LIST OF ABBREVIATIONS AND DEFINED TERMS | |
ADB | Asian Development Bank |
ADB Report | Asian Development Bank, Final Report, Pakistan: Rental Power Review (January 2010) |
Additional Claims | Karkey's claims in this arbitration brought under the MFN clause: (i) fair and equitable treatment; (ii) full protection and security; (iii) prohibition of unreasonable or discriminatory measures; and (iv) the benefit of the umbrella clause. |
Advance Payment Guarantee | Bank guarantee to be provided by Karkey as security for the Down Payment amounting to US $80 million. Defined at Section 4.5(a) of the Contract |
Alican Bey or KPS 1 | Karadeniz Powership Alican Bey |
Bid | Karkey's bid document dated 11 July 2008 |
Pakistan-Turkey BIT, BIT or Treaty | Agreement Between the Islamic Republic of Pakistan and the Republic of Turkey Concerning the Reciprocal Promotion and Protection of Investments |
Chief Justice | Chief Justice of the Supreme Court of Pakistan, Iftikhar Muhammad Chaudhry |
COD | Commercial Operations Date |
Counter-Memorial | Pakistan's Counter-Memorial, dated 23 January 2015 |
Contract or 2009 RSC | Amended and Restated Rental Services Contract between Karkey Karadeniz Elektrik Uretim A.S. and Lakhra Power Generation Company Ltd., dated 23 April 2009 |
DCF | Discounted cash flow |
December 2008 Contract or 2008 RSC | Rental Services Contract between Karkey Karadeniz Elektrik Uretim A.S. and Lakhra Power Generation Company Ltd., dated 5 December 2008 |
Decision on Provisional Measures | Decision on Provisional Measures, dated 16 October 2013 |
Deed | Deed entered into between Karkey, the NAB and Lakhra, dated 7 September 2012 |
Dogan Bey or KPS 3 | Karadeniz Powership Dogan Bey |
Draft RSC | The draft contract appended to the RFP for Package B as Exhibit V |
ECC | Economic Coordination Committee of the Cabinet of Pakistan |
ECL | Exit Control List |
EIA | Environmental Impact Assessment |
Equipment | The Kaya Bey, the Alican Bey, the Iraq, and the Enis Bey, including all generating equipment and all other power plant equipment. Defined on p. 1 of the Contract |
Evaluation Committee | The Bid Evaluation Committee, comprised of representatives of the Ministry of Finance, PPIB, PEPCO, and NEPRA |
Fatmagül Sultan or KPS 9 | Karadeniz Powership Fatmagül Sultan |
FET | Fair and equitable treatment |
First Iraq Contract or Iraq I | Contract between the Ministry of Electricity of the Republic of Iraq and Karkey Karadeniz Elektrik Uretim A.S., dated December 2008; Amendment dated May 2010 and Addendum dated 29 March 2011 |
FPLC | Fuel Payment Letter of Credit, as defined at Section 4.5(m) of the Contract |
FPS | Full protection and security |
GENCO | A State-owned Generation Company |
GoP | Government of Pakistan |
HFO | Heavy Fuel Oil |
ICSID or Centre | International Centre for Settlement of Investment Disputes |
ICSID Arbitration Rules | ICSID Rules of Procedure for Arbitration Proceedings (2006) |
ICSID Convention | Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered in force on 14 October 1966 |
ILC Articles or ILC Articles on State Responsibility | The International Law Commission's Articles on State Responsibility |
Iraq and Enis Bey | Two support vessels located in Pakistan |
Irem Sultan or KPS 6 | Karadeniz Powership Irem Sultan |
IPP | Independent Power Producer |
Judgment or RPP Judgment | Judgment of the Supreme Court of Pakistan in the Rental Power Case, dated 30 March 2012 |
Karkey | Karkey Karadeniz Elektrik Uretim A.S. |
Karpak | Karpak (Pvt.) Ltd., a wholly-owned subsidiary of Karkey |
Karpower | Karpower International B.V. |
Kaya Bey or KPS 5 | Karadeniz Powership Kaya Bey |
KPS | Karadeniz Powership |
KEMA | KEMA International B.V. |
KESC | Karachi Electric Supply Company |
Korangi Site | Project Site located in the Korangi Creek area, near the Korangi Thermal Power Station |
KW | Kilowatts |
kWh | Kilowatt hour |
Lakhra | Lakhra Power Generation Company Ltd. |
Lebanon contract | Contract between the Republic of Lebanon, Ministry of Energy and Water and Karpower, dated 13 July 2012 |
LCIA | London Court of International Arbitration |
LoA | The Letter of Award issued to Karkey on 7 November 2008 |
Mauripur Site | Proposed Project Site near the Mauripur Grid Station, Mauripur Substation |
Measures | Karkey's description of Pakistan's collective alleged breaches of the Treaty, as defined in paragraph 610 of the Karkey's Updated Memorial of 10 October 2014. |
Memorial | Karkey's Updated Memorial on Jurisdiction and the Merits, dated 10 October 2014 |
MoWP | Ministry of Water & Power of Pakistan |
MW | Megawatts |
NAB | National Accountability Bureau |
NAO | National Accountability Ordinance (1999) |
NEPRA | National Electric Power Regulatory Authority of Pakistan |
NESPAK | National Engineering Services Pakistan (PVT) Ltd. |
NOC | No Objection Certificate issued by the NAB on 11 October 2012 |
NTDC | National Transmission and Despatch Company |
Orhan Bey or KPS 7 | Karadeniz Powership Orhan Bey |
PPIB | Private Power and Infrastructure Board of Pakistan |
PEPCO | Pakistan Electric Power Company Limited |
PMSA | Pakistan Maritime Security Agency |
PQA | Port Qasim Authority |
PPRA Rules | Pakistan Public Procurement Rules 2004 (made under the Public Procurement Regulatory Authority Ordinance 2002 (XXII of 2002)) |
Project | The Rental Power Project near Karachi that is the subject of the Contract |
Project Schedule or Proposed Project Schedule | The Project Schedule Karkey committed to meeting in its Bid |
Provisional Measures Decision | Decision on Provision Measure in Karkey Karadeniz Elektrik S.A. v. The Islamic Republic of Pakistan (ICSID Case No. ARB/13/1), dated 16 October 2013 |
Rauf Bey or KPS 4 | Karadeniz Powership Rauf Bey |
Rental Power Case | Human Rights Case Nos. 7734-G/2009 & 1003-G/2010, as consolidated with Human Rights Case No. 56712/2010, in the Supreme Court of Pakistan |
Reply | Karkey's Reply on Jurisdiction and the Merits, dated 5 August 2015 |
Rejoinder | Pakistan's Rejoinder on Jurisdiction and the Merits, dated 29 October 2015 |
RFA | Request for Arbitration in Karkey Karadeniz Elektrik S.A. v. The Islamic Republic of Pakistan (ICSID Case No. ARB/13/1), dated 16 January 2013 |
RFP | Request for Proposal |
RPPs | Rental Power Projects |
Second Iraq Contract or Iraq II | Second contract between the Ministry of Electricity of the Republic of Iraq and Karkey Karadeniz Elektrik Uretim A.S., dated 29 March 2011 |
Site or Project Site | The site of the Project, i.e., the mooring location of Karkey's Powerships, near Korangi Thermal Power Station |
Sovereign Guarantee | Guarantee of the Islamic Republic of Pakistan, dated as of 24 April 2009 (as reissued from time to time) |
Supreme Court | Supreme Court of Pakistan |
Sur-Rejoinder | Karkey's Sur-Rejoinder on Counterclaims, dated 21 December 2015 |
Tower-1 | KPS Tower No. 1, a transmission tower built by Karkey for the Project |
Vessels | Karkey's vessels in Pakistan, i.e., the Kaya Bey, the Alican Bey, the Iraq, and the Enis Bey |
WACC | Weighted Average Cost of Capital |
Walters | Walters Power International |
WAPDA | Water and Power Development Authority of Pakistan |
WHT | Withholding tax |
WPPO | WAPDA Power Privatisation Organization |
• The Claimant was to submit its full briefing on its Request for Provisional Measures by 11 March 2013;
• The Respondent was to present its observations on the request for Provisional Measures by 10 April 2013;
• The Claimant was to file its reply by 24 April 2013; and
• The Respondent was to file its rejoinder by 8 May 2013.
For the Claimant :
Mr. Paolo Di Rosa Arnold & Porter LLP
Mr. Lawrence Schneider Arnold & Porter LLP
Ms. Maria Chedid Arnold & Porter LLP
Mr. José Antonio Rivas Arnold & Porter LLP
Mr. Alejandro Leáñez Arnold & Porter LLP
Ms. Ana Sofia Martinez Arnold & Porter LLP
Ms. Amy Endicott Arnold & Porter LLP
Mr. Kelby Ballena Arnold & Porter LLP
Mr. Syed Ahmad Hassan Shah Hassan Kaunain Nafees
Mr. Orhan Remzi Karadeniz Karkey Karadeniz Elektrik Uretim A.S.
Ms. Ayse Nazli Dereli Oba Karkey Karadeniz Elektrik Uretim A.S.
For the Respondent :
Mr. Michael Polonsky Berwin Leighton Paisner LLP
Ms. Carol Mulcahy Berwin Leighton Paisner LLP
For the Claimant :
Mr. Paolo Di Rosa Arnold & Porter LLP
Mr. Lawrence Schneider Arnold & Porter LLP
Ms. Maria Chedid Arnold & Porter LLP
Mr. Anton Ware Arnold & Porter LLP
Mr. José Antonio Rivas Arnold & Porter LLP
Ms. Amy Endicott Arnold & Porter LLP
Mr. Kelby Ballena Arnold & Porter LLP
Ms. Ana Sofia Martinez Arnold & Porter LLP
Mr. Syed Ahmad Hassan Shah Hassan Kaunain Nafees
Mr. Orhan Remzi Karadeniz Karkey Karadeniz Elektrik Uretim A.S.
Ms. Ayse Nazli Dereli Oba Karkey Karadeniz Elektrik Uretim A.S.
For the Respondent:
Mr. Stuart Isaacs QC Berwin Leighton Paisner LLP
Mr. Michael Polonsky Berwin Leighton Paisner LLP
Mr. Zahid Ebrahim Ebrahim Hosain
The following persons were examined:
Karkey Karadeniz Elektrik
Mr. Yasin El Suudi (Witness) Uretim A.S.
Mr. David Nickerson (Expert) Power Barge Corporation
1. The State of Pakistan shall take all steps necessary to allow the vessel, Karadeniz Powership Kaya Bey ('the vessel'), to depart into international waters and reach, before 1 November 2013, the dry dock in Dubai for inspection and repairs as determined by the Bureau Veritas (or other equivalent agency) to maintain the vessel's flag-registry and class certification.
2. To that effect, the State of Pakistan shall, in particular:
a. Cause Lakhra Power Generation Company Limited to take all steps necessary to obtain the temporary suspension of the order of the High Court of Sindh at Karachi dated 29 of May 2013 in the Admiralty Suit No. 07 of 2013, which arrested the vessel, as long as the Arbitral Tribunal shall not have informed the State of Pakistan that the suspension is no longer necessary for the purposes of enabling the vessel to obtain the vessel's flag-registry and class certification.
b. Grant the Claimant all authorizations and clearance required for the vessel's departure including:
i. Clearance Certificates from Pakistan Customs;
ii. Clearance of crew members of the vessel by the immigration authorities at Port Qasim;
iii. Clearance from NAB, to be forwarded to all relevant authorities, including the Pakistan Maritime Security Agency, Ministry of Defense, Ministry of Ports and Shipping, Ministry of Water and Power and others necessary under the law and procedure of Pakistan; and
iv. Clearance and facilitation from Lakhra, as Lakhra is the 'importer for record' in terms of the Amended Contract.
c. Take any other action necessary or required to allow the vessel to depart lawfully into international waters.
3. Claimant shall proceed diligently and as rapidly as reasonably possible to obtain the necessary certificates referred to, as stated above.
4. Claimant shall: (i) inform the Tribunal of the date of departure of the vessel from Pakistan, its date of arrival in Dubai, and (ii) keep the Tribunal informed of the progress of the dry docking inspection and repair and of the flag-registry and class certification process.
5. Claimant should be prepared to promptly comply with such further orders as the Tribunal may consider necessary for the return of the vessel to safe anchorage in Karachi.
6. All other requests not granted herein are dismissed.
7. The Tribunal will decide on the costs related to the Request at a later stage of the arbitral proceedings.5
• Exhibits C-131 to C-387;
• Legal Authorities CA-053 to CA-171;
• Witness Statement of Orhan Remzi Karadeniz dated 31 January 2014;
• Witness Statement of Ibrahim Selami Colak dated 30 January 2014;
• Second Witness Statement of Yasin El Suudi dated 31 January 2014.
• Second Expert Report of David Nickerson dated 29 January 2014;
• Expert Report of Brent C. Kaczmarek, CFA dated 31 January 2014 (with annexes); and
• Expert Report of Sami Zafar dated 31 January 2014.
• Exhibits R-044 to R-053; and
• Legal Authorities RA-053 to RA-057.
The Respondent indicated that it had appointed Mr. David Waller of Waller Marine as its industry expert in these proceedings.
• Exhibits C-394 to C-399;
• Legal Authorities CA-173 to CA-179;
• Second Witness Statement of Orhan Remzi Karadeniz dated 17 June 2014; and
• Statement of David Nickerson regarding Waller Marine dated 17 June 2014.
• Exhibits C-400 to C-404;
• Rejoinder Witness Statement of Orhan Remzi Karadeniz regarding Waller Marine dated 3 July 2014; and
• Rejoinder Statement of David Nickerson regarding Waller Marine dated 3 July 2014.
• Legal Authorities CA-001 to CA-206 (updated);7
• Witness Statement of Orhan Remzi Karadeniz (updated) dated 10 October 2014;
• Witness Statement of Ibrahim Selami Colak dated 30 January 2014;
• Second Witness Statement of Yasin El Suudi dated 31 January 2014;
• Expert Report of Brent C. Kaczmarek (updated) dated 10 October 2014, and Exhibits NAV-001 to NAV-202;
• Second Expert Report and Third Expert Report of David Nickerson, dated 29 January 2014 and 10 October 2014 and Exhibits DN-001 to DN-081; and
• Expert Report of Sami Zafar dated 31 January 2014.
• Exhibits R-054 to R-337;
• Legal Authorities RA-058 to RA-188;
• Witness Statement of Faizullah Dahri dated 22 January 2015;
• Witness Statement of Muhammad Zargham Eshaq Khan dated 21 January 2015;
• Expert Report of Justice (R) Fazal Karim dated 21 January 2015;
• Expert Report of Philip Haberman dated 23 January 2015 and Exhibits HAB-001 to HAB-046; and
• Second Expert Report of David Waller dated 19 January 2015 and Exhibits WMI-001 to WMI-008.
• Exhibits C-221 (revised) and C-430 to C-672;
• Legal Authorities CA-214 to CA-333;
• Second Witness Statement of Ibrahim Selami Colak dated 3 August 2015;
• Third Witness Statement of Yasin El Suudi dated 3 August 2015;
• Third Witness Statement of Orhan Remzi Karadeniz dated 3 August 2015;
• Expert Report of Jerome Grand d'Esnon dated 3 August 2015 and Exhibits JG-1 to JG-21;
• Second Expert Report of Brent C. Kaczmarek (Navigant) dated 4 August 2015 and Exhibits NAV-99 and NAV-203 to NAV-246;
• Fourth Expert Report of David Nickerson dated 3 August 2015 and Exhibits DN-35 to DN-37; and
• Second Expert Report of Sami Zafar dated August 4, 2015 and Exhibits Z-1 to Z-99.
• Exhibits R-338 to R-419;8
• Legal Authorities RA-077 (resubmitted) and RA-189 to RA-287;
• Witness Statement of Zarar Aslam dated 17 September 2015;
• Second Witness Statement of Faizullah Dahri dated 29 October 2015;
• Second Witness Statement of Muhammad Zargham Eshaq Khan dated 27 October 2015;
• Second Expert Report of Justice (R) Fazal Karim dated 29 October 2015;
• Second Expert Report of Philip Haberman dated 29 October 2015 and Exhibits HAB-047 to HAB-113; and
• Third Expert Report of David Waller dated 29 October 2015 and Exhibits WMI-009 to WMI-035.
For the Claimant:
Mr. Paolo Di Rosa Arnold & Porter LLP
Mr. Lawrence Schneider Arnold & Porter LLP
Mr. Anton A. Ware Arnold & Porter LLP
Ms. Amy Endicott Arnold & Porter LLP
Mr. John Muse-Fisher Arnold & Porter LLP
Mr. David Reed Arnold & Porter (UK) LLP
Mr. Monty Taylor Arnold & Porter (UK) LLP
Ms. Bridie McAsey Arnold & Porter (UK) LLP
Mr. Bart Wasiak Arnold & Porter (UK) LLP
Ms. Maria Chedid Baker & McKenzie
Mr. Nicholas Kennedy Baker & McKenzie
Mr. Carson Thomas Baker & McKenzie
Ms. Nadine Ramaswamy Baker & McKenzie
Ms. Hesa Alaseeri Baker & McKenzie
Mr. Ahmad Hassan Shah Hassan Kaunain Nafees Legal Practitioners and Advisers
Mr. Kelby Ballena Arnold & Porter LLP
Ms. Aimee Reilert Arnold & Porter LLP
Ms. Dara Wachsman Arnold & Porter (UK) LLP
Mr. Arthur Dedels Arnold & Porter (UK) LLP
Ms. Sila Uysal Arnold & Porter (UK) LLP
Mr. Scott Johnson Legal Images, on behalf of Arnold & Porter LLP
Mr. Orhan Karadeniz Karkey Karadeniz Elektrik Uretim A.S.
Mr. Yasin El Suudi Karkey Karadeniz Elektrik Uretim A.S.
Mr. Ibrahim Colak Karkey Karadeniz Elektrik Uretim A.S.
Ms. Nazli Dereli Oba Karkey Karadeniz Elektrik Uretim A.S.
Mr. Jerome Grand d'Esnon Carbonnier Lamaze Rasle & Associés
Mr. Brent Kaczmarek Navigant Consulting
Mr. Garrett Rush Navigant Consulting
Mr. Gabriel Perkinson Navigant Consulting
Mr. David Nickerson Power Barge Corp.
Mr. Sami Zafar Sami Zafar & Co.
For the Respondent:
Ms. Judith Gill QC Allen & Overy LLP
Mr. Mark Levy Allen & Overy LLP
Ms. Kate Davies Allen & Overy LLP
Mr. Matthew Hodgson Allen & Overy LLP
Mr. James Neill Allen & Overy LLP
Ms. Louise Fisher Allen & Overy LLP
Mr. Guled Yusuf Allen & Overy LLP
Ms. Elizabeth Staves Allen & Overy LLP
Mr. Alastair Campbell Allen & Overy LLP
Ms. Olga Owczarek Allen & Overy LLP
Mr. Jack Busby Allen & Overy LLP
Mr. Anshu Wijeyeratne Allen & Overy LLP
Mr. Khawaja Muhammad Asif Minister of Water and Power and Minister of Defense of Pakistan
Mr. Salman Aslam Butt Attorney General of Pakistan
Mr. Dilnawaz Cheema Assistant to the Attorney General of Pakistan
Justice (R) Fazal Karim Former Judge of the Lahore High Court and former Judge of the Supreme Court of Pakistan
Mr. David Waller Waller Marine, Inc.
Mr. Philip Haberman Haberman Ilett LLP
Ms. Liz Perks Haberman Ilett LLP
Ms. Kate Lillyman Haberman Ilett LLP
Mr. Faizullah Dahri Finance Director of Lakhra Power Generation Company Limited
Mr. Muhammad Zargham Eshaq Khan Joint Secretary of the Government of Pakistan's Ministry of Water and Power
Mr. Shahid Rafi Former Secretary to the Government of Pakistan's Ministry of Water and Power
On behalf of the Claimant:
Mr. Orhan Karadeniz Karkey Karadeniz Elektrik Uretim A.S.
Mr. Yasin El Suudi Karkey Karadeniz Elektrik Uretim A.S.
Mr. Ibrahim Colak Karkey Karadeniz Elektrik Uretim A.S.
Mr. Brent Kaczmarek Navigant Consulting
Mr. David Nickerson Power Barge Corp.
Mr. Sami Zafar Sami Zafar & Co.
On behalf of the Respondent:
Justice (R) Fazal Karim Former Judge of the Lahore High Court and former Judge of the Supreme Court of Pakistan
Mr. David Waller Waller Marine, Inc.
Mr. Philip Haberman Haberman Ilett LLP
Mr. Faizullah Dahri Finance Director of Lakhra Power Generation Company Limited
Mr. Muhammad Zargham Eshaq Khan Joint Secretary of the Government of Pakistan's Ministry of Water and Power
Mr. Zarar Aslam10 Former Additional Secretary to the Government of Pakistan's Ministry of Water and Power
Mr. Shahid Rafi Former Secretary to the Government of Pakistan's Ministry of Water and Power
i. Karadeniz Powership Dogan Bey (the "Dogan Bey" or "KPS 3"), which is a self-propelled Powership of handymax size (188 meters long and 37 meters wide), housing 12 installed medium speed diesel engines, with a combined power generation capacity of 126 MW;
ii. Karadeniz Powership Rauf Bey (the "Rauf Bey" or "KPS 4"), a self-propelled Powership of panamax size (242 meters long and 32 meters wide), housing 15 installed medium speed diesel engines, with a combined power generation capacity of 179 WM;
iii. Karadeniz Powership Kaya Bey (the "Kaya Bey" or "KPS 5"), a self-propelled Powership of panamax size (242 meters long and 32 meters wide), housing 19 installed medium speed diesel engines, with a combined power generation capacity of more than 216 MW.
iv. Karadeniz Powership Alican Bey (the "Alican Bey" or "KPS 1"), a non-self-propelled power barge, 91 meters long and 30 meters wide, housing 10 installed medium speed diesel engines, with a combined power generation capacity of more than 104 MW.13
i. An "important notice" regarding the need for bidders' own due diligence (Disclaimers);
ii. The basis on which bids would be "rejected" and the requirements for them to be considered "responsive";
iii. Instructions to bidders; and
iv. A number of exhibits, including a pro forma letter of award and a draft rental services contract (a "Draft RSC").19
Activity | Period | |
1 | Assumption: Issuance of LOA | 0 |
2 | Finalizing of Rental Services Contract | 20 days |
3 | Construction Start | 60 days |
4 | Testing | 165 days |
5 | Commercial Operation | 180 days |
- one with 10 Sülzer engines (referred to as "Karadeniz Power Ship-1" or "KPS-1"); and
- the other with 12 MAN engines (referred to as "Karadeniz Power Ship-2" or "KPS-2").24
WHEREAS, the PARTIES entered into a Rental Services Contract on 5th December 2008, in terms whereof the BUYER [Lakhra] contracted with the SELLER [Karkey] to provide Rental Services in relation to a 231.8MW ('Rental Services Contract'). The Rental Services Contract did not come to effect and no obligations or rights accrued to either PARTY there under.
WHEREAS, the Parties are now desirous of amending and restating the Rental Services Contract.39
(a) The Sovereign Guarantee:
i. Within 30 days of the date on which the 2009 RSC was signed, Lakhra was to procure and deliver to Karkey a guarantee issued by Pakistan, securing the payment of all Monthly Rental Services Fees and Termination Charges ("Sovereign Guarantee").41
ii. The Sovereign Guarantee was executed by the Managing Director of the PPIB on behalf of the President of Pakistan, for and on behalf of Pakistan, on 24 April 2009.42
(b) The Advance Payment Guarantee:
i. Within 10 business days of the date of execution of the Sovereign Guarantee, Karkey was to submit a bank guarantee to Lakhra, securing the payment of US$80 million (14.16% of the Lump Sum Contract Price) (the "Advance Payment") for performance of Karkey's obligations under the 2009 RSC ("Advance Payment Guarantee").
ii. The Advance Payment Guarantee - issued by Citibank N.A. (acting through its place of business in Lahore) - was an on-demand guarantee for payment "not exceeding" US$80 million, should Karkey default any of its obligations under the 2009 RSC.
iii. The Advance Payment Guarantee was delivered to Lakhra on 6 May 2009.43
(c) The Advance Payment
i. Following submission of the Advance Payment Guarantee, Lakhra was to release the Advance Payment to Karkey within five days.
ii. Pursuant to an invoice issued by Karkey on 11 May 2009, the National Bank of Pakistan released the Advance Payment (less the 6% withholding tax44) to Karkey on Lakhra's behalf on 12 May 2009.45
Upon successful completion of the two hours operational test on 9th April 2011, in which Net Electrical output remained more than Guaranteed Electrical output [231.8 MW], this is to certify that commercial operation of 231.8 MW Karkey Rental Power plant is achieved, as per provisions of clause 4.4 of RSC. The undersign as per clause 3.1 (m) of RSC hereby issues the 'COMMERCIAL OPERATION ACHIEVMENT CERTIFICATE'.
Now it is notified that, as per clause 4.4 of RSC Commercial operation date shall occur at 00:01 AM on 13th day of April 2011.72
- US$161,856,018 as termination charges pursuant to Clause 4.6(d);
- US$12,000,000 as mobilization and transport charges to return the Equipment to SELLER's designated depot as per Clause 4.6(b); and of
- All receivables including but not limited all Monthly Rental Services Fees and all Monthly Operation and Maintenance Services Fees and fuel invoices to date as per the 2009 RSC.
The clear line between the recognized authority of the Supreme Court to monitor NAB investigations to the limited extent of ensuring fair investigation, and itself becoming involved in guiding investigations, appears to be becoming breached as a norm as the elections near. Contempt notices, verbal orders that differ from written orders, and insufficient time to prepare numerous progress reports, are placing extreme pressure on NAB personnel who appear before the Honorable Judges. There is even a danger that NAB personnel could lose their independence and are unable to carry out their investigations in an independent manner due to the pressure being exerted on them by the Honorable Supreme Court to proceed along lines which seem to be desired by the SC [Supreme Court]. In revealing this pressure, to safeguard their jobs, and so as not to displease the Honorable Court, there is danger of unfair investigation being resorted to [...]. I fear that in the current direction that the Honorable Supreme Court appears to be taking, I will not be able to perform my independent statutory role […].103
'take all steps necessary to allow the vessel, Karadeniz Powership Kaya Bey […], to depart into international waters and reach, before 1 November 2013, the dry dock in Dubai for inspection and repairs as determined by the Bureau Veritas (or other equivalent agency) to maintain the vessel's flag-registry and class certification', and to that effect, to '[c]ause Lakhra […] to take all steps necessary to obtain the temporary suspension of the order of the High Court of Sindh at Karachi dated 29 May 2013 in the Admiralty Suit No. 07 of 2013, which arrested the vessel [Kaya Bey].'108
Investments shall not be expropriated, nationalized or subject, directly or indirectly to measures of similar effects except for a public purpose, in a nondiscriminatory manner, upon payment of prompt, adequate and effective compensation, and in accordance with due process of law....
According to the Claimant, Pakistan attempts to prevent the importation of obligations from its other BITs by asserting that the phrase in "in similar situations" requires the investor to demonstrate a direct violation of the MFN clause before the favourable protection of other treaties can apply. The Claimant argues that Pakistan attempts to bolster its restrictive interpretation of the MFN clause by relying on the newly issued Ickale v. Turkmenistan award, which held that unless the term "in similar situations" was read to require the investor to point to an actual comparator, the term would lack effet utile.161 Karkey submits that this reading is contrary to the weight of prior investment jurisprudence, and Pakistan itself admits that the Ickale award "is the only investment treaty award" that has adopted Pakistan's restrictive reading of the MFN clause.162
- Advertised the terms of Lakhra's Contract and approved Karkey's Bid;
- Directed Lakhra to enter into the Contract, even though it was apparent that Lakhra lacked the financial resources or financial standing to fulfil the obligations;
- Determined Lakhra's obligations under the Contract;
- Through PEPCO, deputized Lakhra with authority to sign the Contract with Karkey;
- Through PEPCO and the Ministry of Finance, released the Advance Payment to Karkey;
- Controlled Lakhra's board throughout the life of the Contract; etc.
- The Supreme Court disregarded its own procedural rules, which require allegations to be supported by a sworn affidavit, to protect due process and prevent unfounded accusations;173
- The Supreme Court unconstitutionally usurped Executive authority in reversing the RPP policy;174
- The proceedings were driven by the political agenda of Mr. Hayat and Mr. Asif, who were afforded over half a dozen175 opportunities to present oral argument, while Karkey was limited to one (spread over parts of two hearings);176
- The Court accepted Mr. Hayat's plainly erroneous conclusion that Pakistan had sufficient generation capacity, despite PEPCO's demonstration that Mr. Hayat had mistakenly "compar[ed] Power (MW) with Energy (MkWh), which are two different things;"177
- The Court misunderstood the structure of the RPP Contracts — pursuant to which the RPP sponsor guaranteed it would make available a certain generation capacity, not a certain output — in finding that Karkey was not producing at the contractual rate;178
- The Court imposed the arbitrary requirement of a reserve price on the procurement of electricity, a requirement entirely unsupported by Pakistani law;179
- The Court imposed the same liability on all the RPP sponsors, despite material differences between the procurement, financing, and operational statuses of the different RPP programs;180
- The Court declared all RPP contracts to be both "void ab initio" and "rescinded forthwith," even though such holdings are mutually inconsistent under Pakistani law;181
- Destroying any presumption of innocence, the Court held that Karkey, like all other RPP sponsors, was "prima facie , involved in corruption and corrupt practices," and subject to prosecution by NAB, despite the lack of any evidence of corruption by Karkey;182
- The Court eviscerated Karkey's rights without any right to appeal.183 Lower courts in Pakistan comply with the Supreme Court's orders, no matter how defective — as the decisions of the Sindh High Court have demonstrated; and
- Karkey's position regarding the foregoing is supported by Pakistan's own submissions to the Supreme Court — not only those filed during the RPP proceedings, but also the Civil Review Petitions that were filed after the Judgment was rendered. Such petitions demonstrate the unlawfulness of the Judgment, and confirm the validity of Karkey's RSC.
[…] the injuries suffered by Karkey were caused by the internationally wrongful acts of Pakistan (the 'Measures'), which include, inter alia:[i] Lakhra's failure to comply with the terms of the Contract (including its obligations to pay Rental Service Fees, to cover confirmation charges, to pay for fuel payments, and to pay termination charges and expenses upon termination of the Contract on 30 March 2012); [ii] Pakistan's failure to honor the Sovereign Guarantee; [iii] the Supreme Court's arbitrary and unfounded presumption that Karkey participated in corruption; [iv] the denial of justice committed by the Supreme Court in purporting to invalidate the Contract on the basis of nothing more than a presumption ofwrongdoing, which was contrary to the evidence before the Court; [v] NAB's investigation of Karkey, its arbitrary demands for payment from Karkey, and its commencement of criminal proceedings against Karkey; [vi] Pakistan's detention and expropriation of Karkey's ships; [vii] Pakistan's harassment of Karkey and its personnel, including through actions by Lakhra, NAB, and the Sindh High Court in connection with proceedings before the latter court.
Damages Interest Interest (not including Option A Option B No.* Category Name interest) (Sovereign Spread) (NAB Rates)Interest to 30 June 2015 | ||||
1.a. | Broadly Agreed Damages - Termination Charges & Unpaid Invoices | 224.5 | 105.9 | 98.4 |
1.b. | Broadly Agreed Damages - Other | 33.5 | 5.4 | 6.8 |
2. | Kaya Bey Damages | 240.1 | 16.9 | 23.5 |
3. | Alican Bey Expropriation** | 445.7 | 26.6 | 37.6 |
4. | Construction Delays | 308.7 | 0 | 0 |
5.a. | Miscellaneous - Wasted Costs | 23.9 | 6.1 | 7.0 |
5.b. | Miscellaneous - Actual and Expected Repairs to Kaya Bey*** | 27.3 | 0 | 0 |
5.c. | Miscellaneous - Geothermal | 178.4 | 0 | 0 |
TOTAL | l,482.2 | 160.9 | 173.3 |
*Corresponding to the amounts in Claimant's closing presentation.
**Assuming a 10% WACC and 3 months of time for transfer between contracts reduces Damages by US$ 25.9 million but does not affect interest on this loss.
***Only includes amounts incurred after 30 June 2015 that are not already included in the "Kaya Bey Damages" category. Therefore no interest is applied to these costs.
Source: Karkey's Post-Hearing Brief, ¶ 263
In the event the Contract is terminated by SELLER before the Contract designated expiry date, due to BUYER default, the BUYER shall pay. mobilization and transport charges to return the Equipment to SELLER's designated depot and also will be responsible for the exportation of the aforementioned Equipment from Pakistan, for which time shall be of the essence.
- it was reasonable to assume, based on the available evidence,237 that the Kaya Bey would take only one month to redeploy to Iraq238 (rather than the eight months that he had modelled);
- the site installation costs of US$15,000,000 that he had used in his calculations were too high;239 and
- because he had incorrectly calculated the unit price under the Iraq I contract, his criticism that Mr. Kaczmarek had cherry-picked the highest priced contract was wrong.240
US$ million | 15 Month Delay Under ActualContracts | Actual Delay Under Actual Contracts | ||
Vessel | Original Claim* | |||
Months Delay | Damages | |||
KPS 7 | 66.7 | 65.5 | 2 | 8.7 |
KPS 9 | 21.0 | 94.6 | 3 | 18.9 |
KPS 10 | 125.3 | 133.8 | 24 | 214.1 |
KPS 11 | 71.9 | 53.8 | 33 | 118.4 |
KPS 12 | 23.7 | 49.1 | 15 | 49.1 |
Total | 308.6 | 396.9 | 409.3 | |
*See Table 24 of Second Kaczmarek Report |
Source: Karkey's Post-Hearing Brief, ¶ 247
- Karkey's Iraq Vessel Rehabilitation Program
a. Mr. Haberman criticizes the evidence upon which Mr. Kaczmarek's calculations are based, including a feasibility study that Karkey provided to Turkey IS Bank for obtaining financing.277 This document, used by a lender to assess the geothermal project, is in fact an ideal source of contemporaneous information about the project.278
b. Mr. Haberman has misunderstood how Mr. Kaczmarek's modelling accounts for tax, which leads him to assume that an error has been made. There is no error. Mr. Kaczmarek has simply not applied taxes to historical cash flows, an approach he made quite clear.279
[...] Karkey respectfully requests that the Tribunal:
c. Declare that it has jurisdiction to address all of Karkey's claims;
d. Declare that Pakistan, through the various wrongful acts and omissions described above and in Karkey's Submissions, has violated its obligations under the BIT with respect to Karkey and its investment in Pakistan, including, as described in the Reply, Pakistan's obligations to abstain from expropriation of Karkey's property; to afford Karkey's investment fair and equitable treatment and full protection and security; to refrain from arbitrary or unreasonable treatment of Karkey's investment; to observe the commitments and obligations it entered into with respect to Karkey and its investments in Pakistan; and to 'permit in good faith all transfers related to an investment to be made freely and without unreasonable delay.'315
e. Award compensation to Karkey for the harm that Karkey has suffered as a result of Pakistan's violations of the BIT with respect to Karkey and its investments in Pakistan, in an amount of no less than US$1,482,200,000 plus interest, compounded annually at either
i. the monthly interest rate applied by NAB in its October 2012 calculation, which was 1 percent per month or 12 percent per year, until the date of payment of the Award, or
ii. the Pakistani sovereign bond yield (which has averaged 8.9% per year from the beginning of April 2012 until the end of June 2015), until the date of payment of the Award
f. Decline jurisdiction over Pakistan's counterclaims, or alternatively, dismiss such counterclaims on their merits;
g. Issue an award in Karkey's favor of all fees and costs of this arbitration, including all fees and expenses of Karkey's attorneys and external advisers; and
h. Grant such other relief to Karkey as the Tribunal may deem fair and proper.
(i) Rule 40 of the PPRA Rules prohibits negotiations in a public tender;
(ii) Section 9(a)(ii) of the NAO, which defines what constitutes "corruption and corrupt practices" as the obtaining of any valuable thing without consideration or for inadequate consideration. This goes beyond the payment of bribe and captures many if not all of the changes that occurred to Karkey's contract because, as Karkey's Pakistani law expert explained, even if material changes are not captured by the PPRA Rules, "there will be other laws which would take care of it. Q. What other laws? A. Generally, corruption laws;"
(iii) Article 9 of the Constitution. The Khawaja case demonstrates by reference to earlier case law that material changes to public procurement contracts post-bid (and post contract signature) are a breach not just of Pakistani procurement laws but also of Article 9 of the Constitution, which is a fundamental right pursuant to which "the national wealth/resources must remain fully protected;" and
(iv) General principles of fairness and transparency, which are enforced pursuant to the Supreme Court's jurisdiction under Article 184(3) of the Constitution.
(i) The alleged fraud occurred between July 2008 (when Karkey submitted its Bid) and September 2008 (when Karkey was notified that it was the successful bidder and would be issued with a Letter of Award);
(ii) The alleged misprocurement occurred between 6 November 2008 (following the issue of the Letter of Award to Karkey) and 9 December 2009 (when Karkey and Lakhra entered into the First Amendment to the 2009 RSC, which contained further extension of the Target COD in breach of Pakistani procurement laws); and
(iii) The alleged corruption and corruption practices (as defined by Pakistani law) occurred from at least 7 June 2008 (when Mr. Zulqarnain first held himself out as being the authorized representative of Karkey, notwithstanding that he had no agreement in place at the time), and throughout the lifetime of Karkey's 2008 and 2009 RSCs (as many if not all of the changes secured by Karkey prior to and after the 2008 RSC constitute not just a misprocurement but a breach of Section 9(a)(ii) of the NAO because they were a "valuable thing" that was "obtain[ed]... without consideration, or for consideration which he knows to be inadequate").
i.e. only if the Tribunal finds that there has been a denial of justice can the Judgment be ignored.322 It follows that Karkey's contract is void ab initio under Pakistani law in accordance with the Judgment and its investment was established in material breach of fundamental principles of Pakistani law and contrary to Article I(2) of the Treaty. As held in the Judgment:323
The contracts of all the RPPs. were entered into in contravention of law/PPRA Rules, which, besides suffering from other irregularities, violated the principle of transparency and fair and open competition, therefore, the same are declared to be non-transparent, illegal and void ab initio.324
(i) "if material changes are brought about...subsequent to the bidding, this will in fact negate the notion of a fair and open competitive bidding process...all such changes as have been discussed below were material in nature and had been made to benefit JJVL. These changes were never available to other pre-qualified parties" which Karkey appears to agree with; and
(ii) If a "material change...represents a significant loss to the State...and thus ultimately to the People of Pakistan".
(i) the undisputed statements of fact that Karkey could achieve Milestone A were false;
(ii) Karkey had no belief that it could and would achieve Milestone A; and
(iii) Karkey had no intention to perform the promises it gave to meet Milestone A.
(i) A false statement of fact, without belief (or reasonable belief) in its truth, with the intent to deceive or induce another to enter into a contract;
(ii) A promise made without any intention of performing it, with the intent to deceive or induce another to enter into a contract; and
(iii) A false statement of fact, in order to influence a procurement process or the execution of a contract.
(i) By misrepresenting a material fact (its ability to achieve Milestone A, or even Milestone B);
(ii) Because Pakistan relied on a material fact (as evidenced by the contemporaneous correspondence);354 and/or
(iii) Because Karkey intended to deceive Pakistan, or was at least reckless, as to its ability to achieve Milestone A (or even Milestone B) through its false representations.
(i) The delays in achieving the target schedule, which Karkey's counsel pointed to, deprived Pakistan of the short-term emergency power it was seeking as the primary rationale for the RPP and which Karkey had promised. In view of the lack of available power from elsewhere, the "contractual mechanism" to which Karkey refers, which provides only for damages, does not address the consequences for, nor adequately compensate, Pakistan.
(ii) Pakistan will also suffer loss if Karkey is found to be an investor in accordance with Article I(2) of the Treaty, despite Karkey's investment having been established in breach of Pakistani law.
(i) a copy of a document in the form of a consultancy agreement between Karkey and a consultant (the Consultant), whose name was redacted (the Consultancy Agreement);
(ii) a copy of a document in the form of a consultancy agreement, the date of which was redacted, between the Consultant and a local consultant (the Local Consultant), whose name was also redacted (the Local Consultancy Agreement).
Fraud: Pakistan argues that Karkey procured and was awarded the RSC as a result of fraud in relation to Karkey's readiness to meet the Proposed Project Schedule set out in Proforma X of its Bid, which breached Section 9(a)(ii) and (iv) of the NAO.388