Karkey penalty eclipses past wins

ISLAMABAD: Pakistan has contested around a dozen cases at the international forum in the last six years wherein its performance remained satisfactory. However, the quantum of amounts received or secured were nothing as compared to the penalty awarded in the Karkey case.

Sources in the Ministry of Law told The Express Tribune that Pakistan won litigation in 13 cases since 2012-13, but the challenge of dealing with the Karkey and Reko Diq cases still looms.

They said claims against Pakistan in the Progas case and in matters related to Minhaj Khokhar and Orient were dismissed by the international court.

In Daewoo versus National Highway Authority case, counterclaim worth Rs532 million was awarded in favour of NHA.

Pakistan State Oil managed to win the case against FAL Oil, while millions of dollars cost was recovered in the Agility Private Limited case.

An Appellate Body of the World Trade Organisation also ruled against the EU’s countervailing duties imposed on import of polyethylene terephthalate (PET) from Pakistan.

Further, Pakistan successfully won two cases against South Africa wherein anti-dumping duty was removed.

Likewise, a dispute with the United States over a matter related to the export of promotional schemes was successfully defended.

Pakistan also got $92.052 million recovered and transferred in matter related to the encashment of bank guarantees from Turkish banks.

However, in other cases apart from the ones won, it is learnt that awards of billions of rupees went against Pakistan.

The state-owned Sui Southern Gas Company (SSGC) lost a case in the International Court of Arbitration against Habibullah Coastal Power Company (HCPC) for failure to provide gas to the power plant in line with an agreement, which will inflict damages of millions of dollars upon the government.

According to the official record, the country has been awarded damage of Rs287,324 million.

On October 4, Pakistan also suffered a setback when a court of appeal in the UK rejected its final plea, challenging the jurisdiction of the London Court of International Arbitration (LCIA) in a suit filed by independent power producers (IPPs) for the recovery of dues from a government-owned national grid company.

The LCIA had ruled in favour of the nine IPPs for the recovery of approximately Rs11 billion unpaid capacity payments from the National Transmission and Despatch Company (NTDCL).

On August 22, 2017, the International Centre for Settlement of Investment Disputes (ICSID) awarded $846 million in damages to Karkey Karadeniz Elektrik Uretim AS, a Turkish power company.

According to the ICSID award, Pakistan will not only pay damages amounting to more than $800 million but is also bound to pay $5.6 million (Rs590 million) per month as interest to Karkey.

Due to the failure of the caretaker government to deposit Rs15 billion security guarantee, a stay order in favour of Pakistan on the execution of the $846 million arbitration cost has been vacated in the month of June. The Turkish firm had approached several countries courts for enforcement of the award.

However, it is learnt that despite clear evidence of corruption, Pakistan’s legal team could not successfully defend Karkey case at the international forum. The government had hired Allen and Overy and paid more than $10 million in fees.

Pakistan’s legal team was not allowed to present key evidence regarding corruption on the part of the Turkish company.

Surprisingly, key witnesses, including Shahid Rafi, the water and power secretary at the time, were also not permitted to give statements before the arbitrators, he said. However, Pakistan can file revision against the ICSID earlier judgement in three years.

The ICSID had also dismissed Pakistan’s allegations of corruption against Tethyan Copper Company Pty Ltd (TCC) last year. Later, TCC called for $11.5 billion in damages but Pakistan rejected the claim. The exact amount of award is yet to be determined in this case. Proceedings in this regard are likely to conclude next year.

The International Arbitration in London is going to announce final award next month (November) over billions of rupees damage claim of an international firm Broadsheet LLC against Pakistan.

Broadsheet LLC, based in the Isle of Man, was hired by NAB during Gen (retd) Musharraf’s regime to trace out hidden assets of Pakistanis in foreign countries.

There are conflicting reports regarding the demand of damage by the international firm. According to the Global Arbitration Review (GAR), the firm’s claim against Pakistan is worth at least $600 million, but a senior official told The Express Tribune that the Broadsheet’s claim is $316 million.

In August, 2016, the international tribunal held that Pakistan was liable to pay damages and it also found that Pakistan and the NAB had wrongfully repudiated an asset recovery agreement with the Broadsheet and committed a tort of civil conspiracy by entering into a sham settlement with a former Broadsheet executive.

In his award on liability in 2016, the international tribunal judge Evans upheld Broadsheet’s arguments that the 2008 settlement was not binding on it, as James had no authority to act on the company’s behalf at the time.

He also found that NAB was liable for the tort of conspiring to cause unlawful economic loss to Broadsheet because of its “reckless” conduct in entering into the settlement when it knew the company’s liquidator was not a party to the negotiations.