By NP Newsroom
The World Bank’s International Center for Settlement of Investment Disputes (ICSID) has fined Pakistan $1.6 billion on behalf of Karkey Karadeniz Elektrik Uretim A.S., in the ICSID case No. ARB/13/1. The Turkish power company took the case to ICSID on the grounds that the Pakistani government had allegedly unlawfully detained four electricity-generating vessels owned by the claimant Karkey Karadeniz, as well as alleged breaches of contractual payment obligations for the electricity generated by Karkey’s power generation vessels.
Karkey’s claim was for $2 billion and the case (ARB/13/1) has been going on since 2013 and according to news sources following the case, it has has just been finalised and the fine imposed, but paired with the decision to keep the case under wraps and therefore away from prying eyes in Pakistan.
Arbitration tribunals are not courts, but decide corporate disputes out of court by arbitrators appointed by mutual consent of all parties to the dispute. The arbitrators are legal experts, and also include experts from the field of the dispute in question.
In case No ARB/13/1 with the ICSID, the president was Yves DERAINS (French) – Appointed by the Chairman of the Administrative Council and the arbitrators were Horacio A. GRIGERA NAÓN (Argentine) – Appointed by the Claimant(s) and David A.O. EDWARD (British) – Appointed by the Chairman of the Administrative Council.
Former Attorney General for Pakistan Salman Aslam Butt is reported to have decided — around the time the case was in it’s last throes — not to hire local lawyers to pursue the case.
Karkey was one of the 12 companies contracted in 2009 to produce rental power to Pakistan from vessels docked at the port. The Supreme Court eventually scrapped all the deals made by the government with RPPs set up since 2006 by declaring them illegal, non-transparent and invalid.
The SC on November 26, 2012, ordered NAB to recover $128 million from Karkey. According to Karkey, Islamabad did not comply with ICSID’s demands and continued to detain the power-producing vessel.
That’s when Karkey decided to take the case to the ICSID.
Karkey began investing in Pakistan when Pakistani authorities announced an international competitive bid for energy firms to help Pakistan out of continual power outages. Karkey won a bid and sent four vessels, including two of its Turkish-flagged power ships, supplying 232MW.
Pakistani officials explained that in an earlier claim lodged by Karkey, the ICSID tribunal in its October 16, 2013 order had rejected all claims of the power firm, merely allowing the ship to temporarily sail to Dubai for mandatory dry-docking (maintenance).
In July 2014, ICSID had rejected the plea by Pakistan’s Water and Power Ministry against the jurisdiction of a tribunal hearing the $2 billion damages suit by Karkey.
