Karkey dispute resolved

It was another sign of relief when Prime Minister Imran Khan announced that the Karkey case involving a Turkish power company has been amicably resolved and the country has escaped a hefty penalty

Pakistan has been absolved of paying the $1.2 billion fine imposed by the International Centre for Settlement of Investment Dispute (ICSID) – a World Bank body responsible for settling trade disputes – with the help of Turkish President Erdogan.

The prime minister has congratulated the government’s negotiating team for doing an excellent job, but has not provided any details of how the dispute was resolved. PM Khan had personally requested Erdogan to resolve the lingering dispute as Pakistan’s ailing economy cannot afford to pay such a hefty fine.

The dispute dates back to 2008 when the PPP government signed deals with twelve power companies -including Karkey to resolve the power crisis under the Rental Power Plants (RPP) scheme. The policy stoked controversy as former prime minister Raja Pervaiz Ashraf is still embroiled in corruption cases.

Eventually, a ship-mounted power plant was brought to Karachi in April 2011 but failed to generate the required 235 megawatts electricity at exorbitant rates. This was a serious breach of contract and NAB filed a reference case against the Turkish company.

Karkey sought international arbitration in 2013 after the deal was terminated on the orders of Supreme Court Chief Justice Iftikhar Chaudhry. In August 2017, ICSID made the award to Karkey imposing the exorbitant fine on Pakistan.

This is certainly a huge victory for the government and good news for the nation. Finance adviser Hafeez Shaikh has said the amount saved can be used for development projects and provision of services to the public. The government has hailed the success claiming that international institutions have confidence in the prime minster.

Pakistan has resorted to an out-of-court settlement on the international disputes where the country faces huge penalties. This includes the Reko Diq case involving the Tethyan Copper Company which imposed $5.9 billion litigation imposed on our country. The company has agreed to a negotiated settlement with Pakistan.

These disputes arise due to the parallel power centres and clash of state institutions. Foreign companies are reluctant to invest in counties with inconsistent policies. Pakistan has been rescued due to strong relations with Erodgan, but is imperative that institutions play their constitutional role and make the country safe for foreign investment.