Contractual dispute between the Republic of Maldives and GMR was resolved finally in favour of GMR. The GMR was selected to develop, manage and operate the Ibrahim Nasir International Airport (on Hulhule’ island, near the capital island of Male’). However due to change in political regime, the GMR contract was abruptly terminated by the successor government.
The Concession Agreement was wrongfully repudiated by the Maldives Government and Maldives Airport Company Limited on November 29, 2012 alleging that the same was void ab initio. The unilateral termination of the contract by the Maldives government 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.
GMR Male’ International Airport Private Limited (GMIAL), a subsidiary of GMR Infrastructure Limited, has claimed USD 803 million (around Rs 4,987 crore) from the Maldivian government for ‘wrongfully’ terminating the international airport contract in Male, the capital city of Maldives. In addition to that, a plea for award of further damages for loss of reputation caused to GMR as a consequence of wrongful repudiation of the Concession Agreement has also been made to the Arbitral Tribunal in Singapore.
On 18th June 2014, the International Arbitral Tribunal constituted to adjudicate the said dispute, with its seat at Singapore, had issued its First Part Final Award holding that the Concession Agreement was valid and binding, Government of Maldives and Maldives Airports Company Limited had unlawfully repudiated the same and that they are jointly & severally liable in damages to GMIAL for loss caused by such wrongful repudiation.
By its Award dated 23rd February 2016, the Arbitral Tribunal has ruled that such damages payable by GoM and MACL to GMIAL will also include all the sums owed by GMIAL to the project lenders Axis Bank Singapore Pte Ltd. Under the Facility Agreement, the project debt covered by the aforesaid ruling as part of damages is besides the other damages/compensation payable by Maldives Government to GMIAL of GMR in terms of the First Part Final Award. However, at that point, the quantum assessment of the damage/compensation payable by Government of Maldives was not completed.
Now the Lord Hoffman’s Tribunal in Singapore has decided that GMR is entitled to payment of damages for termination of its contract. This will include all the money it had borrowed from Axis Bank for the project. 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.
The compensation covers the debt, equity invested in the project along with a return of 17 per cent and also termination payments and legal costs. The compensation is net of taxes that GMIAL may be required to pay in the Maldives. The tribunal has now issued an award and declared that "the collection of airport development charges (ADC) and insurance surcharge (IS) as allowed in the concession agreement was lawful under Maldivian law" and 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 MACL and GoM".
A GMR spokesperson in a statement said: “It has always been our firm belief that the cancellation of concession agreement by Government of Maldives was wrongful. We are happy to note that the Tribunal has unequivocally upheld this stand and closed the adjudication with a final award of compensation. This award is a testimony to the high standards of conduct, corporate governance and commitment observed by GMR Group across all its businesses. It further endorses the immaculate track record of the Group in the airport business and its excellent reputation as a leading global airport developer and operator.”
This case will be an eye opener for the Employers, who are tending to terminate the contracts without proper reason and rationale. Wrongful Termination always leads to high compensation claims. The Employers have to think over hundred times before termination of any contract.
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Tags: GMR, Maldives, Arbitration, Compensation, Damages, wrongful Termination,
The Concession Agreement was wrongfully repudiated by the Maldives Government and Maldives Airport Company Limited on November 29, 2012 alleging that the same was void ab initio. The unilateral termination of the contract by the Maldives government 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.
GMR Male’ International Airport Private Limited (GMIAL), a subsidiary of GMR Infrastructure Limited, has claimed USD 803 million (around Rs 4,987 crore) from the Maldivian government for ‘wrongfully’ terminating the international airport contract in Male, the capital city of Maldives. In addition to that, a plea for award of further damages for loss of reputation caused to GMR as a consequence of wrongful repudiation of the Concession Agreement has also been made to the Arbitral Tribunal in Singapore.
On 18th June 2014, the International Arbitral Tribunal constituted to adjudicate the said dispute, with its seat at Singapore, had issued its First Part Final Award holding that the Concession Agreement was valid and binding, Government of Maldives and Maldives Airports Company Limited had unlawfully repudiated the same and that they are jointly & severally liable in damages to GMIAL for loss caused by such wrongful repudiation.
By its Award dated 23rd February 2016, the Arbitral Tribunal has ruled that such damages payable by GoM and MACL to GMIAL will also include all the sums owed by GMIAL to the project lenders Axis Bank Singapore Pte Ltd. Under the Facility Agreement, the project debt covered by the aforesaid ruling as part of damages is besides the other damages/compensation payable by Maldives Government to GMIAL of GMR in terms of the First Part Final Award. However, at that point, the quantum assessment of the damage/compensation payable by Government of Maldives was not completed.
Now the Lord Hoffman’s Tribunal in Singapore has decided that GMR is entitled to payment of damages for termination of its contract. This will include all the money it had borrowed from Axis Bank for the project. 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.
The compensation covers the debt, equity invested in the project along with a return of 17 per cent and also termination payments and legal costs. The compensation is net of taxes that GMIAL may be required to pay in the Maldives. The tribunal has now issued an award and declared that "the collection of airport development charges (ADC) and insurance surcharge (IS) as allowed in the concession agreement was lawful under Maldivian law" and 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 MACL and GoM".
A GMR spokesperson in a statement said: “It has always been our firm belief that the cancellation of concession agreement by Government of Maldives was wrongful. We are happy to note that the Tribunal has unequivocally upheld this stand and closed the adjudication with a final award of compensation. This award is a testimony to the high standards of conduct, corporate governance and commitment observed by GMR Group across all its businesses. It further endorses the immaculate track record of the Group in the airport business and its excellent reputation as a leading global airport developer and operator.”
This case will be an eye opener for the Employers, who are tending to terminate the contracts without proper reason and rationale. Wrongful Termination always leads to high compensation claims. The Employers have to think over hundred times before termination of any contract.
Like PROFESSIONELS for more news and views on Construction Claims, Arbitration and Litigation.
Tags: GMR, Maldives, Arbitration, Compensation, Damages, wrongful Termination,