Pakistan is facing a potential $2 billion international arbitration after Saudi and Kuwaiti shareholders of K-Electric issued a formal notice to the government under the OIC Investment Agreement, Business Recorder reported, citing official sources. If it proceeds, it would be the third major arbitration case in the power sector after the Halmore Power Company and Star Hydropower disputes.
The notice was sent by international law firm Steptoe LLP on November 12, 2025, following an earlier dispute notice dated October 20.
The investors said they had proposed negotiations or conciliation but had received no acknowledgment or response from any government representative within the stipulated three-week period.
In its letter, Steptoe wrote: “Our clients now intend to proceed to arbitration in accordance with Article 17(2) of the OIC Investment Agreement. We shall write to you shortly identifying the name of the arbitrator our clients intend to appoint.” The firm stated that initiating arbitration had become necessary due to continued financial, regulatory and reputational harm to its clients’ investment in Pakistan.
The notice cited the non-implementation of NEPRA’s 2025 multi-year tariff, the government-directed review petition filed by CPPA-G, worsening liquidity pressures on K-Electric because of delays in tariff differential subsidies, and a lack of action by SECP, the State Bank of Pakistan and the Federal Investigation Agency over alleged regulatory breaches. The investors also raised concerns over the loss of governance rights, particularly efforts to alter the company’s management despite court orders.
The firm attached a separate letter sent by AJPL and Denham to K-Electric’s board on November 9, objecting to attempts to convene a board meeting and change the CEO. They argued that such actions would violate Sindh High Court orders and further diminish the value of their investment. According to the notice, government-nominated directors were aware of these developments but took no steps to prevent them.
The investors warned that unless the government appoints an authorised representative for immediate settlement talks by close of business on November 14, they will move ahead with constituting the arbitral tribunal as provided under Article 17(3) of the agreement. It remains unclear whether the government has responded.
Steptoe reiterated that its clients reserve all rights under international and Pakistani law and urged the government to engage constructively and in good faith to avoid escalation into full arbitration.
