BRT project: PDA, contractors reach out-of-court settlement

PESHAWAR: The Peshawar Development Authority (PDA) and contractors involved in the Bus Rapid Transit (BRT) project have reached an out-of-court settlement.

As part of the agreement, the Khyber Pakhtunkhwa government will pay the contractors Rs2.6 billion against contractor’s original claim of Rs152.198 billion. The government claims that this would potentially save the national exchequer Rs150 billion.

In return for the payment, the contractors will withdraw their case from the International Court of Arbitration. Additionally, the National Accountability Bureau (NAB) will close its cases against the contractors. A summary has been moved for approval of the agreement by the provincial cabinet after which both the parties would ink it.

Government sources claim the province will suffer a huge financial loss if the International Court of Arbitration rules against the government. “The case, if subjected to international arbitration, could have escalated into another Reko-Diq situation for Pakistan,” an official said.

According to the local government summary, the amicable settlement will save the provincial government from the hassle of pursuing the case at the International Court of Arbitration and the associated legal expenses, potentially saving PKR150 billion and avoiding geopolitical and strategic damage to Pakistan and Khyber Pakhtunkhwa in case the arbitration is decided against the PDA. The PDA will pay Rs2.6 billion for all six reaches of the project against the contractor’s original claim of PKR152.198 billion.

The joint venture (JV) contractors will withdraw all proceedings and claims pending with the Dispute Resolution Board and the International Court of Arbitration. The NAB will close, withdraw and terminate all proceedings under Section 9(c) or 31(b) of the NAO, 1999, within sixty days of signing the settlement agreement, ensuring that such proceedings will not be reopened or revived in any manner.

Both parties will seek an early hearing in the Peshawar High Court and present this agreement for endorsement by all parties, including the NAB through its duly authorized representative. The PDA will release the contractors from any further performance or liability regarding the BRT project and issue the Performance Certificate under Clause 11.9 of the contract for the completed work.

Upon implementation of this agreement, all disputes and claims between the parties regarding the BRT project will come to an end, including audit paras, waiver of claims, liabilities, damages, rights and interests by or against both parties where these matters are sub judice.

PDA sources confirmed that the contractor’s case was strong, and the national exchequer was saved from a potential loss of around Rs150 billion. The cost of appointing one arbitrator was USD320,958 (Rs89,226,324) for both parties while appointing three arbitrators would have required a deposit of USD758,086 (Rs210.75 million). The KP government was unwilling to release the arbitration fee.

Credible sources stated that the agreement was reached after a series of meetings, with NAB officials also involved in the negotiations. A PDA official disclosed that the dispute was not resolved amicably between the two parties due to the NAB inquiries.

The joint venture contractors (SGEC-MAQBOOL-CALSONS-JV) invoked the provisions of the contract and approached the International Court of Arbitration on March 28, 2024, seeking Rs57 billion in outstanding disputed amounts for one of the six reaches.

If the claim had been accepted, the total cost of BRT Peshawar would have exceeded Rs200 billion. The contractors demanded payment for the increased scope of the project, frequent design changes, price escalation, delayed payments, financial charges, retention amounts, and interest on all outstanding amounts. The joint venture, consisting of Chinese and Pakistani companies, submitted an arbitration request to the Secretariat of the International Court of Arbitration, International Chamber of Commerce (ICC) in Paris, France.