$860m Award In Karkey Rental Power Case Suspended As Pakistan Prepares Fresh ‘Corruption’ Evidence

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PKONWEB Report (Islamabad) — The International Center for Settlement of Investment Disputes (ICSID) has suspended an award against Pakistan worth over $860 million (Rs120 billion) in favor of Turkish power company Karkey Karadeniz Elektrik Uretim (Karkey).

The decision comes after PTI-led government initiated ‘revision proceedings’ in the ICSID to set aside the 2017 award in Karkey Karadeniz versus Pakistan, adding that Article 51 of the ICSID conviction allows parties to a dispute to bring to the tribunal any new facts that could decisively affect the award.

Sources revealed to local daily The Express Tribune that Pakistan has gathered fresh ‘evidence of corruption’ in the procurement of rental power project (RPP) contract by the Turkish company.

“We are confident that by presenting this fresh evidence of corruption, Pakistan will establish that Karkey engaged in systematic corrupt practices to obtain a contract worth over $550 million for the supply of electricity. If this evidence is accepted, the whole award could be set aside by the tribunal”, said a senior government official.

Karkey had made arrangements for the supply of electricity through generation plants installed on three ships offshore Karachi. The firm filed a claim before the ICSID after the Supreme Court of Pakistan terminated all rental power contracts.

It has also been learnt that due to the suspension of the award, enforcement proceedings against Pakistan have been halted.

Generally, revision proceedings can take a couple of years. The sources claim Pakistan has a very good case and has very solid and undeniable evidence of corruption.

A senior government official said that Pakistan expressed serious concerns over the award and that Pakistan’s legal team then was not allowed to present key evidence regarding corruption on the part of the Turkish company.

In 2008, Karkey had obtained a contract from the government of Pakistan for the supply of electricity under the RPPs that had been instituted to meet the shortfall in electricity.

Subsequently, the Supreme Court declared all RPPs contract void ab initio as there was a prima facie case that the contracts had been obtained by several private parties through corruption. The apex court had also instructed the National Accountability Bureau to investigate.

Aggrieved by the SC’s verdict, Karkey initiated proceedings in ICSID under Pakistan Turkey Bilateral Investment Treaty in January 2013. Karkey claimed that the SC decision had amounted to expropriation of its investment in Pakistan, which is violative of the provisions of the Pakistan-Turkey Bilateral Investment Treaty. On August 22, 2017, ICSID issued an award in favor of Karkey.

According to some experts, if Pakistan can prove its ‘white collar crime’ assertion based on fresh evidences, the case could lead to criminal proceedings also besides setting aside of the whopping $860 million award.

Article 51 of the ICSID conviction allows parties to a dispute to bring to the tribunal any new facts that could decisively affect the award.

Sources claim that Pakistan has a very good case and has very solid and undeniable evidence, however, records show that around 600 parties have approached ICSID for the annulment of an award since 1960, but only 17 have been successful in getting revisions.

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