Summary of Facts - LCIA Final Award
The 9 independent power producers (the IPPs) mentioned in the international arbitration dispute with NTDC//CPPA(G) are in the business of generating and supplying electricity to National Transmission and Dispatch Company under long-term power purchase agreements approved by the Federal Cabinet at fixed rates pre-determined by NEPRA:
Starting in 2011 and the overdue payments to IPPs for power already provided, reached such high levels that the companies did not have funds to even buy fuel. As a result, they were intermittently shutting down on account of non-payment by NTDC/CPPA(G). The IPPs and NTDC/GOP agreed that for such period no deductions or penalties can be applied and the parties signed a Settlement Agreement to such effect. This agreement was extended several times but eventually, in early 2012, the GOP declined to extend it further without giving a reason and NTDC/CPPA(G) started imposing penalties and deducting payments from IPPs.
At this point, the IPPs filed petitions before the Supreme Court of Pakistan in spring of 2012. The petitions were heard from July 2012 till May 2013. The Supreme Court ordered NTDC/CPPA(G) (i) to pay all undisputed amounts in 9 installments, (ii) to be restrained from making deductions when a plant shuts down on account of non-payment. However, the amounts that were already deducted by NTDC/CPPA(G) by such time, approximately PKR 11 billion, was to be decided later. When the PML-N government came into office in June 2013, the Prime Minister and Finance Minister committed to paying the undisputed amounts and asked the IPPs to withdraw the case from the Supreme Court and settle the matter of the illegally withheld amount through arbitration provisions as per the agreements instead. The parties signed an MOU to that effect and Justice Sair Ali, an eminent retired Supreme Court judge was appointed by mutual consent as the Expert to resolve the matter as per the procedure of the agreements.
From 2013 till 2015, proceedings before the expert continued to take place. On 15.08.2015, the learned Expert delivered that NTDC/CPPA(G) could not benefit from its own default and ordered the payments of the PKR 11 billion. He decided not to award prior accrued interest on this amount (for four years) to lessen the burden on NTDC/CPPA(G) but allowed interest from the date of the order till payment.
In light/continuation of the expert determination, the IPPs wrote to the NTDC/CPPA(G) requesting it to make payments in accordance with the determination. As per the PPA, NTDC/CPPA(G) had an option to refer the matter to arbitration within seventy-five days of Expert determination but only after first making the payment. As per PPA, upon failure to refer to the arbitration within the time frame, the expert determination becomes final and binding.
However, NTDC/CPPA(G) neither paid nor challenged the matter in 75 days. Instead of the 75th day the GOP went to a civil court in Lahore and got an ex-parte stay order and NTDC/CPPA(G) took the position that it was restrained from proceeding with arbitration on account of this. In order to resolve the dispute as per the PPAs, the IPPs initiated arbitration, in which they sought that the expert determination is declared final and binding as per the provisions of the PPAs. Although NTDC/CPPA(G) and GOP tried through five different legal actions in local courts to stop the arbitration proceedings happening in London, however, on June 8, 2017, after several rounds of submissions,the London Court of International Arbitration validated the Expert order by Justice Sair Ali declaring it final and binding. The arbitrator then sought submission of supporting information for claimed amounts and set a hearing on the same. While the IPPs submitted the documentary evidence of withheld amounts, NTDC/CPPA(G) neither submitted a reply nor attended the hearing.
The London Court of International Arbitration (LCIA) issued the final arbitration award on October 29, 2017 wherein it quantified the amounts payable as per the original award by Justice Sair Ali, plus interest from that date onwards at rates specified in the agreements, and the legal costs. The total is approximately PKR 14 billion.
It is pertinent to mention that when the LCIA validated the earlier decision in June 2017, NTDC/CPPA(G) challenged this award in London Commercial Court as well. The London Court has yet to decide whether it will accept such challenge.The IPPs then filed in London Commercial Court for an anti-suit injunction and were granted a stay order against NTDC/CPPA(G) going to any court in Pakistan, since the agreement between parties expressly provides only international arbitration as the final forum as dispute resolution. As of today an undertaking signed by both IPPS and NTDC/CPPA(G) stating that till the London Commercial Court proceedings are on-going, neither of the parties will pursue the proceedings related to partial final award in any court outside England. Any violation will be considered in Contempt of Court in London and officers, directors, and advisors shall be subject to imprisonment in London for any violation.
Based on the above, NTDC/CPPA(G) cannot take any further legal action in Pakistani courts and thus the claim that Arbitration Award is under litigation in Pakistan is incorrect.The arbitration process has reached its conclusion. Pakistan is a signatory to New York convention on recognition and enforcement of international arbitrations, is bound to implement it. Failure to do so will result in a breach of its signed international treaties.