In a recent turn of events the International Centre for Settlement of Investment Disputes (ICSID) suspended an award worth over $860 million (Rs120 billion) in favor of Turkish power company Karkey Karadeniz Elektrik Uretim. ICSID had made the award to Karkey after their contract was canceled by Government of Pakistan because the Supreme Court declared all RPPs contract void ab initio.
According to sources Pakistan has gathered fresh ‘evidence of corruption’ in the procurement of a rental power project (RPP) contract by the Turkish company. It is believed that by presenting this fresh evidence of corruption, Pakistan will establish that Karkey engaged in systematic corrupt practices to obtain a contract worth over $550 million for the supply of electricity. If this evidence is accepted, the whole award could be set aside by the tribunal. Pakistan has also engaged new legal representation – GST LLP – to contest the revision proceedings before the ICSID. In 2014, Pakistan hired Allen & Overy, a global law firm. Earlier, Pakistan had paid £200,000 (Rs36 million) to London-based firm BLP, but government officials including senior legal experts felt the firm was not properly contesting the case at the ICSID.
Aggrieved by the SC’s verdict, Karkey had initiated proceedings in ICSID under Pakistan Turkey Bilateral Investment Treaty in January 2013. Karkey claimed that the SC decision had amounted to expropriation of its investment in Pakistan, which violates the provisions of the Pakistan-Turkey Bilateral Investment Treaty. On August 22, 2017, ICSID issued an award in favour of Karkey according to which Pakistan had to pay damages amounting to more than $800 million, along with $5.6 million (Rs 590 million) per month as interest to Karkey.
Although Pakistan has a very strong case, previous record shows that around 600 parties have approached ICSID for the annulment of an award since 1960, and only 17 have been successful in getting revisions.