ICSID awarded $700 million to Karkey Karadeniz Elektrik Uretim AS

The International Centre for Settlement of Investment Disputes (ICSID) has awarded $700 million to Karkey Karadeniz Elektrik Uretim AS, a Turkish company that constructs and operates rental power plants (RPPs), in a damages suit it had brought out against Pakistan.

According to the ICSID website, the award was announced on August 22, but sources told The Express Tribune the centre had given its verdict in March 2016 and now the tribunal has determined the quantum of the award, which is around Rs74 billion.

The Turkish company Karkey Karadeniz Elektrik Uretim A.S, had been awarded this contract to provide barges but the Supreme Court under Justice Iftikhar Chaudhry refused to allow even a settlement by the public prosecutor with the Turkish company. The company went to the ICSID for arbitration, and won the award.

Karkey had registered a claim with the ICSID against Pakistan in 2013 for violation of their contract of as many as $564.6 million for a period of five years, for building rental power plants in Karachi.

The contract was struck down in the Supreme Court decision by then-Cheif Justice Iftikhar Chaudhry in 2012 on a petition by Pakistan Muslim League-Nawaz leader Khawaja Asif and Faisal Saleh Hayat, which called for shutting down all rental power projects in the country.

According to sources, in March 2017, Pakistan offered to give compensation of Rs700 million to Karkey through the Turkish government. Both the respective governments are in negotiations with the company, said sources.

According to the ICSID award, Pakistan will not only pay damages but is also bound to pay $5.6 million (Rs590 million) per month as interest to Karkey Karadeniz Elektrik Uretim AS, which was hired for providing rental power services. Pakistan will be liable to pay one month’s interest on September 22 because the award was announced on August 22.

It was also learnt that Punjab Chief Minister Shehbaz Sharif, during his trip to Turkey last week, raised this issue with top Turkish officials, but no positive development was forthcoming.

“President Recep Tayyip Erdoğan also tried to intervene in the matter, but no settlement could be finalised due to the interference of the apex court, led by former chief justice Iftikhar Muhammad Chaudhry in 2013,” said a senior official.

Vice-President PPPP, Senator Sherry Rehman voiced her shock and concern over the undisclosed $700 million fine slapped by the International Centre for Settlement of Investment Disputes (ICSID) on Pakistan.

Speaking on the floor of the House, Rehman said, this was the very case that Khwaja Asif had taken to NAB against Raja Parvez Ashraf as the famous Rental Power case.  Rehman pointed out that, despite spending more than Rs. 1.3 billion on lawyers' fees to contest the cases which are recently being adjudicated before the ICJ, Pakistan's success rate in international arbitration cases stands at a shocking 2pc.