June 19--MUMBAI -- GMR Infrastructure Ltd on Thursday said an international tribunal has declared that its concession agreement for Maldives airport was valid.
GMR Male International Airport Ltd (GMIAL), a unit of GMR Infrastructure, had entered into a concession agreement with the government of Maldives and Maldives Airport Co. Ltd for modernization and operation of Ibrahim Nasir International Airport in 2010. But this contract was unilaterally terminated by the Maldives government which subsequently initiated arbitration proceedings on 29 November 2012, seeking a declaration that the concession agreement was void ab initio.
GMIAL had disputed this termination.
After detailed proceedings lasting more than 18 months, The Rt Hon Hoffman's Tribunal has now issued an award.
In a filing to the BSE, GMR Infrastructure said the tribunal declared that the concession agreement was valid and binding and "was not void for any mistake of law or discharged by frustration".
"Government of Maldives and Maldives Airport Co. Ltd are jointly and severally liable in damages to GMIAL for loss caused by wrongful repudiation of the agreement as per the concession agreement," GMR Infrastructure said in a filing quoting the tribunal award.
In 2012, the Maldives government terminated the $500 million contract with GMIAL, after a regime change following a political crisis in that country that led to the resignation of President Mohamed Nasheed. In response to the termination of the contract, GMR, which also runs airports in Hyderabad, New Delhi and Istanbul, took the Maldives government to a court in Singapore. Elections in November 2013 handed the mandate of that country to Abdulla Yameen, who narrowly defeated Nasheed, whose government had signed a 25-year airport contract with GMIAL, a consortium of GMR Infrastructure and Malaysia Airport Holdings Bhd, in 2010.
The trigger for the contract termination was dispute over airport development fee (ADF).
The GMR-led grouping was supposed to pay a small percentage of revenue from the airport to the Maldives government. It was also allowed to levy an ADF of $25 per passenger. When the expected revenue from ADF did not meet targets, GMR said it would deduct the shortfall from the revenue share of the Maldives government. When the shortfall still couldn't be bridged, GMIAL asked the Maldives government to make good the difference as per the contract, precipitating the crisis.
"The collection of airport development charges (ADC) and insurance surcharge (IS) as allowed in the concession agreement was lawful under Maldivian law. The agreement to adjust the shortfall arising out of non-collection of ADC and IS from the concession fee was lawful and binding on Maldives Airport Co. and Maldives government," GMR Infrastructure said in Thursday's filing to the BSE.
It said the tribunal has declared Maldives government and Maldives Airport Co. to pay GMIAL $4 million by way of costs within 42 days.
It did not disclose the total claim the airport company is seeking form the Maldives government.
On 25 April, the Press Trust of India reported that with a legal tussle on between the Maldivian government and GMR over termination of a contract to develop Male international airport, the Indian infrastructure firm is standing by its compensation claim of $1.4 billion.
At 10.08am on Thursday, GMR Infrastructure was trading at Rs.33.85 a share on BSE, up 3.04% from its previous close, while the benchmark Sensex rose 0.21% to 25,299.32 points.
Copyright 2014 - Mint, New Delhi