ISLAMABAD:
Rejecting the Supreme Court’s ruling on rental power plants (RPPs), Turkey-based power firm Karkey Karadeniz Elektrik Uretim (KKEU) has instead moved the International Court of Arbitration – seeking compensation from the Government of Pakistan for losses that it says have arisen out of the latter’s alleged breach of contract. The company has sent a legal notice to the Government of Pakistan seeking remuneration for losses arising out of – what it says – is a violation of the Rental Service Contract (RSC).
The firm says that Pakistan has violated the obligations of an investment treaty between Pakistan and Turkey, and that the breach of contracts pertaining to rental power plants is also in violation of international law.
In a legal notice served to the Government of Pakistan on May 19, 2012, KKEU has demanded that the former halt inquiries initiated by the National Accountability Bureau (NAB).
Previously, NAB had sought payment of over $180 million from KKEU during an inquiry initiated after the Supreme Court’s verdict calling for the dissolution of all rental power projects. The company summarily refused to deposit the amount. NAB had also obtained and issued a freezing order against Karkey’s banks accounts in Pakistan.
The Port Qasim Authority had taken action against the firm on April 5, 2012, after the Supreme Court’s verdict calling for the dissolution of all rental power projects. The authority acted by issuing a notification which said that ‘caution’ had been placed on Karkey’s vessels under Section 23 of the Pakistan National Ordinance. The notification further directed that vessels were not to move from their moored position until completion of the NAB inquiry, or before clearance from NAB. Pakistan has refused to lift that caution to date.
The firm has also demanded that the government withdraw a freeze in place on KKEU’s bank accounts in Pakistan. The latter should also ensure the release – and allow unhindered removal – of all vessels and equipment currently located in Pakistani territory without delays, the notice said.
Karkey said that it had suffered – and continued to suffer – substantial losses arising out of the inquiry, for which the Government of Pakistan should reimburse the firm.
The Pakistan government has also been warned to desist from making any demands or taking any action for sums to be paid by Karkey. Pakistan has been urged, instead, to compensate Karkey for losses suffered by the company to date. Pakistan is to remain liable for any further loss suffered by Karkey, the notice said.
“For the avoidance of doubt, Karkey does not accept that the Supreme Court had jurisdiction in relation to this matter,” the firm’s legal council has said; adding that NAB wrongly commenced an inquiry against Karkey.
“In the event that disputes cannot be settled within six months of the date of this written notification, Karkey will commence arbitration proceedings in accordance with the Article V11 of the Treaty,” the firm has said. In the event of Pakistan’s failure to respond promptly to this notification, or to engage in meaningful consultations and negations, KKEU reserves the right to commence arbitration proceedings forthwith, the company clarified.
A senior official of the Ministry of Water and Power confirmed that the ministry had received a legal notice from the Turkish firm, and added that negotiations were being held with the Turkish government to resolve the issue.
Published in The Express Tribune, May 27th, 2012.
COMMENTS (21)
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All RPPs were set up to get quick kick backs. Does the Turkish company honestly think that giving an old ship with old plant that can't even produce 50% of its capacity is an honest deal?
@Ali Salman:
"Current judgment of the Supreme Court on RPPs has serious and lasting repercussions for the regulatory institutions, foreign investment and overall governance. If the government enters into a contract, and the court interferes five years later, and annuls the contract, there is no need to second guess the preference of investors.”
If this kind of fraudulent investors like the RPPs run away, then it should be more than a welcome development, and for future everybody will know that only a genuine investment should be made in Pakistan.
@ Ali Salman:
You are absolutely correct, but who is going to tell our run away PCO judges? They are the executive and legislative authority as well. There is zero chance of any investor taking any proposal from Pakistan seriously without putting in a HUGE financial penalty upfront. This just means every foreign contract is going to become far more expensive from the get go.
@Freedom Seeker: actually in real and proper business there is a lot of 'LIHAZ' its not so black and white....there are a lot of grey areas, i am a successful businessman exactly because I dont act cut throat, not with my suppliers, nor my customers, i feel sorry for the people you do business with.
Half Baked ideas, like this floating power house should not end up in international court.It belongs in the rubbish bin.
@Nadeem S: Why leniency for Karkey? In my opinion NAB is doing its best to bring back looted Pakistani money from these RPPs and Karkey also should be dealt like other RPPs. If NAB evidence finds Karkey a corrupt company, it should be brought to justice for corrupt practices.
Such a beautiful ship.
This is the second company to take the pak govt. to international arbitration court. The other one was the Tethyan mining company.
This is a Kodak moment!
The clause of ADR by the International Court of Arbitration is present in many contracts. The signatory should be aware of the consequences before signing the contract.
Now we will see real face of Turkey. Honeymoon is over and now its money matter. In market place there are no brothers and sisters its business and money.
This is what my article on 22nd April said: "Current judgment of the Supreme Court on RPPs has serious and lasting repercussions for the regulatory institutions, foreign investment and overall governance. If the government enters into a contract, and the court interferes five years later, and annuls the contract, there is no need to second guess the preference of investors." They will all go to a state where contract enforcement is practiced. The current decision will do more harm than good with respect to investment scenario."
This will certainly add to the liabilities that the current Supreme Court has created for our balance sheet. Previous liabilities were Steel Mills, Sugar Prices, LNG etc. It is high time that a serious evaluation is undertaken to estimate the economic costs of judicial interventions.
http://tribune.com.pk/story/368375/rental-power-saga-court-gives-an-economic-paper-instead-of-a-legal-order/
Let justice be done.This is a pure commercial contract and Pakistan has been short charged due to short-sightedness of interested parties in Pakistan and connivance of Turkish company
Stop scaring off foreign investors, use a small stick not a big club.....Turkey is a very important friend of Pakistan and as suc NAB must be careful and allow the Turkish company some leniency.
Stupid actions by our courts will only scare off investors.
Turkish businessmen or Turkey as a state are not emotional by nature. They are hard headed people always keen to make a profit regardless of brotherly, sisterly or any -ly relationship. SC is right regarding corruption and profiteering in RPPs. It is our bureaucrats, politicians and businessmen who commit Pakistan to the point where it is exploited by others. One needs to treat the Turk like any other nationality and be kept at arms-length in documenting contracts. More importantly, one should be sceptical about Pakistanis abilities to make a fast buck.
Looks like swindling in reverse
What is really going on?
Did the Turkish company do something wrong? Or is the Pakistani authorities/firms trying to get out of their obligations?
The story does not go into details on these...
Ahmet
The SCP has interfered in Steel Mill, Balochistan Riqo-Dik mines, Abduction of Balochs, Sugar prices,PIA...and many more cases...which one has been solved?
brother against brother?
Turkey pakistan bhai bhai. Small dispute will not tarnish relations.
Oh, good grief.