MACL is the government party in the concession agreement with Indian infrastructure giant GMR to manage and develop Ibrahim Nasir International Airport, signed during the Nasheed administration.

Opposition parties at the time the agreement was signed – and are now in government following February 7’s controversial transfer of power – first opposed GMR’s development of the airport on nationalistic grounds, and then levelled numerous allegations against the company ranging from corruption to concerns that the deal would allow Israeli bombers to refuel en route to bombing Arab countries.

The opposition had some success in disrupting the agreement in late 2011, after the Dhivehi Qaumee Party (DQP) won a case in the Civil Court blocking GMR from levying an airport development charge (ADC) as stipulated in its concession agreement.

MACL in a letter sent on January 5, 2012, instructed GMR to deduct the ADC revenues from the concession fees due the government, while it sought to appeal the Civil Court ruling. However the Nasheed government fell a month later and the opposition inherited the problem, receiving a succession of bills from the airport developer throughout 2012.

In the first quarter of 2012 the government received US$525,355 of an expected US$8.7 million, after the deduction of the ADC. That was followed by a US$1.5 million bill for the second quarter, after the ADC payable eclipsed the revenue due the government.

Combined with the third quarter payment due, the government now owes the airport developer US$3.7 million.

“The net result of this is that the Maldivian government now has to pay GMR for running the airport. On this basis it is likely that the Maldivian government will end up paying about MVR 8 billion (US$519 million) to GMR for the duration of the contract,” wrote Dr Hassan Saeed, President Mohamed Waheed’s Special Advisor, in a recent appeal to Indian Prime Minister Manmohan Singh calling on him to cancel the Maldives’ agreement with GMR.

Saeed is the leader of the DQP, the party that filed the case against the ADC while in opposition, and has strongly opposed GMR’s involvement in the airport development.

As per the concession agreement, the ADC matter was referred to the Singapore Court of Arbitration.

The High Court of Singapore on July 23 granted an injunction in favor of GMR, restraining MACL from taking any step in the Civil Courts of the Maldives preventing the company “from adjustment/set-off of the Airport Development Charge and insurance surcharge, as per MACL’s 5th January 2012 letter, which is now referred to arbitration,” according to the airport operator.

MACL approached the High Court of Singapore in October 2012 seeking to have the injunction lifted. However the court dismissed the application on November 19.

MACL has challenged the validity of the July 5 letter instructing GMR to deduct the ADC from its concession revenues, claiming that it was signed by the former MACL Chairman ‘Bandhu’ Ibrahim Saleem without approval from the company’s board, and noted that he had been subsequently replaced under the new administration.

“The dispute raised by MACL on the validity of the 5th January 2012 letter will be decided in the arbitration proceedings to be held in Singapore,” GMR noted in a statement.

Attorney General (AG) Aishath Azima Shakoor claimed in local newspaper Haveeru on Monday that the Singaporean court had permitted MACL to try the matter in a Maldivian court, and allow the company to sue Saleem for the loss of revenue caused by the July 5 letter.

“But in accordance with the agreement whether MACL had the right to ignore or comply with the letter would be decided by arbitration. Even if a Maldivian Court rules the letter as null and void it would not binding for the arbitration,” Azima was reported as telling the paper.

There was, she said, no impediment to the government terminating the GMR agreement altogether, although this would be subject to compensation payable to GMR to be decided through arbitration.