Intl court rules in favour of GMR in dispute over Maldives airport

Written by fe Bureau | Bangalore | Updated: Jun 20 2014, 13:20pm hrs
GMRMaldives government, in November 2012, terminated concession agreement with GMR to operate and expand Male's main airport.
Eighteen months after the Maldives government abruptly terminated GMR Infrastructure Ltd's concession agreement to run the island country's main airport, an international arbitration tribunal has ruled in favour of the infrastructure developer, saying the concession was valid and the government is liable to damages. The ruling also held that collection of airport development charge (ADC) the key issue of the dispute was lawful under Maldivian laws.

In a communication to the stock exchanges, GMR on Thursday announced details of the award by a tribunal of the International Court of Arbitration. The company is claiming $1.4-billion compensation from the Maldives government, and the tribunal is now expected to take up separate hearings on the quantum of compensation, a company official told FE.

The infra company had won a 25-year concession to operate and expand the Ibrahim Nasir International Airport (INIA) in the island country's capital city of Male with a $529-million bid in 2010. But a new government, in November 2012 terminated the concession agreement saying it was void ab initio and took possession of the airport.

The tribunal has now issued an award and declared that the concession agreement was valid and binding and was not void for any mistake of law or discharged by frustration, said GMR's note to the stock exchanges.

The collection of ADC and insurance surcharge (IS) as allowed in the concession agreement was lawful under Maldivian law.

The order also noted that the agreement to adjust the shortfall arising out of non-collection of ADC and IS from the concession fee was lawful and binding on the government and MACL. The government of Maldives and MACL are jointly and severally liable in damages to GMR Male International Airport (GMIAL) for loss caused by wrongful repudiation of the agreement as per the concession agreement," according to the order. The court has ordered them to pay GMIAL $4 million by way of legal costs within 42 days.

It has always been our firm belief that the cancellation of our concession agreement amounted to wrongful repudiation by the government of Maldives and the tribunal has upheld this stand, the infra company said.

The ruling comes at a time when GMR is preparing to take over the second-largest airport in the Philippines, the company's first successful airport expansion bid overseas in nearly four years after the Male contract win. In April 2014, GMR was awarded a 25-year concession for the Mactan-Cebu International Airport after it beat six other rivals with a bid of 14.4 billion Philippine Pesos (around $320 million).