To those who are following the ongoing dispute between Indian infrastructure giant GMR and the Maldivian Government over the Ibrahim Nasir International Airport in Male (the “Airport“), the Singapore Court of Appeal has just overruled the Singapore High Court’s order which prevented the Maldivian government from cancelling the concession contract and repossessing management of the airport.

According to the Business Times,

“CJ Menon set aside the earlier order and said, in laying out the brief grounds, that the government of Maldives has the power to do what it wants, including expropriating the airport, and therefore there would be no room for the grant of any injunction. He also said that it was significant that Mr Daniel [counsel for the Maldivian government and Maldives Airport (MAC) Ltd had accepted that, should the Maldivian government and MAC be held wrong in expropriating the airport, they should be held liable to compensate the consortium for damages under the expropriation clause of their agreement“.

GMR and Malaysia Airport Holdings Bhd had formed a joint venture called GMR Male International Airport Pte Ltd (“GMIAL“). GMIAL had signed a 25 year concession agreement with the previous government of Mali to redevelop and manage the Airport. The financing of this US$400 million project was through a US$25 Airport Development Charge (“ADC“) to be levied on all outgoing passengers as well as an insurance surcharge of US$2 per passenger.

According to news reports, the current Maldivian administration, whilst in opposition, had successfully filed a suit to block the payment of the ADC on grounds that the ADC was a tax which had not been approved by parliament. In order to ensure that the project continued, the previous administration agreed to deduct the amount of the ADC from concession fees that GMIAL was supposed to pay the government resulting in a dramatic fall in revenue that Maldives was supposed to receive. In fact, at one point, there was a shortfall of US$1.5 million which GMIAL sought to claim from the state.

Once in power, the current government reversed course and refused to allow the deduction of the ADC from the concession fees due to the state. The Maldivian government also sought to recover the previously deducted ADC amounts from the concession fees due to the state. Despite conciliation overtures from GMIAL, which had offered to exempt all Maldivian citizens from the ADC, the dispute could not be resolved.

Finally, on 27 November 2012, the Maldivian government and the state owned enterprise which oversaw the Airport gave notice to GMIAL to vacate the Airport and hand over management. This was due to alleged irregularities in the bid process. The bid process had been advised and organised by the International Finance Corporation, a member of the World Bank, and supported by AusAid (Australia), the Ministry of Foreign Affairs of the Netherlands, and DevCo, a multi-donor programme.

Prior to this notice, in August 2012, GMIAL initiated arbitration proceedings in Singapore pursuant to the arbitration clause in the concession agreement. When the notice to vacate was issued, GMIAL successfully sought an injunction from the Singapore High Court on 30 November 2012. That injunction has since been reserved by the Singapore Court of Appeal. The Singapore courts are the supervisory courts of the arbitration which is seated in Singapore which gives them certain powers to provide for interim relief under the Singapore International Arbitration Act (Cap. 143A).