Rental power dispute settlement: Reward for those who helped country save $1.2bn

ISLAMABAD: The federal government has reportedly decided to pay a reward of Rs 2 million to each member of the Core Committee, except the officer who represented the Power Division for unearthing corruption in M/s Karkey Rental Power Project which led to a saving of $ 1.2 billion.

The officers who will be rewarded financially are, (i) Ahmad Irfan Aslam, Consultant/Head of International Dispute Unit, Office of the Attorney General for Pakistan; (ii) Brig. Rana Arfan Shakeel Ramay, Sector Commander, ISI and; (ii) Col. Farooq Shahbaz, ISI.

However, according to sources, the only member of the Core Committee from civil service, the then Joint Secretary, Power Division, Zargham Eshaq Khan, who reportedly played an equaling importantrole in investigation and settlement, is being deprived of the reward. His name was recommended by the Attorney General for Pakistan, but the Prime Minister’s Office, excluded his it.

Ministry of Law and Justice, in its summary to the Cabinet, stated that to overcome energy crisis in the country, the federal government instituted the Rental Power Project (RPP) Policy as a fast track solution.

Pursuant to this Policy, a Turkish company namely Karkey Karadeniz Electrik Uterim (Karkey) was awarded a contract for supply of electricity from power generation ships docked at Karachi on September 08, 2008.

Supreme Court of Pakistan, on March 30, 2012, held that all rental power projects, including Karkey, had been commissioned in violation of Public Procurement Rules and were void ab initio. Subsequently, on May 29, 2013, Sindh High Court ordered the arrest of all Karkey’s vessels.

On September 16, 2013, Karkey instituted arbitral proceedings before International Centre for Settlement of International Disputes (ICSID) under Pakistan-Turkey Bilateral Investment Treaty, 1997 (BIT). On August 22, 2017, the tribunal held that the Supreme Court decision had amounted to expropriation of Karkey’s investment and thus Pakistan had violated its BIT obligations. The Tribunal further awarded Karkey damages of $800 million plus interest. On December 01, 2019, this amount, inclusive of interest, was S1.2 billion.

Subsequent to the award and in pursuance of the approval of the Prime Minister, the Power Division set up a Committee on September 12, 2017 to steer this case. The Committee, in turn, entrusted the management of the case to a Core Committee comprising the following:— (i) Ahmad Irfan Aslam, Consultant/Head of International Dispute Unit, Office of the Attorney General for Pakistan;(ii) Brig. Rana Arfan Shakeel Ramay, Sector Commander, ISI;(ii) Col. Farooq Shahbaz, ISI and ;(iv) Zargham Eshaq Khan, Joint Secretary, Power Division.

The Core Committee came up with the following strategy for the case;(i) initiating investigation into grant of contract to Karkey and to challenge the ICSID Tribunal's decision on evidence of corruption, if found;(ii) resisting enforcement of the award in domestic courts of countries where Karkey had initiated enforcement proceedings, including the US, the UK, Canada, France and the Netherlands and ; (iii) engaging with Karkey to explore possibilities of an out-of-court settlement.

The investigations conducted by the Core Committee led to uncovering of evidence of corruption in Turkey, Switzerland, Lebanon, Panama and Dubai (the UAE). This evidence was presented to the ICSID Tribunal by the Core Committee. Faced with undeniable evidence of corruption and on personal intervention by the Turkish President, Karkey decided to forego its claim of $ 1.2 billion and settled the dispute at zero cost to Pakistan.

This deal of settlement at zero cost to Pakistan was presented to the Prime Minister on November 04, 2019 and to the Federal Cabinet on December 05, 2019. The Federal Cabinet approved the terms of settlement.

This settlement was achieved by the Core Committee’s tireless efforts. The settlement saved Pakistan a sum of $ 1.2 billion. According to one study, if this sum had been paid, Pakistan’s GDP would have shrunk by nearly 2% and Pakistan would have defaulted on its international obligations.

The Attorney General for Pakistan (AGP), in his letter of November 6, 2019, had recommended awards and reward to the members of the Core Committee. Prime Minister in his order of November 8, 2019 had accorded approval, in principle, to the proposal of the AGP and desired that a formal summary in this regard be initiated by the Ministry of Law and Justice.

On August 14, 2020, the President on the advice of the Prime Minister conferred civil award of Sitara-e-Imtiaz on three officers of ISI, who played a pivotal role in successful settlement of the Karkey dispute.

The sources on this Ministry’s Note of October 20, 2020 said that the Prime Minister has agreed with the views of Finance Division and directed that the proposal for award of Rs. 2 million to each officer of ISI and Attorney General’s Office may be placed before the federal cabinet, being the forum competent to grant honorarium, for its decision in terms of Rule 9(9), read with Rule 46(b) of the Fundamental Rules.