Gulf investors file $2bn arbitration against Pakistan over K-Electric
Minute Mirror | 21 January 2026
Gulf investors file $2bn arbitration against Pakistan over K-Electric
By Bilal Javed
Saudi and Kuwaiti investors in K-Electric have launched a $2 billion international arbitration case against Pakistan, intensifying a dispute that has simmered for nearly a decade over regulatory hurdles, unpaid government dues, and the stalled $1.77 billion sale of the country’s largest private power utility.
The arbitration was formally initiated on January 16, 2026, when London-based law firms Steptoe International (UK) LLP and Omnia Strategy LLP submitted a Notice of Arbitration under the OIC Investment Agreement and UNCITRAL Arbitration Rules, naming Pakistan as the respondent.
The claimants include 32 Saudi individuals and entities linked to the Al-Jomaih family, along with five Kuwaiti companies. Together, they hold a 30.7 percent indirect stake in K-Electric, acquired during its landmark 2005 privatisation. They have appointed Professor Stephan Schill as their arbitrator and proposed the Permanent Court of Arbitration to oversee proceedings. Pakistan has 60 days to nominate its own arbitrator.
According to the 39-page filing, the investors say they have injected more than $4.7 billion into Karachi’s power infrastructure over the past two decades, reviving a struggling state utility, reducing losses, and expanding generation and distribution. They claim to have reinvested all profits without taking dividends, estimating their efforts saved Pakistan’s exchequer over $3 billion.
The dispute stems from an October 2016 agreement to sell a majority stake in K-Electric to Shanghai Electric Power Company. Despite initial regulatory support, the deal was stalled for more than eight years due to shifting conditions, contradictory instructions, and withheld national security approvals. Shanghai Electric eventually withdrew, leaving the investors without their planned exit. They argue this amounted to indirect expropriation under international law.
The arbitration also points to long-standing government arrears, including tariff subsidies and other receivables dating back nearly two decades. The investors say these unpaid amounts crippled K-Electric’s finances, while authorities continued to impose penalties.
Attempts at mediation collapsed in 2025, with the investors alleging state interference blocked findings unfavorable to the government. They further accuse Islamabad of politicising tariff frameworks and undermining the independence of regulator NEPRA. Revised tariffs imposed last year, they argue, would cost K-Electric around Rs85 billion annually, eroding its viability and breaching Pakistan’s obligation to maintain a predictable regulatory regime.
Additional claims include failure to protect against hostile takeover attempts by domestic investors, and the diversion of $66 million from the sale of shares in Cnergyico, allegedly transferred offshore without approvals.
The investors say Pakistan has violated multiple provisions of the OIC Investment Agreement, including protections against expropriation, fair treatment, and free transfer of funds. They have also invoked most-favoured-nation clauses to draw on protections in Pakistan’s bilateral investment treaties with Bahrain and Switzerland.
This case marks one of the largest arbitration claims ever brought against Pakistan, with potentially far-reaching consequences for investor confidence in the country’s energy sector.
