Sun Travels & Tours pays USD 31 million to Hilton as per arbitral award

Sun Travels & Tours Pvt Ltd has paid the total sum of USD 31 million (more than MVR 480 million) to Hilton International Manage (Maldives) Pvt Ltd as per the arbitral award issued in regard to the termination of the agreement between the companies for the management of Irufushi Beach and Spa Resort in Noonu Atoll.

The dispute arose when the management agreement regarding the running of Irufushi Beach and Spa Resort between Maldives Development Alliance (MDA) Leader and Member of Parliament for Meedhoo constituency Ahmed Shiyam Mohamed's Sun Travels and Hilton was terminated by Sun Travels in 2013.

In May 2013, Hilton commenced International Chamber of Commerce (ICC) arbitration proceedings. In July the same year, ICC Court of Arbitration fixed Singapore as the seat of arbitration.

Singapore arbitration subsequently issued an arbitral award ordering Sun Travels to pay USD 24 million in damages, including compensation for Hilton's share for the fee and expenses of the ICC.

With Sun Travel's continued failure to settle this amount, Hilton filed cases at the Maldives' Courts seeking enforcement of the arbitral award.

A statement released by Sun Travels & Tours Pvt Ltd today states that they have paid the total arbitral award plus interest, amounting to USD 31 million, to Hilton.

The statement further disclosed that USD 5.6 million had been expended towards legal fees and other expenses.

Sun Travels states that the management agreement with Hilton had to be terminated due to Hilton not generating the revenue it had projected through management of Irufushi resort, leading to running the resort at high expense. Sun Travels claims that Hilton did not invest any amount in the running of the resort, and all costs were borne by Sun Travels. The agreement was finally terminated to prevent Sun Travels from going bankrupt due to this matter, it reads.

"The decision to terminate the agreement was one that was necessary to make in order to save a company that was on the verge of bankruptcy. It was crucial to do so in order to protect the interests of Sun, to uphold its vision, and to maintain it," the statement reads.

Sun Travels state that due to Hilton not being able to generate the projected revenues, Sun had at the time paid State authorities with assistance from affiliated companies. This led to the company's loans having to be rescheduled and other similar measures. However, the operations of Irufushi had to be conducted by Sun at the time through procuring material at significantly high rates in a wasteful manner.

The statement disclosed that the company is, even today, exerting efforts into overcoming the difficulties and damages caused due to Hilton's action. They further said that the company would be seeking legal remedy.