The News | Tuesday, June 18, 2013
Turkish firm Karkey files $700m claim on Pakistan
ISLAMABAD : A Turkish power generation company has filed a case against the Pakistan government for compensation of losses worth 700 million dollars, official documents available to the News have revealed.
The case has been filed in the International Center for Settlement of Investment Disputes (ICSID) by KARKEY Karadeniz Elektrik Uretim for losses due to its vessels not being allowed to leave Karachi Port for almost 16 months.
The firm has leased a vessel based power generation unit to Pakistan in 2011 as a means to alleviate the country’s dire electricity situation.But – due to intervention by the Supreme Court of Pakistan – the project was cancelled and charges of breach of contract laid on the Turkish concern.
Karkey’s claim under the BIT (Bilateral Investment Treaty) – between Pakistan and Turkey - is expected to reach an amount of $ 700 million. It is also expected to include the loss of revenue on the vessels after April 1, 2012, direct and indirect costs and losses incurred by Karkey and damage or depreciation to the vessels.
Unless settled earlier, the ICSID process should take approximately 3 years after the filing of the request. The document also discloses that national courts have no jurisdiction to challenge ICSID awards.
“The KARKEY has also filed the case against Pakistan in London Court of International Arbitration for which the legal penalty has not yet been finalized, the top officials said.The KARKEY rental power project also is remembered as one of the most controversial project and part of the well known RPPs (Rental Power Project) controversy.
The officials say that Law Ministry — without taking the input from the concerned Ministry of Water and Power - has appointed a legal panel comprising Justice (retired) Khalil-ur-Ramdey as presiding arbitrator and Mr. Rashid Nawaz Qureshi as co-arbitrator for the case.
Mr Khalil-ur-Rehman Ramday was an ad-hoc judge later appointed as a permanent judge of the Supreme Court of Pakistan. He remained permanent judge of Supreme Court from 2002 to 2010.
He also served as Advocate General of Punjab in 1987, when PML-N leader Mian Nawaz Sharif was Chief Minister of the province. The Karkey rental plant was commissioned by the PPP government in April 2011, but it failed to generate 231 MW of electricity. Under the agreement, the government paid $9 million as capacity charges to the management of Karkey power plant. However, actual production came to 30-55 MW of electricity per day at the cost of Rs41 per unit.
However, the Supreme Court took the suo moto proceedings against all RPPs starting from 2006 onwards including Karkey plant. The Court - in its judgment on March 30, 2012 - declared all RPP deals as void. The SC also authorized NAB to take actions against all RPPs.
The NAB inquiry uncovered the fact that a deal had been struck under which Karkey would reimburse $ 17.5 million to Pakistan – but the Supreme Court insisted on recovering $ 120 million from the Karkey power plant. Therefore, as under the Bilateral Investment Treaty (BIT) executed between Turkey and Pakistan, Karkey served a notice on government of Pakistan for breaching of BIT on May 19, 2012.
The six month cooling period under the notice expired on November 2012, after which Karkey served another notice to the government of Pakistan on November 23, 2012.In this it said that it would now submit the dispute in the ICSID. Subsequently, Karkey filed a request for arbitration with ICSID in Washington on January 2013 - which request was registered on February 8, 2013 with the case number ARB/13/1.
The document says that ICSID registrar directed Karkey to submit application for interim measures by March 11.This will ask the tribunal to render as interim measure the release of Karkey vessels and prohibition of any civil and criminal actions in Pakistan against Karkay. The interim measure request will be heard after the constitution of tribunal which is expected to take place within 6 months after filing of the request of arbitration. The document said that ICSID proceedings are expected to be completed in 12-18 months – and Karkey is likely to win.