ISLAMABAD: The Lahore High Court’s Rawalpindi Bench has set aside a termination notice issued to a Turkish firm developing water supply infrastructure in the garrison city, asking the Punjab government to settle the dispute within two weeks.

In a judgement issued last week, Justice Jawad Hassan directed the Punjab Local Government & Community Development secretary to personally mediate and resolve the dispute within two weeks. The international firm, 5H Insaat, was working on the Developing Resilient Environment and Advancing Municipal Services (Dreams) project funded by the Asian Development Bank through a concessional loan (2% interest).

The dispute arose after a termination notice was issued to the firm on May 12, 2025. The company had been awarded Lot-2 and Lot-3 of the ADB-funded project in January 2025 to modernise Rawalpindi’s water supply system.

The petitioner alleged unjust termination despite fulfilling all bidding formalities. The petition assailed the authorities’ alleged failure to release the mobilisation advance or issue work commencement orders for over four months, violation of its fundamental right to business, and public’s right to clean water.

Justice Hassan sets aside termination notice to Turkish firm, says contract prioritises arbitration

Another bidder contested the contract award to the said company, claiming it violated the Punjab government’s procurement rules. Justice Hassan quashed the termination notice, observing that disputes must be resolved via mediation led by the local government secretary as a “neutral facilitator”.

The court noted that the contract prioritised amicable settlement and arbitration.

Citing Supreme Court precedent (Mughals Pakistan v. EOBI, PLD 2025 SC 1), Justice Hassan stressed mediation’s superiority: “An ounce of mediation is worth a pound of arbitration and a ton of litigation.”

The order said that mediation must conclude within two weeks of receiving the court order. As per the court order, delays jeopardised access to clean water for Rawalpindi residents and eroded public trust while foreign investment and technology transfer (via ADB) were also at stake.

The court noted that the Turkish firm’s substantial investment created “vested rights,” making termination potentially catastrophic for the company. Senior government officials present in the court, including the special secretary of housing, the Dreams programme director, and Rawalpindi Water and Sanitation Agency’s managing director, agreed to cooperate in the mediation process.

The project aims to provide “reliable access to clean, safe and healthy drinking water” for Rawalpindi, addressing critical infrastructure gaps. It aims to alleviate chronic water shortages in the city but has been delayed after the Turkish construction company sued the Punjab government for ‘unlawfully’ stalling its $200 million contracts.

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

The mega project, split into four interdependent lots: Lot 1 (Rs6.36bn) includes 12mgd water treatment plant at Chahan Dam (awarded to China Construction Third Engineering); Lot 2 (Rs8.3bn): pipeline from Chahan Dam to Chak Jalaldin (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, which have been stalled for seven months, could cause inordinate delays for the entire project.

Published in Dawn, June 10th, 2025