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Karkey asks Pakistan to settle dispute

The Turkish power generation company Karkey, which succeeded in getting an order from International Centre for Settlements of Investment Disputes (ICSID) for release of one of its ships, says a new opportunity has arisen for Pakistan to amicably settle the dispute arising out of company’s rental power project (RPP) in Karachi.

Karkey is seeking compensation from Pakistan for breach of Pakistan’s obligations under the BIT in connection with its investment in the RPP project, as well as for loss of earnings and costs associated with Pakistan’s detention of its ships.

In its hearing on October 8, 2013, the ICSID tribunal ruled that Karkey’s Karadeniz Power ship Kaya Bey, registered under the Turkish flag, should be immediately released from detention and allowed to sail to Dubai for repairs. The tribunal ruled that the State of Pakistan shall grant all authorisations and clearance required for the vessel’s departure, and shall take any other action necessary or required to allow the vessel to depart lawfully into international waters.

Karkey welcomed the decision as on its request for Provisional Measures by the tribunal established under the World Bank-affiliated ICSID. But Karkey spokesperson expressed fears that Pakistani authorities could “fabricate” further charges against Karkey to hide their own wrongdoings.

The spokesperson said the ICSID decision vindicates their position that the tribunal clearly has jurisdiction under the Turkey-Pakistan Bilateral Investment Treaty (“BIT”), and that recourse to Pakistani courts is not mandatory under the BIT. This is especially important since Karkey has opted to enforce its rights and remedies at ICSID due to lack of fair and equitable treatment and due to denial of justice in Pakistan.”

In its decision, the tribunal ruled that it is satisfied pursuant to Article 25(1) of the ICSID Convention that it has prima facie jurisdiction, and has ordered the immediate release of Karadeniz Power ship Kaya Bey (Karkey’s largest Power ship and one of four Karkey vessels that has been illegally detained in Pakistani waters since April, 2012).

The spokesperson also stated that “In light of the decision, a new opportunity has arisen for Pakistan to amicably settle the dispute, especially considering the findings therein regarding the jurisdiction of the tribunal and ICSID.”

The dispute has reached the highest levels of government and was discussed during the recent visit to Turkey of Nawaz Sharif, Pakistan’s prime minister. The prospect of enhanced bilateral cooperation in the energy sector, as desired by both governments, has been dimmed by the long-running legal dispute.

Despite Pakistan’s own admissions that there is no evidence of corruption by Karkey, including such statements in the review petition filed by the Ministry of Water and Power with the Supreme Court of Pakistan and the “No Objection Certificate” issued by the National Accountability Bureau (NAB), Pakistan itself, under the pressure of the Supreme Court, has continued to aggravate the dispute and has unlawfully demanded baseless sums from Karkey, in addition to detaining Karkey’s power ships, the spokesperson said.

Since the new Pakistan government was elected in May 2013, the NAB has continued its inquiries into the RPP projects, and it is expected that Pakistan, in order to conceal its own wrongdoings and contrary to its previous exoneration of Karkey, may fabricate further charges against Karkey, the statement added.

The company spokesperson said that “increased economic cooperation between Turkey and Pakistan is in both countries’ best interest. This unnecessary dispute has clouded the climate for bilateral cooperation and damaged investor and business confidence. We hope it can be settled quickly and fairly, preventing it from becoming an obstacle to successful future Turkish collaboration with the Government of Pakistan in the energy and other sectors.”

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