Pakistan might be fined after embarrassing outcome in international litigations

ISLAMABAD: Pakistan might have to pay a hefty fine of around Rs85 billion in the coming months as the country met an embarrassing outcome in several international litigations.

The latest came when London Court of International Arbitration (LCIA) directed Islamabad to pay Rs11 billion claimed by and independent power producers (IPP).

The federal government has been heavily engaged in international arbitrations, where it has paid around Rs3 billion since 2013 to several law firms and lawyers.

In several background meetings with senior officials associated with international arbitrations, this correspondent learnt that Pakistan has paid millions of dollars to around a dozen law firms and lawyers to plead cases, including those of Indian spy Kulbushan Jadhav, Karkey rental power plants’, Reko Diq mining, Kishanganga hydropower project, Progas LPG, Hubco Power, Sapphhire Electric and Halmore Energy. But not a single victory has been conceded by the hired legal teams so far.

Another tribunal will start proceedings a case to determine the quantum of rest of the damages claimed by nine companies of the IPPs for which a hearing is scheduled for next month, a cabinet member told The News. “Claims’ amount may go up after a new quantum stage is set up,” he feared.

The International Centre for Settlement of Investment Disputes (ICSID) awarded some US$700 million to Karkey Karadeniz Elektrik Uretim after a Turkish filed damage suit against Pakistan. The incumbent foreign affairs minister, Khawaja Asif, approached the Supreme Court against the contract awarded by the previous government to Karkey. Pakistan met another embarrassing situation when International Court of Justice ruled against Pakistan by putting stay on execution of Indian spy Kulbushan Jadhav. “Pakistan made a mistake in Jadhav’s case,” Justice (retd) Shaiq Usmani observed. "It [Pakistan] has shot in its own feet. It’s Pakistan’s mistake to have appeared there. They shouldn't have attended [this proceeding].”

Similarly, Islamabad and New Delhi failed to reach any agreement on the Indus Waters Treaty (IWT) last week. Both neighbours held talks on this issue in Washington where Islamabad apparently could not convince the arbiters about its objections against the designs of Ratle and Kishenganga hydroelectric power projects in Indian-occupied Kashmir.

“We need to settle with foreign investors in order to attract investments – recent embarrassments at international forums are alarming for us,” admitted a cabinet member, requesting anonymity. “Supreme Court’s orders in the Karkey case was perhaps disregarded by international forums –top court also need to be careful in commercial matters, particularly in our international commitments.”

While shedding light on the reasons that led to this failure, the cabinet member said hesitation of various departments to develop a consensus on resolving the matter is responsible for this outcome. “The government generally engaged good legal teams but [even] the best ones cannot make up for lapses of their clients.” 

Ministries of water and power, and law and justice did not offer their comment on this development by saying, “reports pertaining to international arbitrations are not factually incorrect. We are consulting with our legal teams and respond accordingly.” 

Zahid Hamid, Minister for Law and Justice, also did not comment despite attempts.

Another senior official associated with ministry of law and justice was of the view that the government did not avail its newly passed laws pertaining to ‘Mediation Act,’ which provides a window for setting up a panel of retired judges to resolve such issues. In IPPs and Karkey and several other cases, he recalled, international investors have repeatedly been requesting for settlement on win-win terms but traditional indemnity of civil servants remained a major stumbling block in the way of avoiding current billions of rupees loses to national exchequer. 

The official, who was not authorised to speak to media, said that civil servants have concerns that if they settle for lesser amount, then institutions like the National Accountability Bureau (NAB) will come after them. Therefore they hesitated and arbitration moved on resulting into adverse orders.

Ahmer Bilal Soofi, ex-law minister (caretaker), maintained that it was necessary to contest all international cases fully, but there should be a strategy. “My experience is that in most of such cases, international investor is keen to talk to someone in the government and find a resolution even before filing claim. Officials remain reluctant to negotiate and settle for fear of subsequent NAB’s inquiry against them,” Mr Soofi, an authority on international laws told this correspondent. 

Further negotiation requires coordination and consensus of several ministries, provincial governments, PM Secretariat, etc, which takes enough time while arbitration processes move on and final orders or awards are issued, he added. 

That weakens bargaining power of the government, he said, adding, “It is important to recognise that all claimants are actually foreign investors and if we resolve and settle claims we encourage other foreign investors to invest in economic zones of Pakistan and that will also act as a positive balancing factor here.”