PPP Senator Sherry Rehman on Wednesday expressed concern over an "undisclosed" $700 million fine allegedly imposed on Pakistan by the International Centre for Settlement of Investment Disputes (ICSID) in the rental power projects (RPP) case concerning a contract with a Turkish company.
Turkish ship-based energy firm, Karkey Karadeniz Elektrik Uretim (KKEU), was one of 12 rental power companies that were awarded contracts by the PPP government in 2009.
Karkey’s rental power plant, commissioned in April 2011, was brought to Karachi Port to provide electricity to the national grid under the then government’s RPP policy to overcome the energy crisis.
However, it failed to generate 231 megawatts of electricity as required under the agreement, although $9m was paid in advance as capacity charges to its management.
It produced only 30-55MW, and that too at a cost of Rs41 per unit, which was a serious breach of contract. This led to a 50 per cent increase in the refund claim by the government, from $80 million to $120 million.
The Karkey case took an adverse turn when a disagreement emerged between National Accountability Bureau (NAB) officials and other stakeholders over how much the Turkish firm should pay before leaving Pakistani waters.
A NAB inquiry showed that a deal had been struck with Karkey under which the latter would reimburse $17.5m to Pakistan, but the Supreme Court insisted on recovering $120m from the firm.
Then PPP MNA Makhdoom Faisal Saleh Hayat, in a letter, insisted on an amount of $243m, whereas Transparency International Pakistan put the amount at $210m. As such, no amiable solution was found.
The Supreme Court cancelled all contracts in March 2012 after learning about lack of transparency and the companies’ failure to produce power in the required quantity despite having received money in advance.
KKEU then moved the ICSID in 2013 seeking compensation of $700m for the losses incurred by its vessels in terms of damage or depreciation after it was not allowed to leave Karachi port for almost 16 months.
The ICSID website says the case between KKEU and Pakistan has concluded with an award being rendered by its tribunal on August 22 of this year. The amount of the award is not stated and there is no confirmation on the amount of the award.
An Express Tribune news report, however, quotes sources saying that the ICSID has awarded $700m (Rs74 billion) in the damages suit in a March 2016 verdict.
The sources claimed that the award was kept secret by the government, and that the Turkish firm was also requested to keep details of the award under wraps.
Speaking on the floor of the Senate today, Rehman said: "This was the very case that Khawaja Asif had taken to NAB against [former prime minister] Raja Parvez Ashraf as the famous rental power plant case."
The PPP leader claimed that Pakistan is losing taxpayer money in international arbitration "as a result of the PML-N not allowing the PPP to install power."
"The Turkish company KKEU had been awarded this contract to provide barges but the Supreme Court under Justice Iftikhar Chaudhry refused to allow even a settlement by the public prosecutor with the Turkish company. The company went to the ICSID for arbitration, and won the award," she added.
"Not only did the government conceal this fact since 2016, it also tried to cover up the fine of $700m that Pakistan will now have to pay now for suspension of the contract." Rehman claimed.
"When was the government planning to inform the Parliament and the people of Pakistan about this Rs74bn award?" Rehman asked.
"The absence of parliamentary oversight, especially in key international arbitration cases, is a major reason why Pakistan has been losing several important international cases," she said.
The PPP leader claimed, "Despite spending more than Rs1.3bn on legal fees to contest cases recently being adjudicated before the International Court of Justice, Pakistan’s success rate in international arbitration cases stands at a shocking 2pc."
"We need to address these issues, especially the importance of parliamentary oversight immediately, if we are to have a chance at winning our ongoing international cases," concluded the senator.
Questions over US embassy building in Islamabad
Jamiat Ulema-i-Islam-Fazl (JUI-F) Senator Hafiz Hamdullah today raised questions in the Senate over the construction of a seven-storey building for the United States embassy in Islamabad's Diplomatic Enclave.
Senator Hamdullah, on a call attention notice, wondered whether a "mini-Pentagon" was being built in the capital, and asked how the permission to construct a building which could be used for spying was granted by the Capital Administration and Development (CAD).
The CDA is the custodian of Diplomatic Enclave which houses embassies and foreign missions. The embassies often interact with the CDA for resolution of their municipal issues.
Responding to the notice, Capital Administration and Development Division State Minister Tariq Fazal Chaudhry said that the building was being constructed in line with approved blueprints, and that the Interior Ministry had confirmed that no instruments for spying or surveillance were being installed on the roof of the building.
Permission to construct an eight-storey building has also been granted to Bangladesh, Chaudhry said, adding that advanced surveillance equipment did not require rooftops anymore.
According to an audit report released by the AGP office earlier this week, the CDA had withheld the NOC [No-Objection Certificate] for the US embassy until approval from the prime minister, as the CDA can only sanction the construction of up to five-storey buildings in the area.
However, the US government went ahead with the construction of the seven-storey building without waiting for the premier's approval, DawnNews reported.
"Despite pending approval by the prime minister, construction had started,” the audit report said.
The audit report claimed that the CDA chairman had received a letter from security agencies on February 14, 2012, that expressed concerns about the construction of an seven-storey building, saying it "would overtake most of the ministries and other official buildings along the Constitution Avenue".
The AGP audit report also warned that “in all probabilities, [the] rooftop of the building will be utilised to install surveillance devices that could be used to monitor government offices in the vicinity”.
The report acknowledged that the "irregularity" occurred due to a "lack of oversight" and failure of implementation of rules. It added that despite constant requests made by the AGP, a department accounts committee meeting could not be held.
The AGP audit report also recommended a high-level inquiry against the construction of the building and stresses upon "appropriate corrective action".
It is worth mentioning that the building blueprint was approved in January 2012, by a committee comprising officials of the CDA, representatives of Planning, Emergency and Disaster Management and members nominated by the Pakistan Council of Architects and Town Planners.
Not one of them had raised an objection at the time.
After a local intelligence agency raised concerns, the city managers had decided to limit the height of the new US embassy complex.