Arbitration fails to end GMR’s woes

Maldives govt rejects Singapore court’s stay on its order cancelling the $500 mn deal, says decision non-negotiable

Elizabeth Roche, Tarun Shukla
Updated4 Dec 2012, 12:43 AM IST
The Maldives had decided to terminate the $500 million airport contract given to GMR based on legal, technical and economic issues regarding the agreement. Photo: Mint<br />
The Maldives had decided to terminate the $500 million airport contract given to GMR based on legal, technical and economic issues regarding the agreement. Photo: Mint(Mint)

The Maldives government on Monday rejected a Singapore court’s stay on the termination of an airport contract that had been given to a consortium of India’s GMR Infrastructure Ltd and a Malaysian company in 2010.

add_main_image“The government’s decision is very clear. It is non-reversible and non-negotiable,” Masoon Imad, media secretary to the Maldives president, said in an email. “Our decision was based on legal advice we got from our lawyers in the UK and Singapore... We believe the judge was incorrect in interpreting the law. A court cannot issue such an injunction against a sovereign state.”

The laws of Singapore and the UK are very clear and don’t permit an injunction when compensation is adequate, Imad said.NextMAds

“We have initiated the arbitration process and GMR will be compensated,” he said.

“We have asked MACL (Maldivian Airport Co. Ltd) to go ahead with the takeover process that would be done later this week,” he later added, according to news agency PTI.

The details of the compensation proposed by Maldives were not immediately available.

Earlier on Monday, the dispute settlement court in Singapore had stayed an order by the Maldives cancelling the $500 million ( 2,730 crore today) contract awarded to India’s GMR and Malaysia Airports Holdings Bhd (MAHB) to build an international airport in the South Asian island nation’s capital Male.

The Singapore court’s justice Belinda Ang granted the injunction to “restrain (MACL) and the Republic of the Maldives (acting by and through the ministry of finance and treasury) forthwith, whether acting by itself, its directors, officers, servants and/or agents or any of them or howsoever otherwise, from taking any step or action further or pursuant to their notices dated 27 November 2012 to interfere, either directly or indirectly, with the performance by (GMR Male International Airport Pvt. Ltd, or GMIAL), whether acting by itself, its directors, officers, servants and/or agents or any of them, or howsoever otherwise, of the rehabilitation, expansion, modernization, operation and maintenance agreement relating to Malé International Airport dated 28 June 2010,” according to the order, which was reviewed by GMR.

“The Singapore court has given a stay in the injunction order. GMR can now stay in Maldives,” a GMR company official said in response to the ruling. sixthMAds

An Indian government official separately confirmed the Singapore court stay.

“The Singapore court has said both parties can continue the ongoing arbitration on the airport tax matter,” the GMR official said, referring to one of the issues that led to the Maldivian government cancelling the contract last month. “With the legal battle won, it will be the Indian government’s call to pressure the local government there to accept the order and not harm Indian interests.”

GMIAL, a consortium of GMR and MAHB, won the bid to operate and modernize Ibrahim Nasir International Airport after international competitive bidding among six shortlisted contenders conducted by the International Finance Corporation, an arm of the World Bank.

Ibrahim Zaki, special envoy of the former Maldives president Mohamed Nasheed, whose government had awarded the contract to the Indo-Malaysian joint venture in June 2010, had earlier on Monday expressed doubts over whether the current administration would respect the Singapore court verdict.

“The stay order does not mean they (the government) will respect the order,” he said on the phone from Colombo.

“There is a seven-party coalition in government and President Mohammed Waheed has no representation in the parliament. The seven coalition parties are issuing their own orders to the different arms of the administration,” said Zaki, who had visited India last month and warned the Indian government about rising fundamentalist forces posing a threat to India and Indian investments in the Maldives.

The Maldivian parliament, in fact, voted on Monday to hold a secret vote on a no-confidence motion against Waheed. No date has been fixed to take up the no-trust vote.

Nasheed resigned from the post of president in February this year, paving the way for Waheed to be president. Nasheed later said he had been “forced to quit at gunpoint”.

The GMR-MAHB contract ran into trouble soon after Nasheed quit. India was one of the first countries to recognize Waheed’s government in February.

Reacting to the Maldives government’s stand that the termination of the Male airport contract was “non-reversible and non-negotiable”, GMIAL chief executive Andrew Harrison said sovereign guarantees in the agreement should be “respected”, PTI reported.

“We will seek every single remedy to ensure that the concession agreement of Male international airport” is honoured, Harrison said on the phone. “We expect the government will honour the concession agreement as it is executed under English law.”

“We can’t just walk away with 1,765 hard-working employees engaged in construction of the airport terminal,” Harrison said. “We signed a concession agreement not for compensation. We are aware that compensation will be paid in the event of a dispute. But we are working hard to find a solution.”

The representatives of the government were present at the Singapore hearing, Harrison said.

The GMR official cited above said the company had not heard anything officially from the Maldives government after the court order.“We are hoping they abide with what the courts have said and do everything legally,” he said.

Zaki called on the Indian government to “take proportionate action to protect Indian national interests in the Maldives, as Maldives seems to be slipping into the hands of fundamentalists”.

P.R. Sanjai in Mumbai contributed to this story.

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First Published:4 Dec 2012, 12:43 AM IST
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