LAHORE, Oct 19: The Water and Power Development Authority (Wapda) on Sunday approved a costly list of international and national lawyers for fighting its case against an Italian Ghazi Barotha Hydel Power Project contractor who had moved the International Centre for Settlement of Investment Disputes (ICSID) with a claim of $450 million (around Rs26 billion) against it.
The presence of Queen’s Council lawyers from Britain, Johnny Veeder, Greenwood and Roger Stewart, and Syed Sharifudin Pirzada of Pakistan on the list speaks volumes for the importance that the authority has attached to the case. Three more lawyers, Alain Pellet, Sam Wordsworth and Umer Ata Bandial, are also part of the above-mentioned panel.
Wapda has finalized the list following failure of the Pakistan government to reach an out-of-court settlement with the firm.
The contractor, Impreglio, claimed that it had invested $450 million in the project, but Wapda failed to fulfil its contractual obligations. The authority, on the other hand, claimed the firm was just a contractor, not an investor, and had already been paid for its work.
To resolve the dispute, the ICSID formed a three-member arbitration tribunal including UK’s Toby Landau appointed by Pakistan and Spain’s Brenardo Cremades nominated by the Impreglio besides a Frenchman of its own, Gilbert Guillaume. But the tribunal proceedings were stalled by government’s efforts to strike an out-of-court settlement with the firm.
According to an official of the Ministry of Finance, the government wanted to reach an agreement with the Italian firm for not only saving millions of dollars that it would spend to fight the case but also for protecting country’s credibility as a safe place for investment. Pakistan had to suffer loss of reputation after a protracted litigation between Wapda and the independent power producers (IPPs). Now, another legal fight can cause more problems for the country in its efforts to attract foreign investment.
Commenting on the situation, an official of the Ministry of Water and Power said: “The authority derived as much mileage out of the GBHP project as it could. Now, the ministry has to deal with all the claims, false or true. From the beginning, the management of the project left much to be desired. The GBHP execution suffered delays for various reasons, an audit revealed over Rs80 billion problems in it and there were still no dedicated power lines to take full advantage of the project. As if it was not enough, the authority is still persisting with its antics: it has given extension to the brigadier in charge of the project without consulting either the Ministry of Water or the Ministry of Defence. It knew it could not do so because the brigadier is on deputation and could only be given an extension under an agreement between the ministries. Now, the ministry is facing a privilege motion in the National Assembly. Such arbitrary arrangements have affected the project beyond redemption. On top of all this, the claims game has begun.”
Commenting on the situation, a former member for finance said that the authority had been living under the impression, and leading others to believe, that the Italian contractor left the GBHP site because of post-Sept 11 security scare rather than the authority’s failure to meet its contractual obligations or pay back the amount allegedly invested by him. Though Wapda was able to lure the contractor back with $45 million, it had always been maintaining that the money was more of an advance payment against pending work and would subsequently be deducted from the final payment. But now, the situation seems to have changed. The Italians have persisted with their claims and refused an out-of-court settlement. They took the dispute to the ICSID on March 3, 2003 (Case no ARB/03/3). The mere acceptance of the case by the ICSID, prime facie, belied the authority’s claim that Impreglio was a contractor, not an investor. The authority would now be spending millions of dollars on its defence in addition to damaging country’s reputation, he said.
A former member (power) of Wapda is of the view that the authority can be charged with hiding seriousness of the case from general public. After all, it is a Rs26 billion dispute. The authority may rightly be convinced about the legal strength of its stand, but it is still a huge amount and the people of the country must know the facts behind figures. The authority’s preference to work behind closed doors would come under severe pressure if, God forbids, the country loses the case. Both sides are confident about their respective stands, he said and added: “After all, the Italians have reportedly refused a $125 million offer by the Government of Pakistan and opted to go to the court. This shows their belief in merits of their case.”
But the Wapda people are convinced about the veracity of their claim. An official of Wapda says: “The Italians have a history of filing belated claims. They always bid a low price to win a tender and then try to make up for their losses by making such claims. This is exactly what has happened in the case of GBHP. Impreglio filed its bid at almost half the then market price of the work and won the tender. Since the authority knew their way of working, it was extra careful in handling its contractual obligations. Unable to find an excuse for filing a claim, the Italians tried to run away under cover of the security situation following 9/11. But they had to come back for fear of losing the case in the ICSID. Now, after completing the work, they are making a last-ditch effort to recover some money from the government of Pakistan. But, they know in heart of their heart that their case would not stand legal scrutiny. The authority knows its legal strengths and weaknesses and would not let the country down. The case would not hurt country’s reputation. On the contrary, it would project Pakistan as a fair dealer among potential investors.”
