MUMBAI: Indian infrastructure company GMR,
which was forced to hand over Male airport to the Maldivesgovernment last
Saturday, is planning to seek compensation of over $800 million from the
government of the island state.
GMR, which was operating the Ibrahim Nasir International Airport at Male at an investment of $511 million, says it "feels cheated" for having the contract cancelled over an illegal component - airport development charge - present in it, which they were not aware of.
"The estimated compensation that GMRBSE 1.63 %would seek from the Maldives government would be upwards of $800 million. We will discuss with our lawyers and work out a legal strategy. We will also continue to keep the government updated on various issues and seek appropriate support at the right time," GMR (Airports) CFO Sidharath Kapur told ET.
GMR and Malaysia Airports Holdings Berhad won the contract in November 2010 to modernise and run the Male airport for 25 years, with Singapore as the jurisdiction in the event of disputes. GMR's was the biggest foreign investment in the archipelago nation.
However, GMR's decision to impose an airport development charge (ADC) of $25 per departing passenger became a bone of contention between the company and the government, especially with a regime change in Maldives in February.
The finances of the deal went askew when a local court struck down the provision for the airport development charge, terming it illegal, though the provision for the charge was there in the contract.
"We feel we were fooled and cheated. We feel that this information in the contract about the ADC being illegal was suppressed from us. This is going to be our stance in the international arbitration tribunal, where the first hearing over ADC will take place soon," another top GMR executive told ET, requesting anonymity.
Meanwhile, the Maldives government thinks that GMR should have done due diligence and not have played in the hands of the previous government.
"We feel the former government should have been transparent with GMR on the ADC issue. While we are sorry for GMR, I think they should have verified and not played into the hands of the Mohammed Nasheed government," press secretary to Maldives President, Masood Iman told ET over phone.
AndrewBSE 0.25 % Acquaah Harrison, CEO of GMR Male International Airport in a letter addressed to theMinistry of Finance and Treasury of Maldives on December 11, 2012, argued that the Concession Agreement is a "binding agreement" with "specific mechanisms" allowing for termination under certain circumstances. "There is no suggestion that any of the circumstances arose," the letter said.
Further, Harrison in the letter mentioned that the Government of the Maldives also warranted and specifically represented that the Concession Agreement was valid, legal and binding. Further, as part of the closing of the financial transaction on 28 December 2010, the then Attorney General of the Maldives rendered a formal legal opinion confirming that the Concession Agreement was lawful."
GMR, which was operating the Ibrahim Nasir International Airport at Male at an investment of $511 million, says it "feels cheated" for having the contract cancelled over an illegal component - airport development charge - present in it, which they were not aware of.
"The estimated compensation that GMRBSE 1.63 %would seek from the Maldives government would be upwards of $800 million. We will discuss with our lawyers and work out a legal strategy. We will also continue to keep the government updated on various issues and seek appropriate support at the right time," GMR (Airports) CFO Sidharath Kapur told ET.
GMR and Malaysia Airports Holdings Berhad won the contract in November 2010 to modernise and run the Male airport for 25 years, with Singapore as the jurisdiction in the event of disputes. GMR's was the biggest foreign investment in the archipelago nation.
However, GMR's decision to impose an airport development charge (ADC) of $25 per departing passenger became a bone of contention between the company and the government, especially with a regime change in Maldives in February.
The finances of the deal went askew when a local court struck down the provision for the airport development charge, terming it illegal, though the provision for the charge was there in the contract.
"We feel we were fooled and cheated. We feel that this information in the contract about the ADC being illegal was suppressed from us. This is going to be our stance in the international arbitration tribunal, where the first hearing over ADC will take place soon," another top GMR executive told ET, requesting anonymity.
Meanwhile, the Maldives government thinks that GMR should have done due diligence and not have played in the hands of the previous government.
"We feel the former government should have been transparent with GMR on the ADC issue. While we are sorry for GMR, I think they should have verified and not played into the hands of the Mohammed Nasheed government," press secretary to Maldives President, Masood Iman told ET over phone.
AndrewBSE 0.25 % Acquaah Harrison, CEO of GMR Male International Airport in a letter addressed to theMinistry of Finance and Treasury of Maldives on December 11, 2012, argued that the Concession Agreement is a "binding agreement" with "specific mechanisms" allowing for termination under certain circumstances. "There is no suggestion that any of the circumstances arose," the letter said.
Further, Harrison in the letter mentioned that the Government of the Maldives also warranted and specifically represented that the Concession Agreement was valid, legal and binding. Further, as part of the closing of the financial transaction on 28 December 2010, the then Attorney General of the Maldives rendered a formal legal opinion confirming that the Concession Agreement was lawful."
The
Singapore Court of Appeal had on 6 December, overturned an order by a lower
court that barred Maldives from interfering with the airport's operations. The
court, however, held that "the wrongful taking of the airport would amount
to an act of expropriation for which the respondent (GMR-led consortium) would
be entitled to be compensated in accordance with the agreement".
India responded to the Singapore court decision saying the judgment was being studied. The external Affairs Ministry spokesperson Syed Akbaruddin had then said the decision has only dealt with the sovereign right of a nation and that the legality of the agreement and other pending issues have not been taken into account.
According to GMRBSE 1.63 %, there were in all roughly 80 employees at the Male airport and they won't be affected except their displacement from Male.
http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/gmr-to-sue-maldives-for-800-mn-damages-due-to-airport-project-cancellation/articleshow/17592455.cms?curpg=2India responded to the Singapore court decision saying the judgment was being studied. The external Affairs Ministry spokesperson Syed Akbaruddin had then said the decision has only dealt with the sovereign right of a nation and that the legality of the agreement and other pending issues have not been taken into account.
According to GMRBSE 1.63 %, there were in all roughly 80 employees at the Male airport and they won't be affected except their displacement from Male.
