Finally, Indian company GMR wins arbitration case against Maldives

ibrahim nasir airportLeading Indian infrastructure company GMR has won an arbitration proceeding against the Maldives government in a long-standing dispute over the upgradation and management of the Male International Airport.  The Maldives government had started the arbitration process in its effort to declare void its concession agreement for the $511 million project with GMR.

In a move that can be viewed as a relief for Bangalore based infrastructure company, Lord Hoffman’s Tribunal in Singapore ruled in its favour.  The Maldivian government and Maldives Airport Company Limited (MACL) had entered into a concession agreement for the modernisation and operation of Ibrahim Nasir International Airport with GMR Male International Airport Limited (GMIAL), a subsidiary of GMR.

The lineal termination of the contract by MACL on November 29, 2012 which was done on the advice of the Maldivian government, had led GMIAL to challenge the wrongful move.  The tribunal proceedings that lasted for more than 18 months ruled that the Maldives government and MACL shall have to pay $4 million  to  GMIAL within 42 days.

Lord Hoffman’s Tribunal in Singapore said that the concession agreement was valid and binding. GMR is seeking $1.4 billion in damages as the contract was wrongfully terminated and the company is expecting a loss in future earnings from the project. The arbitration process in this regard is expected to start soon.

GMR and Malaysia Airports had entered into a 77:23 partnership in 2010 and had won a contract to upgrade Male’s Ibrahim Nasir International Airport . The cost of this project at the time was $511 million. It was a 25-year concession agreement with regard to upgrading the terminal and building a new one to expand the capacity. The partners invested $230 million in the project for the two years that they managed the project.

“This project had a good potential for us and we were at a loss due to wrongful termination of the contract. We are accounting for possible future earnings when pressing for the $1.4-billion claim,” said a senior GMR management official.

The GMR stocks were largely unaffected by this development.

The unilateral termination of the contract by the Maldives government two years ago had cast a shadow on the India-Maldives relations and acted as a dampener for Indian investments in the Maldives, an Indian Ocean archipelago nation which is better known for its stunningly picturesque resorts.

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