Pakistan’s ‘corruption claims overlooked’ in RPP arbitration

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The Express Tribune | 30 September 2017

Pakistan’s ‘corruption claims overlooked’ in RPP arbitration

By Hasnaat Malik

Senior government officials have claimed that the International Centre for Settlement of Investment Disputes (ICSID) overlooked Pakistan’s claim of corruption while deciding in favour of Karkey Karadeniz Elektrik Uretim over a rental power project (RPP) dispute.

Pakistan is also considering various options to deal with the matter after the announcement of the $800 million award to the Turkish company in damages, according to the government officials.

Karkey Karadeniz Elektrik Uretim – a Turkish company that constructs and operates rental power plants (RPP) – was given a $560 million contract to operate a ship-based power plant in Pakistan, one of several RPPs hired by the PPP government. The initial contract was for five years.

However, PPP-Patriots leader Faisal Saleh Hayat and incumbent foreign minister Khawaja Asif approached the Supreme Court against the contract awarded by the then PPP government. Later the SC declared all RPPs contracts void. The Turkish company then filed a case before the ICSID in 2013 and the arbitration tribunal concluded proceedings in March last year.

On August 22, the ICSID awarded around $800 million to Karkey over a damages suit it had brought against Pakistan. According to the ICSID website, the award had been announced on August 22 but was not made public by both parties.

On Friday, International Dispute Unit Head Ahmad Irfan Aslam and Water and Power Joint Secretary Muhammad Zargham Eshaq Khan held a briefing for journalists wherein they highlighted the background of the case, components of the award, and the available remedies.

The two officials expressed serious concerns over the award and said that Pakistan’s legal team was not allowed to present key evidence regarding corruption on the part of the Turkish company.

Surprisingly, key witnesses such as Shahid Rafi, the water and power secretary at the time, were also not permitted to give statements before the arbitrators, Aslam claimed.

Talking about the award, the two officials said that the international arbitrators raised several questions over the Supreme Court’s judgment in the RPP case, adding that in their opinion, fault lay in the Supreme Court of Pakistan’s decision to declare all RPPs contract void. They also said that the tribunal had also questioned why the top court did not examine each RPP contract individually before voiding all of them for corruption.

Likewise, the ICSID rejected Pakistan’s argument that the country was bound to comply with local legal judgments, said the officials, adding that the tribunal held that the local judiciary’s act would be attributed to that of the state. However, Aslam made it clear that the government of Pakistan stood by the SC’s verdict in the RPP case.

He also said that Pakistan’s stakeholders were considering various options to deal with the situation. Even good offices were being used for a settlement with the Turkish company, he said, calling it a normal practice for parties to sit together and agree on a mutual settlement after the announcement of the award.

However, both the officials told the journalists that no date had been set for the start of negotiations with the Turkish company on a settlement.

Talking about legal remedies, Aslam said that after the announcement of the award, the parties might take remedial measures such as a plea for rectification and filing a revision over the annulment of the award on the basis of corruption on the part of tribunal members, failure to state reasons, fundamental departure from rules and procedures, and improper composition of the tribunal.

But he also said that since 1960, of the roughly 600 requests for annulment of awards, only 17 had been successful.

The parties concerned have four months to move for the annulment of the award. Pakistan’s four-month deadline ends on December 22. The tribunal, according to the officials, generally takes three years to decide on pleas relating to annulment of awards.

Aslam said that the ICSID awarded around $800 million against Pakistan, and the country would also pay interest on the award. He remarked the country was facing international litigation in the Karkey and Reko Diq cases due to verdicts issued by the Supreme Court of Pakistan.

According to the officials, international firms are hired to contest such cases while following government rules. Likewise, a committee comprising a federal secretary and the attorney general of Pakistan finalises the legal firm to contest cases before international tribunals. In the Karkey case, legal firm Allen and Overy was hired by former attorney general Salman Aslam Butt.

The two officials said that if the tribunal’s award was not implemented, the country might face serious consequences.