MALDIVES: Hilton Ordered To Pay US$16m To Sun Travels

The civil court has ordered a subsidiary of American hospitality giant Hilton Inc to pay US$16.6 million to Sun Travels over a claim that it was defrauded into handing over the management of Irufushi resort.

The judgment comes in spite of a Singaporean arbitration tribunal awarding US$26 million in damages to Hilton for Sun’s abrupt termination of the Irufushi management agreement in May 2013.

Hilton has sought to enforce the August 2015 arbitration award, but the civil court ruled in late November that a way forward on the case must be decided by the high court, which is yet to issue a ruling.

Sun Travels and Tours – owned by MP Ahmed Siyam Mohamed, leader of the Maldives Development Alliance, a coalition partner of the ruling party – meanwhile sued in December claiming that Hilton was unable to deliver profits in line with a 2010-2014 financial projection.

Sun argued that it signed the management agreement based on Hilton’s assurances about profits.

Delivering the judgment on Thursday, Judge Ali Naseer said Hilton was unable to prove that the projections were realistic and declared that Sun Travels was defrauded into signing the agreement based on deliberately false premises.

Citing the 1991 law of contract, the judge ruled that Sun Travels had the discretion to terminate the agreement as it was void from the outset. He also ordered Hilton to settle the US$16.6 million payout within six months. The amount was based on a report prepared by auditing firm KPMG estimating financial losses incurred by Sun.

The Maldives Independent has meanwhile learned that Martin Rinck, Hilton’s executive vice president and president of its Asia Pacific operations, wrote to then-Vice President Ahmed Adeeb in late September 2015 seeking assistance after Siyam refused to pay the arbitration award.

Rinck told the former tourism minister that Hilton preferred to resolve the matter without seeking to enforce the tribunal ruling through Maldivian courts as the full history of the dispute would become public knowledge.

In my 30 years in the hospitality industry, I had never experienced or heard of conduct such as that of Mr Siyam in relation to any resort, he wrote.

As Hilton has a substantial presence in the country, Rinck said the company did not want the reputation of the Maldivian tourism sector to suffer.

He advised Adeeb that a swift resolution would help ensure that there is no risk of any loss of confidence in the Maldives as a thriving and attractive market.

A month later, Adeeb was arrested on suspicion of plotting to assassinate the president. He has since been jailed for 33 years on multiple counts of terrorism and corruption.

According to Rinck’s letter, Hilton received less than 24 hours notice of Sun’s takeover of the resort, which was carried out in a manner that was quite threatening to staff and guests alike.

The dispute was referred to arbitration under the rules of the International Chamber of Commerce. Each side nominated an arbitrator of their choice and the ICC appointed the third and presiding arbitrator.

Over the course of many months, both sides exchanged legal submissions, witness statements, and reports by forensic accountants and hotel industry experts.

Hilton claimed damages for its loss due to the unlawful termination of the agreement 16 years before the end of the term.

Attempts to reach an amicable settlement were unsuccessful. After the arbitration hearings concluded in September 2014, Rinck came to the Maldives to meet with Siyam, who said he was “not prepared to pay any amount to Hilton voluntarily.”

Mr Siyam assured me that he was happy to await the tribunal’s decision. I left the Maldives with a very clear understanding that Sun wanted the arbitrators to determine the dispute, he said.

The tribunal’s final award was issued on August 17, 2015, following approval by the ICC’s International Court of Arbitration in Paris.

Rinck noted that the tribunal “dismissed all of Sun’s assertions of dishonesty and wrongdoing on Hilton’s part.”

As of September 25, 2015, Siyam had not responded to requests for Sun’s proposed payment plan. Sun also terminated its engagement of the Wong Partnership law firm that represented it during the arbitration proceedings in Singapore.

“The award is plainly not something that can be ignored. Interest is accruing in Hilton’s favour. Sun owes Hilton a liability. This has to be resolved,” wrote Rinck.

The Hilton Maldives Irufushi Resort and Spa was inaugurated in July 2009. Following Hilton’s eviction, the resort in Noonu atoll was rebranded as The Sun Siyam Iru Fushi in February 2014.

Hilton has more than 4,900 hotel properties in 104 countries. The Conrad Maldives Rangali Island Resort, renowned for the world’s first all-glass undersea restaurant, is part of the Hilton hotel chain.

Sun Travel operates the Olhuveli Beach and Spa resort and Sun Aqua Vilu Reef. Siyam also owns the Sun media group, which runs an online paper, a radio and TV station.