Pakistan saved from paying $1.2bn penalty as Karkey dispute ‘amicably’ resolved: PM Imran – Pakistan

Prime Minister Imran Khan announced Monday that his government, with the help of Turkish President Recep Tayyip Erdogan, has "amicably resolved" Karkey's dispute and saved Pakistan from paying the $ 1.2 billion fine imposed by the Center International for the Solution of Investment Disputes (ICSID)

The prime minister in a tweet congratulated the government negotiating team "for doing an excellent job to achieve this." He did not provide details on how the dispute was resolved.

Karkey Karadeniz Elektrik Uretin (KKEU) was one of the 12 electricity rental companies that were awarded contracts by the PPP government in 2008-09 to "resolve" the energy crisis.

A ship was brought to the port of Karachi in April 2011 to provide electricity to the national grid under the government's power plant rental (RPP) policy to overcome the energy crisis. However, it failed to generate 231 megawatts, as required by the agreement, even though the company had been paid $ 9 million in advance as capacity charges.

The plant produced only 30-55MW of electricity and that also at a cost of Rs41 per unit, which was a serious breach of the contract, according to the indictment. This led to a 50 percent increase in the claim for reimbursement by the government, from $ 80 million to $ 120 million.

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According to the National Responsibility Office (NAB), after a referral was filed against Karkey, the Turkish company requested a negotiation agreement and said it was ready to pay $ 18 million to NAB and promised not to go to international arbitration.

However, some politicians moved the Supreme Court and then the president of the court, Iftikhar Mohammad Chaudhry, rejected the agreement and insisted on recovering the 120 million dollars from the Turkish firm.

As a result, Karkey moved ICSID in 2013, seeking compensation for losses suffered by its vessels in terms of damage or depreciation for not being able to leave the port of Karachi for almost 16 months. The Turkish company then won the case in 2017.