Pakistan loses $100 million in Investment Protection Treaties
By Rafaqat Ali
ISLAMABAD, May 19: Pakistan has been robbed of US$100 million, and three claims totalling approximately US$970 million are pending with the International Centre for Settlement of Investment Disputes (ICSID).
The situation is so grim that Pakistan’s foreign assets, including its reserves with the Reserve Bank of America, PIA’s fleet, ships of PNSC, and its embassies, are at risk of being forfeited on the orders of the ICSID.
At present Pakistan has investment protection treaties with 43 countries of the world, the majority of which were signed in the nineties, without properly defining the term “investment”. Even, a company which was hired to provide pre-shipment inspection “services”, has filed a claim for US$120 millions with the ICSID.
Unlike other countries, Pakistan has never protected its foreign assets. If a suit was decreed by the ICSID, the other party could ask for the execution of the treaty by identifying Pakistan’s assets.
In the case of a French firm, which was contracted to build the Jinnah terminal at Karachi Airport, the Civil Aviation Authority had first joined the ICSID proceeding in Singapore, but backed out later, saying that it was too expensive. The ICSID issued an ex-parte decree directing Pakistan to pay US$100 to the company. The suit, however, was set aside by the Sindh High Court.
But when the French government threatened that Pakistan’s foreign assets could be confiscated to realize the claim, Pakistan, in total disregard to the SHC order, signed a loan agreement for US$100 million with the French government to pay the entire amount to the company.
At present three claims worth US$970 million are pending before the ICSID. The Italian company, Impreglio, working at Ghazi Brotha project had approached the ICSID after developing disputes with Pakistan. Efforts are afoot to reach a settlement.
The Swiss Company, SGS, which had been contracted to provide pre-shipment inspection services, has also approached the ICSID, with a claim of US$120 million.
Similarly, Turkish company Bayinder, which was contracted to build the Peshawar-Islamabad Motorway, has filed a claim for US$400 million.
The official sources say that irrespective of what would be the outcome of the claims with the ICSID, participation in the proceeding was so expensive that countries like Pakistan usually avoid appearing.
When a complaint is registered with the ICSID, both the parties are required to deposit US$100,000 as fee apart from engaging foreign lawyers who specialize in the ICSID proceeding, mostly held in foreign countries.
Those dealing with the issue feel that Pakistan can protect its interest by properly defining the term “investment” and that any decree would be executed through Pakistani courts.
They further suggest that a definition of the word “investment” provided in the Foreign Investment Act 1977 should be made applicable. According to that only that money which was brought in for establishing any factory, or for use in the exploration activity in Pakistan, would be called “investment”.
The official sources confirmed that when it comes to the rectification of an investment treaty with any country the cabinet hardly takes two to three minutes to do that.
The present government too has singed five investment protection treaties; of which three disputable claims are with the ICSID awaiting settlement.
The counties with which Pakistan has investment treaties are Germany, Romania, Sweden, Kuwait, France, South Korea, the Netherlands, China, Uzbekistan, Tajikistan, Spain, Turkmenistan, the United Kingdom, Singapore, Turkey, Portugal, Malaysia, Switzerland, Kyrgyz Republic, Azerbaijan, Bangladesh, UAE, Iran, Indonesia, Tunisia, Syria, Denmark, Belarus, Mauritius,Italy, Oman, Sri Lanka, Australia, Japan, Belgium, Qatar, the Philippine, Yemen Arab Republic, Egypt, Opec Fund, Lebanon, Morocco, and Bosnia & Herzegovina.
