ISLAMABAD: Orient Power Company (Private) Limited is ready for an out-of-court settlement with Sui Northern Gas Pipelines Limited (SNGPL) to clear approximately Rs800 million awarded against the former by the London Court of International Arbitration (LCIA), it was reliably learnt Sunday.
Orient Power Company’s CFO Kashif Bashir Rana while talking to Pakistan Today said that the company is prepared to pay the pending amount to SNGPL on same terms and conditions which it had offered to SNGPL in 2017. However, he said that SNGPL has so far remained willing to settle the matter on its own terms and conditions while the case is in the court. “We are ready to settle the matter through an out-of-court settlement,” said the CFO.
Orient Power, in a letter to the Ministry of Energy Petroleum Division Director General, dated January 15, 2019, said that in 2011, a dispute arose between Orient and SNGPL. The matter was referred first to Justice (r) Khalil ur Rehman Ramday, who decided the matter in favour of Orient and awarded Rs300 million plus interest to the company. SNGPL refused to accept the expert order and the matter was taken to international arbitration. LCIA in March 2016 decided the matter in favor of Orient.
In addition to this award, LCIA awarded Rs229 million to Orient. In the same dispute, similar amounts were awarded to two other Independent Power Producers (IPPs) taking the total awarded amount against SNGPL to over Rs650 million plus cost and interest thereon. SNGPL refused to accept and implement the LCIA awards for all three IPPs including Orient and reiterated that until and unless the award is enforced through local courts they will not accept this award. SNGPL also challenged the LCIA award in local courts and obtained certain stay orders.
Another dispute arose between Orient and SNGPL related to SNGPL’s claim of ‘Take or Pay’ (without having supplied gas) and Orient’s counterclaim against SNGPL for its failure to supply gas during the firm’s allocation period. The matter was referred to Justice (r) Khalil ur Rehman Ramday as an expert in the matter. The gas not taken by Orient was sold to other customers by SNGPL and SNGPL received payment for the same gas from such customers. The expert in June 2014 decided all the matters in favor of Orient.
Justice Ramday categorically stated that under the laws of Pakistan, SNGPL can only be entitled to forfeit the payment without supplying gas to the extent it has “suffered an actual loss in sale of this gas to others and it has to demonstrate the actual loss”. Since SNGPL has not suffered any loss, therefore, is not entitled to any ‘Take or Pay’. As for Orient’s counterclaim, the expert awarded Rs300 million plus interest thereon.
The CFO in his letter to the DG Gas also advocated that SNGPL had refused to accept the expert determination and challenged the same in London Court of International Arbitration (LCIA). LCIA issued the award in February 2017. LCIA decided the matter of ‘Take or Pay’ in favor of SNGPL ignoring the concept of “demonstration of actual loss” in Pakistan law and on the issue of SNGPL’s failure to supply gas during the firm delivery period, decided the same in favor of Orient.
It has also been learnt from the letter that despite the fact that SNGPL had itself first challenged the March 2016 LCIA award in local courts, Orient was prepared to settle and close both these issues by paying the original amounts without going through the local courts’ process. SNGPL again declined to implement the LCIA awards.
Orient’s CFO also raised the issue before the DG, petroleum division that had SNGPL settled this with Orient, this would have resulted in a net payment of Rs407 million to SNGPL plus interest in 2017. Orient, therefore, had no choice but to file in local courts which it did in 2017. The court had stayed the LCIA decision and matters are pending.
In the LCIA award of February 2017, LCIA awarded interest at 6 per cent on payment owed by each party to the other. SNGPL in total disregard of this LCIA award continues to charge interest at 24 per cent on ‘Take or Pay’ amount under the award and at the same time has refused to pay or even acknowledge the amounts it owes to Orient under the same LCIA award.
It is relevant to mention that currently, all the above-mentioned matters are pending in local courts and Orient will fully implement the final decisions of the Pakistani courts and expects SNGPL to do the same.
