ECC flays ministry over court appeal

Pakistan's economic managers have raised questions over a decision of the Ministry of Interior to challenge court orders about the payment of liabilities to Huawei Technologies on account of the Safe City project in Islamabad and have given directives to review its internal legal processes and decision-making to determine why an intra-court appeal was initiated.

Sources told The Express Tribune that the Economic Coordination Committee (ECC) of the cabinet, in a recent meeting, directed the Ministry of Interior to come up with reasons as to why an intra-court appeal was preferred contrary to the advice of the Law and Justice Division, and submit a report to the committee.

ECC emphasised that the Ministry of Interior should settle the matter with the vendor on its own.

During discussions, the economic decision-making body noted that the case had been submitted to ECC following the Islamabad High Court's (IHC) order, which was upheld at the appellate forum.

It was observed that payment to the vendor was being processed five years after expiry of the contract. The committee questioned the rationale behind the Ministry of Interior's decision to challenge court orders, contrary to the opinion of the Law and Justice Division.

The Finance Division supported the proposal, stipulating that the mode and manner of payment to the vendor would be decided by the Ministry of Interior, which would also resolve the matter.

The Interior Division briefed ECC that an agreement for the Safe City project in Islamabad was signed between the Ministry of Interior and Huawei Technologies Co Ltd on December 29, 2009. Total value of the Safe City contract was $124.719 million. Of this, $118.549 million was paid against the concessional loan provided by the government of China through the Exim Bank of China.

However, the remaining 5% payment, ie, $6.170 million, has not yet been made. The Exim Bank loan expired before final inspection and handing over of the project. Consequently, the remaining liabilities of $6.170 million could not be settled.

Subsequently, Huawei Technologies filed a writ petition in IHC for the remaining 5% payment. On October 12, 2023, the court ruled that the release of payment to the petitioner by the Ministry of Interior had been unduly delayed without justification.

The court directed Finance Division and Economic Affairs Division secretaries to facilitate the Ministry of Interior in discharging the liability. Responding to that, the Ministry of Interior filed an intra-court appeal in IHC on December 14, 2023, which was dismissed.

The Interior Division informed the forum that the ministry requested the Economic Affairs Division to approach the Exim Bank of China for extending the loan validity to pave the way for clearing the outstanding liabilities.

However, the Exim Bank said that an extension in the loan agreement was not possible. In compliance with IHC's directives, the Finance Division was requested to arrange the payment of liabilities to Huawei Technologies.

The Finance Division returned the case with instructions to process it in accordance with a decision of the Executive Committee of the National Economic Council (Ecnec) made on April 6, 2023 regarding the procedure for clearing pending liabilities of closed projects.

A position paper was subsequently submitted to the Planning, Development and Special Initiatives Division for onward consideration by the Central Development Working Party (CDWP) on November 12, 2024. CDWP reviewed the paper and issued the following decision:

The Ministry of Interior will coordinate with the Finance Division to clear the project's pending liabilities in compliance with the IHC decision.

The Interior Division said that the Finance Division endorsed the CDWP's decision and called for sending a summary to ECC for approval of the payment of outstanding liabilities of $6.170 million (equivalent to Rs1.721 billion) to Huawei Technologies in compliance with the IHC decision.

The Interior Division requested ECC to release the aforementioned funds as a technical supplementary grant for clearing the liabilities of Huawei Technologies, as per the CDWP decision and the IHC directives.

The ECC considered a summary submitted by the Ministry of Interior titled "Payment of Liabilities to Huawei Technologies Co Ltd on account of Safe City Project Islamabad." It approved the proposal for the technical supplementary grant.