Male/New Delhi: In a sudden and unilateral action, Maldives Tuesday decided to scrap the USD 500 million contract given to GMR Group for developing Male Airport, evoking a sharp reaction from India which said it sends a "very negative signal" to foreign investors.
The Maldives Cabinet in a meeting Tuesday decided to terminate the contract, Maldivian President's Press Secretary Masood Imad said.
In a statement, the Maldivian government said the decision to terminate the Concession Agreement signed on June 28, 2010, between GMR-MAHB consortium, Maldives Airports Company Ltd and the government was based on a paper presented by the Attorney General's office prepared after a "thorough research done for the past nine months by a Cabinet Committee".
The paper is based on "technical, fiscal and economic issues" and also includes the legal advice of lawyers from the UK and Singapore regarding the agreement which was "legally invalid, and impossible to further continue".
The Attorney General's office will initiate arbitration proceedings against GMR Male International Airport Ltd (GMIAL), the Cabinet decided, the statement said.
The USD 500-million project was hanging in balance ever since the regime change in Maldives earlier this year. The GMR group had won the contract during the regime of former President Mohamed Nasheed.
Some coalition partners of the current regime headed by Mohamed Waheed had also held a rally against GMR on November 3.
The airport contract was awarded to GMR through a 10-month long global competitive bidding process run by the then Maldivian government headed by Nasheed.
In New Delhi, the External Affairs Ministry came out with a strong reaction saying the decision was taken without due consultations.
India also asked Maldives to ensure Indian interests and security of Indian nationals in the Indian Ocean island country are "fully protected".
"The decision to terminate the contract with GMR without due consultation with the company or efforts at arbitration provided for under the agreement sends a very negative signal to foreign investors and the international community", MEA spokesperson said.
India, he said, expected that Maldives "would fulfil all legal processes and requirements in accordance with the relevant contracts and agreement it has concluded with GMR in this regard".
The government of India would continue to remain engaged with the government of Maldives on this issue, he added.
The GMR Group termed the Maldivian government's decision as "unilateral and completely irrational".
"In a unilateral and completely irrational move the Government of Maldives has today issued a notice to the GMR Male International Airport Ltd (GMIAL) intending to take over the possession and control of the Ibrahim Nassir International Airport (INIA) under the pretext that the agreement is void," it said in a statement.
"This unlawful and premature notice on the pretext that the Concession Agreement is void is completely devoid of any locus standing and is therefore being challenged by the company before the competent forums," it said.
The company said it disputes the contention that the Concession Agreement is void, and added that it has taken all measures to continue operations at the INIA.
"We are therefore taking all measures to ensure the safety of our employees and safeguard our assets. We are confident that the stand of the company will be vindicated in every way," the statement said.
Nearly eight months after the regime change in Maldives, some Indian companies present there, including GMR, are blaming political interference for creating "undue challenges" for them.