ISLAMABAD: In a significant development with potential to escalate into an international arbitration case, a consortium of Saudi and Kuwaiti investors in K-Electric has served a formal notice of dispute to the Government of Pakistan, seeking $2 billion in compensation for alleged violations of their investment rights. The principal foreign investors, Saudi Arabia’s Al Jomaih Group and Kuwait’s Denham Investments Limited, are being represented by the London-based law firm Steptoe International (UK) LLP. The notice, dated October 20, was delivered to the Attorney General for Pakistan, the Prime Minister’s Office, and the Special Investment Facilitation Council (SIFC). This legal action marks the first time Pakistan is facing a claim under the multilateral Agreement on Promotion, Protection and Guarantee of Investments Among Member States of the Organisation of Islamic Cooperation, commonly known as the OIC Investment Agreement.
The notice emerged just a day before the prime minister was scheduled to depart for an official visit to Saudi Arabia, adding sensitivity to the timing. The investors allege that Pakistan has repeatedly breached its international obligations by obstructing legitimate business transactions, interfering in regulatory matters, and failing to protect their investment from unlawful third-party actions. They contend that these actions have caused severe financial harm and eroded the value of their holdings in K-Electric, the country’s largest integrated power utility serving Karachi and adjoining areas.
As a result of what they describe as “years of obstruction, inconsistency, and unfair conduct,” the investors have estimated their cumulative losses at no less than $2 billion. This figure incorporates the lost value from the stalled sale to Shanghai Electric, deterioration in market value, increased debt servicing costs, and reputational damage.
They have urged the government to enter into good-faith negotiations or conciliation to resolve the matter amicably but have clarified that they reserve the right to commence arbitration under the OIC Investment Agreement if no settlement is reached. “Our clients are concerned that Pakistan is no longer dealing with them in good faith,” the notice states, while also confirming the investors’ openness to an amicable resolution.
The 67-page notice outlines three principal disputes. The first and most significant concerns the government’s failure to approve the $1.77 billion sale of K-Electric’s shares to Shanghai Electric Power, a subsidiary of China’s State Power Investment Corporation, agreed in October 2016. The transaction remains incomplete due to Pakistan’s failure to issue key approvals, including tariff notifications, foreign exchange clearance, and national security consent. The notice argues that by indefinitely withholding these approvals, the government effectively deprived the investors of the ability to realise the value of their stake—an act it characterises as “indirect expropriation” and a breach of guarantees on free capital transfer.
The second dispute revolves around delayed government payments and tariff uncertainty. The investors claim government entities have failed to release Tariff Differential Subsidies and other dues owed to K-Electric, while simultaneously demanding payments from the company with penalties. They further allege that the Ministry of Energy’s Power Division exerted pressure on the National Electric Power Regulatory Authority (NEPRA) to revise K-Electric’s multi-year tariff, forcing it to adopt unrealistic targets and a Pakistan Rupee-based return on equity instead of the approved US Dollar-based rate. According to the investors, these imposed changes would cost K-Electric nearly Rs100 billion annually, pushing the utility toward “economic destruction.”
The third dispute centres on what the investors describe as an “orchestrated takeover attempt” of K-Electric’s parent company by Pakistani businessman Shaheryar Chishty through his offshore firms. The notice alleges that Chishty gained control of the holding structure without making mandatory disclosures or public offers, and it accuses him of misappropriating approximately PKR 10.35 billion.
The investors also blame the Securities and Exchange Commission of Pakistan, the State Bank of Pakistan, and the Federal Investigation Agency for failing to take enforcement action despite detailed evidence, arguing this represents discriminatory treatment compared to the strict scrutiny they themselves have faced.
