LAHORE: Turkish energy company Karkey Karadeniz Elektrik Uretim on Wednesday approached the D.C Federal judge to confirm the $846 million arbitration award issued to Pakistan for detaining power generation vessels used during a power crisis in Karachi. The Turkish firm has now demanded that Pakistan must pay as the court stay order is now over.
Stating a violation of a joint investment treaty with Turkey, Karkey Karadeniz Elektrik has requested immediate recognition and enforcement of the award handed down by the International Centre for Settlement of Investment Disputes (ICSID) in August 2017, directing Pakistan to pay over $800 million for expropriating some of Karkey’s investments, including the Karadeniz Powership Kaya Bey, a floating marine vessel that generated power during the power crisis in Karachi.
According to Karkey’s statement, Pakistan is seeking to annul the award and had initially secured an enforcement stay, but that pause is now over. “Since the stay of enforcement of the award has been terminated, Pakistan is obligated to voluntarily and immediately comply with the award,” Karkey said. “Pakistan has not done so. As a result, Karkey is entitled to seek recognition and enforcement of the award pursuant to Article 54 of the ICSID Convention.”
Following the severe energy crisis faced by Pakistan during 2006 and 2007, the government of Pakistan began to explore power generation through rental power projects and Karkey subsequently became one of the successful bidders to provide power generation services to Pakistan.
Karkey had originally been awarded a $560 million contract for power ship operations in Pakistan to overcome the country’s power crisis. This contract had been for the provision of power generation vessels for the port city of Karachi in 2009 and was part of the famous “rental power projects” managed under former prime minister Raja Pervez Ashraf.
However, following serious corruption allegations, the Supreme Court of Pakistan voided the related contracts in 2012. Karkey claims that following this development, Pakistan detained four Karkey ships.
The ICSID tribunal ordered Pakistan to immediately release Karadeniz Powership Kaya Bey, however, the company pressed Pakistan for more than $2 billion in compensation related to its breach of the investment treaty, lost earnings and costs associated with detention.
The tribunal held in August concluded that Pakistan had indeed violated the investment treaty and ordered Pakistan to pay Karkey for outstanding invoices, unpaid contractual obligations, repair costs, lost revenue, replacement of other detained vessels and other indirect losses. The award also required Pakistan to pay for legal costs and interest applied from the date of the treaty violations.
The tribunal initially ordered Pakistan to pay $501 million, however, due to nonpayment and accumulation of interest, the total has grown to nearly $846 million, according to the company’s latest press release.
According to a report of the Global Arbitration Review (GAR), Pakistan filed an application for annulment with the ICSID on November 7, which was aimed at trying to quash a final award in favour of Karkey Karadeniz Elektrik Uretim.
Pakistan’s loss in the case against Karkey had first come about in September 2016, when the Attorney General of Pakistan (AGP), which coordinated the arbitration proceedings and the Power Division under the Ministry of Energy separately, confirmed that the arbitration by the ICSID of the World Bank had gone against Pakistan.
Karkey states that following Pakistan’s attempt at annulment of the award and initially securing a provisional stay of enforcement, the provisional stay ended on June 15 and now Pakistan needs to pay up.
