ISLAMABAD, May 5: Pakistan and the Societe Generale de Surveillance SA (SGS) have reached a settlement to withdraw respective civil claims and counter-claims against the termination of the 1994 pre-shipment inspection agreement reached between the Swiss cargo inspection company and the Benazir government.

An announcement by the Central Board of Revenue (CBR) issued here on Wednesday suggested that as part of a settlement, the SGS has written a letter of apology to President Pervez Musharraf admitting that certain former employees of the SGS did, in fact through Mr Jens Schlegelmilch, a Geneva-based lawyer, make unlawful payments to Mr Asif Ali Zardari and Ms Benazir Bhutto to get the pre-shipment inspection contract.

In the letter the SGS has expressed its regrets for the adverse impact that such payments made on the government of Pakistan. Under the settlement, the SGS and the government would withdraw all claims and counter-claims pending before the International Centre for the Settlement of Investment Disputes (ICSID) and the Pakistani arbitrator in Islamabad.

The Swiss company has also agreed to pay $2 million towards the legal expenses incurred by the government of Pakistan and to make available its services to the Central Board of Revenue free of charge. The government had also challenged the ICSID jurisdiction.

Meanwhile, the CBR stated that it had been agreed and understood between the parties that this settlement would have no effect on any one or more of the criminal prosecutions pending in respect of such matters either in Pakistan or in Switzerland.

Asif Ali Zardari was facing a corruption reference for his involvement in the SGS pre-shipment inspection agreement in a Rawalpindi accountability court. PPP spokesman Senator Farhatullah Babar when contacted told Dawn that the government had been off and on regurgitating propaganda against Ms Benazir Bhutto and this was the latest part of that vicious media trial.

About the allegations that illegal payments were made to Benazir Bhutto through Swiss agent Jens Schlegelmilch, he said Ms Bhutto had repeatedly stated that she had no agent in Switzerland.

Mr Babar further said: "The PPP demands that the letter allegedly written by the SGS to the government of Pakistan be released immediately so that it could be replied." He said withholding of original communication gave rise to the suspicion that a new round of media trial had been initiated by releasing a doctored version of the SGS letter.

"According to the government's own version of the letter, an agreement had been reached between the SGS and government of Pakistan and the latter is withdrawing the charges of illegal payments against the SGS," he said.

If illegal payments were involved and a legal case could be made, the government of Pakistan should have pursued the matter to recover the money instead of reaching a settlement, he said. He said that if the government had reached an out-of-court settlement with the SGS, it meant that there was no case of illegal payments.