The Power Division and Attorney General of Pakistan have initiated 'revision proceedings' in the ICSID to set aside the 2017 award in Karkey Karadeniz versus Pakistan, adding that Article 51 of the ICSID convention allows parties to a dispute to bring to the tribunal any new facts that could decisively affect the award.
M/s Karkey, a Turkish power company, set up a 232MW ship mounted rental power project pursuant to rental power policy 2008, announced by the government of Pakistan (GoP). M/s Karkey entered into rental services contract (RSC) on April 23, 2009 for generation of electric power with Lakhra Power Generation Company Limited (LPGCL).
Pursuant to the terms of the RSC, the GoP issued sovereign guarantee to secure payment obligations of LPGCL. M/s Karkey achieved commercial operations in April, 2011. In the meanwhile, the Supreme Court in exercise of its original jurisdiction initiated suo motu proceedings against the rental power projects (RPPs) and through its detailed judgment of March 30, 2012, declared all the RSCs void, ab initio, being illegal and against public policy. The Supreme Court also directed National Accountability Bureau (NAB) to carry out investigation under the NAB Ordinance 1999. In the light of judgment of the Supreme Court, NAB commenced investigation and placed caution on M/s Karkey ships restraining them from leaving territorial waters of Pakistan. M/s Karkey, filed arbitration claim against the GoP, for various 'breaches', unilateral termination of the RSC and detention of its ships, before the ICSID under Pakistan-Turkey Bilateral Investment Treaty (BIT), 1995.
The proceedings before ICSID were held between March 23 and March 26, 2018. On August 22, 2018, the ICSID awarded against GoP amounting to $ 760 million along with interest thereupon. After the award, Karkey went into enforcement of arbitration award against Pakistan in various jurisdictions including the USA, UK, Germany and France. With this action government of Pakistan's assets abroad became at potential threat of being attached or lien being created on them that would have resulted in huge financial implications.
Attorney General's Office informed the Ministry to arrange funds to the tune of $ 1.37 million, out of which US$ 0.395 million is advance payment on urgent basis, to engage counsel to initiate various initiatives/remedies including revision, reviews, defense of the enforcement proceedings etc, to start, review and complete on a critical time line.
Sources in Power Division claim that Pakistan has gathered fresh 'evidence of corruption' in the procurement of a Rental Power Project (RPP) contract by the Turkish company. An official told Business Recorder that pursuant to suspension of the award, enforcement proceedings against Pakistan have been stopped which is a big relief to the government for the time being.
GST LLP and Axis Law Chambers and Attorney General of Pakistan are now contesting the proceeding at the ICSID, whereas M/s Karkey will be represented by Arnold & Porter, Washington, D.C., San Francisco, CA, U.S.A. and London, U.K. and Hassan Kaunain Nafees Islamabad. The government has spent about Rs 1 billion on Allen & Overy, a global law firm as well as on Government officials including the then Minister for Water and Power, Khawaja Asif who traveled to London in connection with the case.
