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Pak moves int’l forum against Turkish power firm

Daily Times, Pakistan

Pak moves int’l forum against Turkish power firm
* KKEU seeks $334 million in damage from the Pakistani government

By Ahmad Ahmadani

23 April 2014

ISLAMABAD: The Ministry of Water and Power has approached the Washington-based International Centre for Settlement of Investment Disputes (ICSID) and challenged the jurisdiction of a tribunal which has been hearing a damage suit worth $334 million sought by a Turkish power firm, Karkey Karadeniz Elektrik Uretim (KKEU), against Pakistan.

Earlier, in March 2013, the Turkish company, which established a power plant in a ship berthed at Karachi port to provide electricity to the national grid, moved ICSID against Pakistan for not allowing it to move out from the port and for breaching Article VII of Bilateral Investment Treaty (BIT) inked on March 16, 1995, by the government of Pakistan due to which it allegedly suffered a huge loss.

Sources in the Water and Power Ministry privy to the development informed Daily Times that the ministry has submitted a plea with the ICSID to challenge its jurisdiction, as the Turkish power firm sought $334million in a damage suit from it. The ICSID has been asked to dispose of the damage suit against Pakistan sought by the Turkish power company, as the matter does not fall in its jurisdiction or mandate, the sources added.

“The ministry has pleaded with ICSID to put off the damage suit submitted by M/s Karkey against Pakistan, as the matter does not fall in its jurisdiction ,” a top-seated guru at the Water and Power Ministry said. Only London International Court of Arbitration, according to him, can hear this case because ICSID can only hear the matters related to investment, while the matter of Turkish power firm is related to a contract not about the investment.

The ship-based Karkey rental power project is also probably the most controversial project among all the RPPs (Rental Power Projects). The PPP-led coalition government, in April 2011, commissioned the Karkey Rental Plant but Karkey failed to generate the promised 231MW of electricity. The actual production came to be mere 30-55 MW per day at the cost of Rs 41 per unit.

Under the agreement, the government had paid $ 9 million as capacity charges to Karkey power plant management. The Supreme Court took suo moto notice of all the RPPs installed in Pakistan from 2006 onwards including Karkey Plant. The court, in its March 2012 judgment, declared all the RPP deals as void. It also authorised National Accountability Bureau (NAB) to take action against all the RPPs.

The NAB inquiry uncovered that as per the deal, KKEU had to reimburse $17.5 million to Pakistan but the Supreme Court insisted on recovering $120 million from the company. Previously, NAB had sought payment of over $180 million from KKEU during an inquiry initiated after the court verdict calling for the dissolution of all RPP contracts. The NAB had also obtained and issued a freezing order against Karkey’s banks accounts in Pakistan.

The foreign power company, which has so far summarily refused to deposit the amount, has instead accused Pakistani government of breaching the Bilateral Investment Treaty (BIT) executed between Turkey and Pakistan on May 19, 2012, which is in violation of the international law.

M/S Karkey, in a damage suit it filed with ICSID for compensation of financial losses, also served Rs33 billion damage suit to the ministry over alleged violation of the Rental Service Contract (RSC). It says it has suffered – and continued to suffer – substantial losses arising out of the inquiry, for which the ministry should reimburse the firm.