A copy of 'Partial Final Award' of the LCIA available with this correspondent revealed that on June 08, 2017 Professor Douglas Jones AO, sole arbitrator of the LCIA, issued the award on preliminary issues against the NTDC in response to nine IPPs, claimants, from Pakistan.
Currently nine IPPs are in the business of generating and supplying electricity to the NTDC (100 percent owned and controlled by the government) and the power purchaser has binding Power Purchase Agreements (PPAs) with companies including: (i) Atlas Power Limited; (ii) Liberty Power Tech Limited; (iii) Nishat Chunian Power Limited; (iv) Nishat Power Limited; (v) The Hub Power Company Limited; (vi) Saif Power Limited; (vii) Orient Power Company (Pvt) Limited; (viii) Sapphire Electric Company Limited; and (ix) Halmore Power Generation Company Limited.
Under the PPAs, the NTDC is required to make payment to the IPPs within 30 days and being an exclusive purchaser of electricity from the IPPs, the NTDC is required to make payments to IPPs for the operation of their complexes, which include payment for fuel to the fuel supplier. It is worth mentioning that the payments are required to be paid in advance to the fuel supplier.
In January 2011, differences arose between the IPPs and NTDC with respect to non-payment and delayed payment of the amounts due against the NTDC. Consequently, the delay or non-payment led to severe liquidity crunch as the IPPs were unable to procure fuel in order to operate their plants at full capacity.
The IPPs after unsuccessful discussions on the payment issue with the government of Pakistan and NTDC, invoked the apex court's jurisdiction in 2012 under Article 184(3) of the Constitution. After hearing the pleas of the IPPs from July 2012 till May 2013, the Supreme Court issued directives to the NTDC to restrain from making deductions and pay various outstanding amounts to the IPPs from time to time.
Though the NTDC cleared part of the amounts to the IPPs, substantial part of the amounts was not paid and the same remains outstanding as of today. In another development to reach amicable resolution of the dispute, the IPPs and the NTDC agreed to enter into a memorandum of understanding (MoU) under which it was agreed that the issues raised by the parties therein shall be resolved through the dispute resolution mechanism set out in the PPAs. Later, the IPPs initiated the expert proceedings before Justice Sair Ali (Retd), a retired judge of the Supreme Court in the matter from 2013 till 2015.
On August 15, 2015, Justice Sair Ali (Retd) delivered the determination and held: (i) the power purchaser's promise to make complete and timely payment precedes the IPPs' obligation to maintain a thirty (30) day fuel inventory; and (ii) the deductions made by the power purchaser were unauthorized, thereby, the power purchaser is in breach of the PPAs and accordingly, the power purchaser is obligated to make good the losses resulting from its breach of the PPA in terms of the capacity payments and will pay the said amounts forthwith.
In furtherance of the determination, the IPPs wrote to the NTDC requesting it to make payments in accordance with the determination. As per the PPAs, the NTDC had the option to refer the matter to arbitration within seventy-five days of expert determination and upon failure to do the same, the expert determination would become final and binding. However, the NTDC neither referred the matter to arbitration nor made any payments to the IPPs so far.
In order to resolve the dispute as per the PPAs under the MoU, the IPPs initiated arbitration in LCIA, in which they sought that the expert determination be declared final and binding as per the provisions of the PPAs.
Filing reply before the LCIA, the NTDC sought stay of the arbitration proceedings in light of pending suit at the civil court, Lahore, however, both the parties of the arbitration exchanged pleadings after which on July 08, 2016 the arbitrator gave his ruling and held, inter alia, that: (i) the arbitration shall proceed and the respondent's request for a stay is denied; and (ii) the respondent will withdraw its application of 11 November 2015 filed before the Lahore court and refrain from taking any further steps therein to disrupt the arbitration. Thereafter, the arbitrator issued various procedural orders pursuant to which the arbitration proceedings were conducted. While issuing final partial award in the matter on June 08, 2017, the arbitrator declared that the expert (Former Justice Sair) determination is final and binding on the parties and deferred the quantification of quantum for a later stage.
Additionally, Professor Douglas Jones AO also ordered the NTDC to pay to the IPPs the amounts claimed by way of security (amounting to Rs 10,977,769,162), which the NTDC has not paid to date. Currently the arbitration proceedings are at the stage of quantification of the quantum, for which hearing is fixed in the matter before the LCIA on October 1 and 2, 2017.
Copyright Business Recorder, 2017