Saturday June 22, 2024

Pakistan facing $1b default threat in dispute with Karkey

By Mehtab Haider
June 19, 2018

ISLAMABAD: In a major blow, Pakistan will be facing a threat of default to the tune of $950 million to $01 billion this week. It will be on account of damages and per day penalty slapped by the International Centre for Settlement of Investment Disputes (ICSID) of the World Bank on a complaint, filed by Karkey Karadenis Elektrilk Urentim AS, a Turkish company on breach of agreement against Islamabad.

Now the caretakers led by Justice (R) Nasirul Mulk led regime is literally forced to live among the devil and deep sea if Islamabad opts to pay damages of $800 million as well as per day penalty (which comes close to $01 billion now), it will be violating the order of the Supreme Court (SC) as the apex court had declared this rental power project as illegal, and if it does not pay damages, it will cause default within this week. The Karkey will be in position for filing a law suit in any part of the world for seizing assets of Pakistan in that particular country.

“We are in catch-22 situation and completely clueless about prevailing situation how to proceed further as we have lost this case at international forum of the ICSID, and now the stage of default will become effective within this week,” top official sources confirmed to The News here on Monday. Ironically, the law firm Allen and Ovary London, which was hired to defend two cases, including Karkey and Reko Diq case was paid over Rs04 billion from the national exchequer, but the country had to face defeat in both the cases at the ICSID forum. The hired law firm was paid hourly fee, so there is need to investigate whether proper due diligence was done or not for making such a huge payment, added the sources.

Pakistan did not get single watt of electricity in case of Karkey and no benefit accrued to Balochistan in case of Reko Diq, yet Pakistan may have to pay multi-billion dollars in damages to these companies. Who is responsible to this colossal loss to money of poor people of Pakistan? This matter requires thorough investigation from NAB and may not be allowed to be buried under the carpet.

The previous PML-N led regime had not flagged up this issue before the caretaker setup, so it was quite shocking and all of sudden, for the interim setup to get full details of this fiasco like situation.

Now, the caretaker premier was briefed on this matter about brewing up crisis last week as keeping in view dwindling foreign currency reserves, the country was not in position to pay close to $01 billion to Karkey on account of damages compensation. It also exposes and highlights that the country’s top judges were not equipped with international laws that sometimes creates highly unwarranted situation such as in case of Karkey and Reko Diq where now the country was heading towards paying heavy losses in terms of multi billion dollars because of decisions taken by judiciary. Karkey had filed the damages suit against Pakistan at the ICSID in February 2013 after the Supreme Court’s ruling in the Rental Power Projects case in 2012. Karkey was awarded a $560 million contract for power ship operations in Pakistan to overcome a spiraling power crisis in the country. The initial contract was for five years. However, former ministers Makhdom Faisal Saleh Hayat and Khawaja Asif had approached the top court against the contract awarded by the then PPP government. In 2012-13, then NAB prosecutor had attempted to settle the issue with Karkey, but the then chief justice Iftikhar Chaudhry had stopped his efforts and warned NAB officials of strict action in case a settlement was reached with the Turkish firm. Karkey’s case is not the only one where Pakistan had to bite the dust.

In the Reko Diq case, the ICSID dismissed Pakistan’s allegations of corruption against the Tethyan Copper Company Pty Ltd (TCC). Later, the TCC made a claim of $12 billion, but Pakistan’s rejected it. Now, there is need to ascertain who caused loss to national exchequer?