Pakistan to pay $ 165 million for Out of court settlement of Karkey dispute


PM Imran Khan in his tweet informed the nation that the dispute of Rental Power Project with M/s Karkey has been amicably resolved and saved Pakistan from paying the $1.2 billion penalty imposed by the International Centre for Settlement of Investment Disputes (ICSID). Pakistan has agreed to pay $ 165 million to Turkish company M/s Karkey Karaddeniz Electric Uretim.

According to sources a committee comprising Joint Secretary (Power Finance) Zargham Eshaq Khan, two senior officers of Inter-Services Intelligence (ISI) and an officer from Attorney General’s Office made more than ten visits to Turkey to meet the officials of M/s Karkey Karaddeniz Electric Uretim, where the company’s officials were shown documents which proved that kickbacks were involved in the contract.

After the out of court settlement the Turkish firm has been given a guarantee in writing that GoP or NAB will not take any further action against the company or its representatives in Pakistan.

M/s Karkey had set up a 332 ship-mounted Rental Power Project (RPP) at Port Qasim, Karachi, pursuant to Rental Power Policy 2008. M/s Karkey entered into Rental Services Contract (RSC) on April 23, 2009 for generation of electric power with the Lakhra Power Generation Company Limited (LPGCL). Pursuant to the terms of the RSC, the GoP issued a sovereign guarantee to secure payment obligations of LPGCL and Karkey achieved commercial operations in April 2011. In the meanwhile, the Supreme Court in exercise of its original jurisdiction initiated suo motu proceedings against RPPs and through its detailed judgment of March 30, 2012, declared all RSCs void ab initio, being illegal and against public policy.