Noomadi compensation: Govt would have faced a bigger loss if case was not settled

Finance Minister Ibrahim Ameer has stated that the government would have faced a greater loss had it not compensated Noomadi Resorts and Residences over the arbitration claim they filed against the government.

Noomadi Resorts and Residences was contracted to construct 700 housing units under the private villa model on January 20, 2011, and to develop 500 housing units, Police Academy Phase I, and sewerage systems in three islands on May 30, 2013. However, the agreements were terminated by the previous government, claiming that the company had violated the terms of the contract. The company denied the claim.

The termination led to the company filing a claim for US$155 million as compensation, and other arbitration charges at the Permanent Court of Arbitration in The Hague, Netherlands.

During Wednesday's parliament sitting, Minister Ameer was questioned regarding the case by its members. Kaashidhoo MP Abdulla Jabir inquired from the minister why the government compensated Noomadi spending millions of dollars from the taxpayers' money while the arbitration case was still pending at the Permanent Court of Arbitration. The MP asked how the government could have predicted that the case would have ended in Noomadi's favour, and probed regarding the amount that has been paid by the government to Noomadi.

Responding to the questions, the minister Ameer said the government decided to settle the matter out of court based on the recommendation given by the settlement committee established by President Ibrahim Mohamed Solih. The committee had noted that the fact that the former housing minister had changed his statement during arbitration had weakened the government's defense and that a lot of negligence on the former government's part had also been noticed.

When the arbitration case was first filed on December 11, 2017, former Housing Minister Dr. Muizzu took part in the discussions and decisions were made by the state on how to handle the case with the involvement of Dr. Muizzu in the capacity of the government's housing minister.

After the minister lost his position on the government on November 17, 2018, Dr. Muizzu on 14 June 2019 gave a statement as a witness against the state produced by Noomadi in their arbitration claim. His statement against the state contradicted his previous stance on the issue while he was minister, and damaged the state's defense.

Minister Ameer said based on the assessments conducted regarding the compensation, the settlement committee noted that it was highly likely that the case would conclude in favour of Noomadi. In the event that the arbitration finds the Maldivian government liable, the government would have to pay a compensation of US$ 154 million and other expenses to Noomadi, said the committee. Therefore, it recommended the government to reach an out-of-court settlement agreement for a lesser amount.

"No one can tell what the outcome of the arbitration will be. However, based on how the case was proceeding, and reports of experts and legal advice of the lawyers, we can foresee that there is a high probability that the state will lose the case. Thus, after extensive research and deliberations, the advisory committee came to the conclusion that if the arbitration process is concluded in Noomadi's favour, the government will have to pay an exorbitant amount as compensation” said Minister Ameer.

The current government reached a settlement agreement with the company on August 25 2019. According to the out-of-court settlement, the government will pay the company US$ 55 million as compensation. The first payment of US$ 27.5 million was paid by the government on 5 September 2019. The remaining half of the total payment has now been completed.