ISLAMABAD, Feb 14: Pakistan is expected to allow power sector dispute settlements through international arbitration at a neutral venue like England, instead of Pakistan's local judicial system , to provide confidence to the foreign investors in the country as it seeks investments for this sector, it is learnt.

"Regrettably, in fact, in consequence of various relatively recent Pakistani judicial decisions notably by the Supreme Court in the Hubco and Kapco cases, the confidence of foreign investors in Pakistan's legal/judicial processes appears markedly to have diminished," says an official summary.

The reconstituted board of directors of Private Power and Infrastructure Board (PPIB) is expected to meet here on Tuesday to approve this summary in addition to expansion of the PPIB through induction of at least four senior and project managers.

The move takes place at a time the government of Pakistan starts next week the process of international competitive bidding to seek foreign investment in 1,400-mw power projects worth $1.5 billion to overcome power shortages.

A senior government official told Dawn the reason for international arbitration at a neutral venue, and English laws as the governing law, is the lack of investor confidence in Pakistani judicial processes, which has not improved at all.

Furthermore, major international participants in the power sector all over the world are accustomed to international arbitration and neutral venue which has now become virtually standard international practice for developing countries like Pakistan. Deviation from this practice or principle is a strong potential disincentive for international investors in Pakistan's power sector, the board members have been told.

In February 2002, President General Musharraf, the official said, in his capacity as chief executive issued a letter apparently restricting the governmental entities from stipulating international arbitration and neutral venues in all future commercial contracts.

The PPIB has informed the board that if international arbitration at the neutral venues was denied to foreign investors, PPIB would be unable to procure future foreign investments.

The PPIB has already sought a definitive clarification from the law ministry as to the interpretation of the said directive and to ascertain its inapplicability to past, present and future "security package agreements".

The PPIB says that it has committed with the investors to provide international arbitration at neutral venue and under the English law and hence appropriate modification from the highest executive authority to the earlier directive should be obtained immediately.

The board of directors would also be updated on arrangements made for holding international competitive bidding (ICB) for three gas-based power projects - 500mw at Uch, 450mw at Faisalabad and 350mw near Chichoki Malian, Lahore - in Dubai next week and in London early next month. The board will also approve Rs123 million budget for holding these two conferences in Dubai and London.

The PPIB board will also approve expansion of PPIB by inducting four project directors and creating a new coal section in view of emerging investments in coal-based power projects on a permanent basis.

Further, the PPIB would also be empowered to appoint international advisers, local legal advisers, financial and technical advisers to process ICBs for the three upcoming projects.

The board will also allow the PPIB to complete processing of proposals for power sector investments which are under evaluation and then take a decision whether to accept or reject them.

The PPIB is also expected to be allowed to return to the investors the proposals for 600-mw Hawksbay and 300-mw Gadani power projects along with received fee of $18,700 and also to return unsolicited and unprocessed raw site proposals for five projects along with their fee of $2,500.

The government had reconstituted the PPIB board of directors in December 2004 by inducting seven private and semi-private sector members to process IPPs on a fast track basis purely on commercial lines.

The reconstituted 15-member board is headed by minister for Water and Power. Five provincial and AJK secretaries, general manager of Wapda and chief customs tariff of CBR have been replaced by semi-private sector members.

The seven members from the federal government include secretaries of water and power, finance, board of investment, petroleum and natural resources, member infrastructure of the planning commission, chairman Wapda and managing director of the PPIB.

The seven semi-private sector members include Chairman of SECP Dr. Tariq Hassan, Managing Director PSO Tariq Kirmani, member of Smeda Shahzad Alam, Managing Director PICIC Mohammad Ali Khoja, President of FPCCI, a Citibank representative Alman A. Aslam and former chairman State Engineering Corporation (SEC) Hussain Siddiqui.