KARACHI, Sept 9: The long-standing dispute between the Civil Aviation Authority (CAA) and its Duty-Free Shop operator, Aer Rianta, has finally been decided in arbitration by former Supreme Court Judge Justice Wajihuddin Ahmed.

In an elaborate 70-page decision, Justice Wajihuddin granted the CAA claim of 8.9 million US dollars and rejected the Aer Rianta’s counter-claim of 22 million US dollars.

The world-renowned Irish company Aer Rianta was awarded a 10-year contract to run Duty-Free Shops at the then newly-established Quaid-i-Azam International Airport, Karachi, in 1992. However, soon disputes arose between the parties leading both of them to file cases against each other before the High Court of Sindh.

The High Court referred the disputes to arbitration by two arbitrators where Justice K. M. A. Samdani was appointed by the CAA, and Justice Haider Ali Pirzada was appointed by Aer Rianta as their respective nominees. The two arbitrators rendered their contrasting decisions in 2001, where Justice Samdani allowed unspecified dues of the CAA, but Justice Pirzada allowed the Aer Rianta’s claim of 17.4m US dollars. Due to the difference between the decisions of the two arbitrators, the matter was referred to the umpire, Justice Wajihuddin Ahmed, for final decision.

The CAA’s claim against Aer Rianta was based on non-payment of licence fees and electricity dues. In contrast, Aer Rianta had made a case for losses suffered by the Duty Free giant on account of alleged misrepresentations made by the CAA in giving wrong forecast on passenger numbers.

According to Justice Wajihuddin, “the crucial aspect of the case pertains to a claimed misrepresentation in the form, allegedly, of wrong and misleading forecast supplied by the CAA on the basis whereof the ARI made its own evaluation of the worth of the venture, suffering detriment in consequence.”

With regard to the forecast on passenger numbers made by the CAA, Justice Wajihuddin ruled that “Aer Rianta referred to the CAA forecast by making use of it for Aer Rianta’s expectations of (shared) returns from the venture.

“Inbuilt was Aer Rianta’s own forecast on per passenger expenditure, which varied between US$10.9 to 13.5. Such forecast, deducible from Aer Rianta Document 2, appended with its bid ... was also proved wrong and, according to Mr Zahid F. Ebrahim, for the CAA, while their own forecast is off the mark by 50%, that of Aer Rianta’s is botched up to the extent of 200%.”

According to Justice Wajihuddin, “the implication of the contention is hard for anyone to miss: Did Aer Rianta also make misrepresentations of its own by painting a rosy picture of its potential to generate income?”

According to the Arbitration Award, “The forecast, about which no one claims that the same was unsound, was thus, possibly, subject to the imponderable of a Third World polity. It was, therefore, more a case of a due forecast, based on positive expectations, acceptable to both sides, each side expert in its own area, going wrong, and going wrong because of circumstances, always in contemplation of both parties.”

While evaluating the expertise of both parties Justice Wajihuddin observed that “the bid gives out Aer Rianta to be a major international player in the field. Aer Rianta had already established and was running duty-free shops in several parts of the globe.

“It even owned and ran airports. CAA, by contrast, and no surprisingly, emerges as a small fry.”

The former Supreme Court Judge, who refused to take oath under the PCO, concluded that even if “representations were made, they did not qualify as misrepresentations. Each may have involved a mistake but a genuine one, out of expectation from a new venture, endowed with all positive attending factors.”

After deliberating on the agreements signed, correspondence exchanged and the evidence led by the parties, the Arbitration Award ruled that no breach of contract had been committed by the CAA, but as to Aer Rianta there had been breaches.

Accordingly, Aer Rianta was not entitled to its counter-claim of 17.4m US dollars. However, the CAA was entitled to licence fee of 8.7m US dollars and electricity dues of Rs25.5m.

The CAA was represented by Advocate Zahid F. Ebrahim, and Aer Rianta by Orr Dignam’s Barrister Sajid Zahid and Barrister Ali Shah.