Dispute with Iran: Pakistan wins legal battle

International court orders Iranian company to pay NTDC compensation

ISLAMABAD: In a significant international victory, the National Transmission and Despatch Company (NTDC), which falls under the Ministry of Energy (Power Division) has prevailed in an international commercial arbitration initiated by an Iranian company (GAM ARAK Ind Co) in 2017 against NTDC before an arbitral tribunal constituted under the rules of the International Chamber of Commerce (ICC), Paris.

The spokesmen said that in its detailed award released on April 24, 2020, the arbitral tribunal dismissed all the claims brought by the Iranian company and accepted and granted several counterclaims of NTDC amounting to approximately Rs714 million (approximately $4.5 million) plus interest at the rate of 7.925% per year as of the date of NTDC’s counterclaims dating back to July 2018 until full payment.

While elaborating upon the details, the spokesman said that the dispute arose out of a contract between the Iranian company and NTDC executed in February 2011 for the design, supply, installation, testing, and commissioning of 500kV Guddu-Multan 3rd Circuit at Rahimyar Khan 500kV substation. The NTDC had terminated the contract due to persistent delays on the part of the Iranian contractor and the project was eventually completed by another contractor.

The spokesman said that the Iranian company, GAM ARAK initiated the arbitration in early 2017 claiming an amount of approximately Rs180 million ($1.1 Million) on account of unpaid invoices and damages. NTDC, apart from defending the claims, had filed its own counterclaims alleging the Iranian company’s delays, the costs required in completing the project from another contractor, and claims related to liquidated damages, mobilisation advances, customs duties, and demurrage.

On NTDC’s counterclaims, the arbitral tribunal held that NTDC had validly terminated the contract as the Iranian company was responsible for the delay in the project. Accordingly, NTDC was awarded liquidated damages in the amount of Rs57.5 million to compensate NTDC for the delay in project completion. Furthermore, NTDC was also awarded Rs167.55 million as differential costs in respect of the new contractor engaged by NTDC to complete the project.

The tribunal also ordered the Iranian company to repay the unadjusted portion of the mobilisation advance given to it at the time of the project commencement amounting to Rs12.2 million and a portion (Rs28.1 million) of the demurrage charges paid by NTDC when shipments were stuck at port.

The spokesman further said that NTDC is also entitled to interest at the rate of 7.925% per annum for the Pakistani rupee portion of the damages awarded in its favour. The interest will accrue from July 6, 2018 and run until such time as payment of the award is made.

Published in The Express Tribune, April 26^th, 2020.

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