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GMR loses court battle for Maldives airport

06 December 2012

In a setback to India's GMR Infrastructure Ltd, the Singapore Court of Appeals today ruled that the Maldives government was within its right to take over the development and operation of Male airport, cancelling the $511 million contract given earlier to a GMR-led consortium .

Maldives airportGMR Male International Airport Pvt Ltd (GMIAL), the consortium of GMR and Malaysia Airports Holdings Bhd, had won a stay order from the court on Monday against the Maldives government's order to hand over the airport by Saturday, and for GMR's Indian personnel to leave the archipelago nation by then.

This had led to a standoff between the government and GMIAL, with the consortium insisting that it would continue to operate the airport and the government adamant on the handover.

Today's order would seem to have ended the tussle in Maldives' favour. "The Maldives government has the power to do what it wants, including expropriating the airport," Sundaresh Menon, the Chief Justice of Singapore, said in court.

"The legal path for taking over Male airport has been cleared. The Singapore Court of Appeals has given us the right to take back the airport," Masood Imad, the Maldives' presidential spokesman, said.

"We will take over. We will enrol all those people from GMR who wish to join. Those who don't can go home. By Friday midnight we will take over," Masood said, adding that the Maldives would pay compensation to GMR.

GMR declined immediate comment. ''Let us first see a copy of the judgement,'' GMR spokeswoman Sowmya Shenoy said.

While it now seems clear that Maldives will take control, the next question is how much compensation the consortium can expect.

"The (compensation) calculation is complex and involves the entire equity investment in the project, return on equity and damages to be paid for payment that the consortium has paid to various sub-contractors that have worked on the airport project," said Sidharath Kapur, chief financial officer of GMR's airports division told reporters in New Delhi today.

The standoff over the project threatens to cloud foreign investor sentiment towards Maldives, which is seeking overseas cash for many of its tourism projects. The country terminated the agreement with GMR last week, rattling its relations with India. The Indian government had said the move could threaten its aid to the Maldives.

India provides Maldives with aid of $25 million a year and material assistance and training to its defense forces. Also, India's navy patrols Maldives' sea lanes to ward off pirates.

The government of the Maldives, a tropical island chain south-west of India famous for its luxury beach resorts popular with honeymooners and scuba divers, cancelled the 2010 agreement, the largest foreign investment in the country, saying that it was not valid.

The cancellation follows a year of political turmoil that saw the ousting of its former president and months of unrest. The democratically elected government of Mohamed Nasheed was overthrown in February, in what has been described as a coup. The present government, however, insists Nasheed stepped down on his own.

The contract to upgrade and operate the airport and build a new terminal came after a global tender overseen by the World Bank and signed under Nasheed's administration.

However, Nasheed's rivals filed legal action saying the contract was invalid as it contained a $25 airport development charge per outgoing passenger which was not authorised by parliament.

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