Indian infrastructure firm, GMR, has won at least US$250million in damages from the Maldivian government for abruptly cancelling a lucrative contract to develop and manage the country’s main airport.
GMR said the award, which brings to an end a four-year legal battle, includes the debt, equity invested in the project along with a return of 17percent, and termination and legal costs.
The award, announced Wednesday, will amount to approximately US$270million, the firm said. But Attorney General Mohamed Anil estimated the figure to be US$250million, an amount far less than the GMR’s initial claim of US$1.4billion. The firm later revised the claim to US$803million.
Anil said the government and the state-owned Maldives Airport Company Ltd are currently in talks with GMR on making the payment. He refused to take questions from reporters citing “the confidential nature of arbitration proceedings.”
The GMR said in a statement: “This award is testimony to the high standards of conduct, corporate governance and committed observed by GMR Group across all its businesses.”
MACL, which runs the Ibrahim Nasir International Airport, maintains that the GMR deal, signed during the tenure of former President Mohamed Nasheed, was detrimental to its rights and interests.
Adil Moosa, the company’s managing director, said MACL had built up a “massive reserve” from its profits since GMR’s eviction in 2012. The company made MVR1.196billion (US$77million) in 2013, up from MVR16million (US$1million) in 2012, the year the airport was nationalised, he said.
Anil said that while the Singaporean tribunal had found the agreement’s cancellation to be wrong, it had determined that “compensation to be paid would effectively be limited to the amount that GMR had spent on the airport.”
This was due to the fact “that the tribunal found that given the circumstances that the Maldives was in at that time, there were public interest reasons that would have justified the government’s termination of the concession agreement,” he said.
Anil also stressed that the award was far less than the figure touted by Nasheed’s Maldivian Democratic Party, which had warned of a sovereign debt crisis from the pay out, which it estimated would “not be lower than US$800million.”
He noted that President Abdulla Yameen had correctly predicted that the figure would be closer to a “manageable” US$300million.
The GMR had faced legal and political wrangling over the airport deal before it had even assumed management of the airport. The US$511 million concession agreement represented the largest foreign direct investment in Maldivian history.
The then-opposition attacked the deal as part of vitriolic anti-government campaign that led to Nasheed’s resignation in February 2012.
Nasheed’s successor, Dr Mohamed Waheed Hassan, declared the airport contract void ab initio, or invalid from the outset, eight months after assuming power.
GMR and its partner Malaysia Airports were given seven days of notice.
When GMR contested the eviction, the Singaporean Supreme Court ruled that the Maldivian government “has the power to do what it wants, including expropriating the airport.” GMR and Axis Bank then went on to initiate separate arbitration proceedings against the government.
According to submissions made by the government and the Axis Bank to the tribunal, Waheed had considered buying GMR out, but lacking the necessary funds, declared the agreement invalid.
The airport takeover had soured Maldives-India relations with India imposing visa restrictions and freezing the export of construction materials. Relations were normalised only when Yameen assumed power in 2013.
In June 2013, the Anti-Corruption Commission released a 61-page investigative report concluding that there was no corruption in the awarding of the concession agreement to the GMR-Malaysia Airports Holdings Berhad consortium.
Yameen has meanwhile kicked off a US$800million airport expansion project by Chinese and Saudi Arabian firms.
China’s Exim Bank and the Saudi Fund for Development have pledged to lend US$373million and US$100million, respectively.
The government has secured an additional US$50million loan from the Kuwait Fund for Arab Economic Development and US$40million loan from the Abu Dhabi Fund for Development. It is also in talks with the Islamic Development Bank to obtain a fifth loan of US$110million.
The president had previously said he was confident returns from the airport will be high enough to compensate GMR. He had also described Nasheed’s decision to privatise the airport as an “economic crime,”
Andrew Harrison, the former CEO of GMR Malé International Airport Pvt Ltd, branded the president’s remarks “absolutely baseless and far from the truth and aimed mainly at sullying GMR’s reputation.”
During the period in which GMR operated the Malé airport, GMR was the highest revenue generator for the government, he said in a letter to the president.
While the government earned on average MVR90 million a year from MACL from 2006 to 2010, GMR paid the government an upfront fee of MVR1.2 billion (US$78 million) and MVR508 million (US$33 million) in concession fees in 2011, Harrison said.
“In addition, GMR paid more than MVR308 million [US$20 million] to the government through royalties, duties, etc, during the same period,” the letter continued. “Moreover, GMR would have paid close to MVR1billion [US$64million] in 2012 had GoM/MACL honoured and performed their obligations under the concession agreement.”
The World Bank has previously said the pay out to GMR would place severe pressure on the Maldives’ already low foreign reserves. In August, it said that the debt from mega infrastructure projects, including the airport expansion project, puts the country at high risk of external debt distress.
Additional reporting by Shafaa Hameed and Xiena Saeed