Govt to submit evidence to ICSID

ISLAMABAD: Pakistan is to submit documents and evidence to International Centre for Settlement of Investment Disputes (ICSID) on October 21, 2019 with respect to Turkish firm M/s Karkey Karadeniz Elektrik Uretim A.S, two days before the visit of Turkish President Recep Tayyip Erdogan to Islamabad, well-informed sources told Business Recorder.

Turkish President, sources said, will raise the issue of M/s Karkey, M/s Zurlu and other Turkish companies facing National Accountability Bureau (NAB) notices/summons. Turkish firms have refused to come to Pakistan. At least two or three officials including former Secretary Water and Power, Shahid Rafi who allegedly received kickbacks from the company, have turned approvers after reaching a plea bargain with NAB.

The sources said all the documents have been finalized with lawyers who will submit them to ICSID in Washington on April 21, 2019.

According to the ICSID website, Pakistan submitted a revised submission on August 30, 2019 and again on September 13, 2019. ICSID said that following payment of the required advance, the proceedings are no longer stayed pursuant to ICSID Administrative and Financial Regulation 14(3)(d).

A committee constituted by the former Prime Minister, Nawaz Sharif, had visited Turkey more than 10 times to meet the officials of M/s Karkey Karadeniz Elektrik Uretim and discussed different options with the representatives of the firm.

Pakistan placed $56 million in an escrow account in a first class bank in Frankfurt, Paris and Zurich as part of arbitration claim of M/s Karkey Karadeniz Elektrik Uretim A.S. - $50 million for escrow by May 30, 2019 which was extended to June 30, 2019 and $6 million for opening the account.

Power Division, sources said, moved a summary for the anticipatory approval of Chairman Economic Coordination Committee (ECC) of the Cabinet for provision of $ 56 million as interim security in an Escrow Account in a European Bank to proceed further with the proceedings in the case regarding arbitration claim against the GoP.

Advisor to the Prime Minister on Finance, Revenue and Economic Affairs, Dr Hafeez Shaikh in his capacity as Chairman ECC approved the summary which required: (i) opening of an Escrow Account for $ 50 million in a European Bank; and (ii) supplementary grant of $ 6 million.

On May 30, 2019, proceedings were stayed for non-payment of the required advances pursuant to ICSID Administrative and Financial Regulation.

Insiders claim that the GoP is in talks with the Turkish government and M/s Karkey for an out-of-court settlement to avert attachment of Pakistan’s properties in Europe.

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 Contact (RSC) on April 23, 2009 for generation of electric power with the Lakhra Power Generation Company Limited (LPGCL) and achieved commercial operations in April 2011. The Supreme Court in exercise of its original jurisdiction initiated suo motu proceedings against the rental power projects and through its detailed judgment of March 30, 2012, declared all RSCs void ab initio being illegal and against public policy. The Supreme Court also directed NAB to carry out an investigation under its 1999 Ordinance.

NAB commenced investigation and placed caution on M/s Karkey ships restraining them from leaving the territorial waters of Pakistan. M/s Karkey filed an arbitration claim against the GoP under Pakistan-Turkey Bilateral Investment Treaty (BIT), 1995, for various breaches, unilateral termination of the RSC and detention of its ships before ICSID.

On August 22, 2018, ICSID awarded against GoP along with interest thereupon. Subsequently Karkey has gone into enforcement of arbitration award of about $ 900 million against Pakistan in various jurisdictions including the USA, UK, Germany and France.—MUSHTAQ GHUMMAN