RAWALPINDI: The Lahore High Court (LHC) Rawalpindi bench ‘rescued’ the government from another international arbitration as it revived the contract of a Turkish firm related to a multibillion rupees water supply project meant for the garrison city.

The project to alleviate Rawalpindi’s chronic water shortages had plunged into legal chaos after Turkish construction giant, 5H Insaat, sued the Punjab government for ‘unlawfully’ stalling its $200 million contracts.

The dispute threatened to derail the Chahan Dam water supply project, funded by Asian Development Bank (ADB) through a concessional loan of $122 million. The project envisages the supply of an additional 25 million gallons of water daily to the city.

The mega project, split into four interdependent lots, included:

Lot 1 (Rs6.36bn): 12 MGD water treatment plant at Chahan Dam (awarded to China Construction Third Engineering), Lot 2 (Rs8.3bn): pipeline from Chahan Dam to Chak Jalal Din (awarded to 5H Insaat), Lot 3 (Rs12.1bn): distribution network from Chahan Dam to residential areas (awarded to 5H Insaat), and Lot 4 (Rs7.2bn): upgrading filtration plants and pipelines (awarded to joint venture Metra Kan-5H Insaat).

All four lots must be completed within three years for the system to function. Work on Lots 1 and 4 is underway, but delays in Lots 2 and 3 - stalled for seven months - could cripple the entire project.

According to a writ petition filed at the LHC (Rawalpindi bench), 5H Insaat alleged that despite being awarded Lots 2 and 3 in January 2025 after a seven-month delay caused by disagreements between Punjab government and Wasa Rawalpindi, authorities withheld Rs2.2 billion in mobilisation advances and failed to issue work commencement orders.

The Turkish firm’s initial joint venture with local partner Qasim Khan & Company collapsed in 2024 after the latter submitted “fake performance guarantees.”

A settlement agreement approved by Punjab’s Law Department and ADB allowed 5H Insaat to proceed alone.

Over 10 formal notices, a legal notice (March 29, 2025), and even an appeal to Turkey’s ambassador failed to break the deadlock, the petition said.

It said the delay stemmed from a rift between the Punjab government and Wasa. WASA initially pushed for a joint venture with a Pakistani firm for Lots 2 and 3, but the provincial government overruled this, awarding the contracts exclusively to 5H Insaat. The state has yet to publicly justify the subsequent freeze despite a March 2025 order by the secretary LG& validating the Turkish firm’s sole contractor status.

Delaying Lots 2 and 3 halts 24-hour water supply plans for Adiala Road’s six union councils and Khayaban-i-Sir Syed.

The Turkish firm adopted before Justice Jawad Hassan of the IHC that the Punjab government unilaterally terminated the contract.

Justice Hassan after hearing the arguments revived the project, asking the government to frame a policy in this regard.

It may be mentioned in 2021 Pakistan faced a dispute before the International Centre for Settlement of Investment Disputes (ICSID) over the Islamabad-Peshawar Motorway (M-1) project.

The ICSID is part of the World Bank Group and handles disputes between international investors.

In 2019, Pakistan settled a billion-dollar ICSID award in favour of another Turkish investor, energy company Karkey Karadeniz, without making any payment.

That dispute concerned the cancellation of a short-term electricity contract and seizure of Karkey’s vessels amid allegations of corruption.

The contracts were signed between 2006 and 2008 to plug the energy shortfall as a stopgap arrangement through rental power projects.

Karkey had initiated the arbitration proceedings in 2013 against Pakistan for the breach of the bilateral investment treaty and the unlawful expropriation of different rights and assets of the power-generating company. The dispute was decided in August 2017.

Published in Dawn, May 31st, 2025