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Govt to cough up Rs90m for ICSID case

The Nation, Pakistan

Govt to cough up Rs90m for ICSID case

Bilal Soofi’s firm to take care of a dispute with a Kuwaiti firm

By Terence J Sigamony

7 November 2013

ISLAMABAD - The federal government, which is facing financial crisis and seeking loans from IMF and other financial institutes, is willing to pay Rs90 million to a Pakistani law firm to plead its case in an international court.

The government is ready to pay this hefty amount to the firm owned by former caretaker law minister Ahmer Bilal Soofi for a case against Kuwait’s Agility for Public Warehousing Company (PWC) in the International Centre for Settlement of Investment Disputes (ICSID).

The PWC (Agility) had executed a contract on 02-06-2004 with Pakistan’s Central Board of Revenue (CBR), now Federal Board of Revenue (FBR), for undertaking a pilot project for computerisation of imports clearance at Karachi International Container Terminal (KITC). The contract, initially meant for 7 months, was impliedly extended with mutual consent for another 3-4 years without reducing it into writing.

During the extended period the project was rolled out to two other Customs stations at Karachi – Pakistan International Container Terminal (PICT) and Qasim International Container Terminal (QICT). Subsequently, FBR got a system audit of M/s Agility’s products/services conducted through M/S Sidat Hyder Morshad, which revealed certain vulnerabilities of the systems. The FBR was, therefore, no longer interested in continuing its engagement with Agility, which led to a dispute between the two.
Condition No. 7-2 of the agreement dated 02-06-2004 provided for settlement of disputes through arbitration under the domestic law of Pakistan. According to the said condition, “Any dispute, controversy, or claim arising out of or relating to this contract, or the breach, termination, or invalidity thereof, shall be settled under the provisions of Arbitration Act 1940 as amended or any statutory modification or re-enactment thereof for the time being enforce.”

As the negotiations for an amicable settlement could not materialise, it put both the parties to have recourse to legal remedies. Consequently, the foreign firm filed a case against Pakistan/FBR before ICSID while the FBR filed a petition in Islamabad High Court for restraining the ICSID from taking the cognisance of the matter. FBR’s petition is pending before the court till date.

FBR hired the services of Asaf F Vardaq, an advocate at the Supreme Court of Pakistan, to challenge the assumption of jurisdiction by the ICSID. However, the ICSID rejected preliminary objection of jurisdiction agitated by FBR, vide its order date 27-02-2013 and directed the parties to join arbitration proceedings on merits. ICSID also directed the FBR to deposit $150,000 as 50 percent share of ICSID Tribunal’s cost. As per schedule given by ICSID, the said proceedings are to commence from 04-12-2013.

Feeling aggrieved, the FBR through its counsel Asaf Vardag filed an appeal before ICSID secretary general against ICSID order. However, the secretary general on 15-04-2013 did not entertain FBR’s appeal on the plea that it was not an award against FBR. He also advised the FBR to join merit proceedings.

In view of it, the Law Division’s opinion was also solicited by the FBR. The Law Division opined that FBR had no choice but to join merit proceedings before ICSID and deposit 50 percent charges as directed by ICSID. Accordingly, an amount $150,000 has already been deposited after obtaining concurrence of the Finance Division on 16-05-2013.

Since the provision of Bilateral Investment Treaty (BIT) between Pakistan and Kuwait has an overriding effect on domestic laws and an arbitral award of ICSID can be enforced as a court judgment against the foreign assets of government of Pakistan, the option of staying away from the proceedings was not feasible.

In view of the complicated nature of the proceedings before the ICSID involving an initial claim of $62.4 million and subsequent claim of $432 million (including initial claim and damages) against the government of Pakistan, the Board-in-Council considered the issue of hiring a law firm having adequate professional competence and which is well connected with the lawyers dealing in arbitration cases abroad.
Quotation for services was called from Ahmar Bilal Sufi, advocate Supreme Court, of ABS & Co., a leading firm having expertise in international law, and Asaf F Vardag, which was earlier engaged in the instant case to agitate the issue of jurisdiction before the ICSID, was also contacted.

Mr Vardag after obtaining the quotation of services from Karl Hopkins, an international lawyer, from Washington through email has also submitted the claim of professional fee by the international lawyers, which ranges from 2.3 to 2.7 million dollars. However, Bilal Sufi has agreed to accept the brief/case at total fee of Rs90 million. Keeping in view the expertise of Mr Sufi and his firm in international law and arbitration, the Board-in-Council has approved the nomination of Ahmar Bilal Sufi.

The proposed professional fee includes travelling cost of the legal team, fee for the London-based team and actual expenses to be incurred. The fee demanded does not include the charges to be paid to ‘Quantification Experts’, which will be hired by FBR/GOP itself on the recommendation of M/S ABS & Co. The charges to be paid to Quantification experts (both local as well as foreign based) will be approximately more than $30,000.