The arbitration proceedings in GMR Infrastructure?s dispute with the Maldives government over the country’s international airport are drawing to a close with the verdict expected in the last week of May. The last of the arbitration hearings, over the cancellation of GMR’s over $500-million contract for operating and expanding the airport, was held in a Singapore court on April 16.
Maldives president Yameen Abdul Gayyoom on Thursday said the government will have to pay compensation for the termination of the contract. The Maldives government has agreed to abide by the laws of English court or Singapore in the event of a dispute.
The Maldives government had declared the $500-million contract as ?void ab initio? (invalid from the outset) in late 2012, and GMR last year asked for a compensation of $1.4 billion against the cancellation of the concession agreement. The company had called the termination of its 25-year contract to develop and operate the Male International Airport ?wrongful? and that it needs to be compensated. The figure was arrived at after taking into account the loss of profit and payments made to sub-contractors, among other things.
Axis Bank is also in arbitration with the Maldives government, and the proceedings hinge on the verdict of GMR’s ?void ab initio? arbitration. Verdict in the Axis Bank case is expected soon after the decision on the GMR case. Funding for the $500-million Male airport involved a debt component of $358 million, to be funded by a consortium of Axis Bank and Indian Overseas Bank. Axis Bank provided 84% of the $160 million lent for the airport.
The Maldives government had given a sovereign guarantee to the banking consortium in case of termination of agreement. The direct agreement between the lenders? consortium and the Maldives government says that in case of termination of contract, Maldives will pay damages in 60 days.
The over $500-million-project contract awarded to GMR for modernising and operating the Ibrahim Nasir International Airport (INIA) was signed in 2010 during the regime of Mohamed Nasheed. But it was “unilaterally” terminated by the succeeding government.?GMR, the bidder that promised to pay the highest fees, had paid $78 million upfront. It had also agreed to spend $369 million on a new terminal and other improvements.
