for the remaining 23 years of its tender agreement.

Masood claimed that any decision to retake the airport would be “the responsibility” of MACL.

“Well I suppose if MACL decide to terminate the agreement and the company hasn’t moved, procedures are in place for the MACL to address these issues,” he said, forwarding further inquiries to MACL Managing Director Mohamed Ibrahim.

Ibrahim however told Minivan News he was “not willing to disclose anything at this moment.”


Civil Court suspends Champa’s Rf100 million fine for environmental damage, as case begins

The Civil Court has issued an injunction on the Rf100 million fine levied against local business tycoon Mohamed ‘Champa’ Moosa, by the Environment Protection Agency (EPA) for illegal reclamation work on Thunbafushi, reports Haveeru.

Champa’s lawyer, former Attorney General Azima Shukoor, is contesting that the EPA violated the constitution and the Environment Protection Act by imposing a fine on him.

The EPA labelled Champa an “environmental criminal” for irreversibly damaging the island of Thun’bafushi and the marine ecosystem of Thun’bafalhu.

After three surveys of the area, the EPA assessed the damage as amounting to Rf2,230,293,566 (US$144.6 million), not including the impact of sedimentation from the dredging which can smother coral kilometres from the site.

A foreign consultant who was involved in surveying the island told Minivan News in an earlier interview that the area “seems to have been used as a dumping ground.”

“There were what looked like hundreds of used car batteries, waste metals and oil drums leeching into the marine environment,” the consultant said.