ISLAMABAD - Karkey Karadeniz Electricity Production Corporation (Karkey) has filed a memorial to the World Bank’s International Centre for Investment Disputes (ICSID) claiming $2.1 billion damages against government of Pakistan.
The filing of the claim with ICSID signals not only a significant move in advancing the arbitration forward but also ranks as one of the largest claims filed to ICSID, the Washington DC-based arbitration body.
The claim was filed on January 31 this year. According to Karkey statement an independent international expert has estimated the total amount of damages Pakistan may be liable to pay to Karkey as a result of unlawfully detaining the company’s power ships and energy-producing vessels. Karkey is seeking compensation from Pakistan for breach of its obligations under the bilateral investment treaty (BIT), breaches of international law, and defiance of ICSID provisional measures order, in connection with Karkey’s investment in a rental power project (RPP) in Karachi.
In response to its treatment by Pakistani authorities, including the ongoing detention of four of its vessels, the Turkish energy firm, Karkey Karadeniz Elektrik Uretim AS (Karkey), had registered a claim with the World Bank-affiliated International Centre for Settlement of Investment Disputes (ICSID) against the Government of Pakistan early in 2013.
The initial contract value of Karkey’s Powership operations in Pakistan was USD 560 million for the duration of five years. The claims amount as calculated by experts’ sums up the damages obtained as a result of the loss of earnings and costs associated with the detention of its vessels. Karkey’s vessels have been detained in Pakistan since April 2012, and prevented from being redeployed to other productive destinations where countries in need have been asking and waiting for these power ships, causing Karkey enormous financial harm.
However, the Supreme Court ordered NAB to demand additional monies from Karkey allegedly without any just or legal basis. In response, NAB continued to detain four of Karkey’s ships in Pakistani waters, and - allegedly without any legitimate basis or justification - demanded approximately $128 million from Karkey, which Karkey does not owe Pakistan, according to statement.
Moreover, the vessels are exposed to accelerated deterioration and perils in their current locations, resulting in an ICSID Arbitration Board decision on 8 October 2013 to release the Turkish-flagged powership Kaya Bey to Dubai to undergo maintenance.
However, according to statement, the Pakistani government has not complied with ICSID’s demands and continues to detain the vessel.
Karkey’s investments in Pakistan originated when the authorities announced an international competitive bid for energy firms to provide relief from continuing power shortages through the use of rental power projects (RPP). Karkey won one of the bids and sent four vessels, including two of its Turkish-flagged powerships, supplying 232 Megawatts of power to Pakistan.
However, as per the statement, after 11 months of Pakistan’s failure to cure its default, Karkey discontinued providing services without payment and ultimately was forced to terminate the contract due to Pakistan’s failure to perform and defaults, including its failure to honor its sovereign payment guarantees.