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Corporate Dec 3, 2012

Maldives to wrest airport control, GMR vows to fight back

By Firstbiz Staff

Even though the Maldives government has said it will take control of the Male airport managed by India's GMR Infrastructure despite an order from a Singapore court suspending the cancellation of GMR's $511 million project, the infrastructure company vowed to take forward the legal battle in this regard,

The government will take control of the airport, located in the capital Male, from Saturday, defence minister and acting transport minister Mohamed Nazim told a press conference.

eacting to the Maldives government's stand that its decision of termination of Male airport contract to GMR-led consortium was "non-reversible and non-negotiable", CEO of GMR Andrew Harrison said sovereign guarantee was provided in the agreement and should be "respected".

Earlier today, Maldives president Mohamed Waheed's press secretary Masood Imad told PTI that "The government's decision is very clear. It is non-reversible and non-negotiable. Our decision was based on legal advice we got from our lawyers in UK and Singapore."

The government says the Singapore court judge was incorrect in interpreting the law. Reuters

GMR today won a stay order from a Singapore court on the cancellation of Maldives' biggest foreign investment project and would continue to operate the airport as normal, the company said. The move was likely to pave way for GMR to continue operations at Ibrahim Nasir International Airport (INIA) in Maldives.

However, when asked about Singapore court's order, Imad said, "We believe the judge was incorrect in interpreting the law."

The official also said Maldives have initiated the arbitration process and "GMR will be compensated".

As per the contract in the project, in case of differences between various parties, the law of either Singapore or the UK would apply.

The statement said the high court upon hearing both the parties granted the stay in The Maldivian Airport Co Ltd , based on the directions of the new Maldivian government, had on November 27 terminated the contract given to GMR in 2010 during the previous regime of President Mohamed Nasheed. Waheed had said the contract was invalid and was signed under "dubious" conditions by the Nasheed regime.

It has also said that GMR has no right to collect airport development fees from passengers, since no parliamentary approval was sought or obtained, making the practice unconstitutional. This is the issue at stake in the arbitration proceedings.

A Business Standard report this morning suggests that GMR got a sweet deal from former Maldivian president Mohamed Nasheed that eventually turned sour as a new government came to power under President Mohammed Waheed. It quoted Waheed's special advisor, Hassan Saeed, as saying the Indian firm's contract to manage the Male airport was terminated last week because the project had turned unviable for the government.

The paper said the country's government, instead of earning revenues, would have had to shell out a staggering eight billion Maldivian rufiyaa (Rs 2,871 crore) over 25 years to give GMR the concession to run the airport. That would have been a massive blow to the island nation's coffers.

Meanwhile, GMR Infrastructure and its partner Malaysia Airports Holdings will continue a separate arbitration procedure in Singapore with the Maldives government regarding contract terms that the government says are invalid.

"Had the Civil Court of Maldives not disallowed the airport and insurance charges, we at GMR would have paid $25 million on an annualised basis to Maldives for the next 25 years. The Maldives Government had to pay us for the April-September period instead because they scrapped these levies," a GMR spokesperson told Firstpost from Male.

The project cancellation exacerbated already strained relations with India, which last week warned it would "take all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives".

The move sent a "very negative signal" to foreign investors, India added.

"If they don't comply (with the stay order), the Maldives will no longer be respected as upholding its obligations under international law, which will be very detrimental to future foreign investment," Fayyaz Ismail, a lawyer for GMR told Reuters. "Hopefully they will be reasonable."

The contract to upgrade and operate the airport and build a new terminal came after a global tender overseen by the World Bank and signed under former president Mohamed Nasheed's administration.

The project was implemented through a joint venture company comprising GMR Infrastructure Limited and Malaysia Airports Holding Berhad.

With inputs from Agencies

by Firstbiz Staff

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