ISLAMABAD: Disturbed by the arbitration notice from the owner of M/s Halmore Power Generation Company and its legal implications, Pakistan’s public sector legal experts have reportedly decided to seek the viewpoints of concerned officials from the Ministry of Energy (Power Division) and the Task Force established to settle IPP (Independent Power Producers) disputes regarding the allegations made by the claimant.
Well-placed sources told Newzshewz that a meeting was held at the Office of the Attorney General on January 7, 2025, to discuss the “written notification of a claim pursuant to Article 8 of the Bilateral Investment Treaty (BIT) between the UK and Pakistan.”
The participants reviewed the contents of the arbitration notice, and the Attorney General’s Office briefed them on the following assertions made by the claimant:
The participants perused the contents of the written notification of a claim (Arbitration Notice) and the Attorney General’s Office apprised of the following assertions made against Pakistan: (a) Mr Karim-Ud-Din (the “Claimant”) claims to be a protected investor and to have made an investment in Pakistan under the Pakistan-UK BIT. These investments include ownership, construction and operation of a 225MW power plant, Halmore Power Generation Company ;(b) Pakistan and its state entities have breached obligations owed to the Claimant under the PAK-UK BIT by unlawfully disrupting its investments in Pakistan, encroaching on the physical and legal integrity of its investments, and engaging in conduct amounting to coercion, intimidation and tarnishing of reputation ;(c) the claimant further asserts that such conduct violates the following obligations enshrined in the BIT: (i) fair and equitable treatment under Article 2(2); (ii) full protection and security under Article 2(2); (iii) undertaking to observe obligations under Article 2(2); (iv) providing treatment no less favorable than those accorded to investments made by other investors of other third States under Article 3(1); and (v) expropriation of investments under Article 5.
In this regard, the participants observed that the Claimant is likely to satisfy all requirements for issuance of arbitration proceedings under the BIT, and that the Claimant would bear the burden of proving its allegations as a matter of factual evidence. In addition, the Claimants would have to establish the quantum of pecuniary loss and damages flowing from breach of obligations in the BIT.
It was also noted that the Claimant has referenced a potential claim resulting in loss of $ 52 million premised on forcefully compelling Halmore Power Generation Company to a accept a reduction of its guaranteed rates of return from 15% to12%. Furthermore, allegations have also been made pertaining to breach of undertakings provided by Pakistan in its sovereign guarantees.
According to sources, the Attorney General’s Office further apprised that legal principles defining ‘expropriation’ in investor state disputes is of two kinds, direct and indirect. Direct expropriation is forcible appropriation by the host state of an asset; and indirect expropriation is any measure by the host state that does not deprive the investor of legal title over its investment and assets but deprives him of benefits and/or enjoyment of the investment.
The participants noted that Article 8 of the BIT provided three months from the date of the Arbitration Notice for the parties to engage in amicable settlement i.e. by February 25, 2025.
In view of the above and that non-settlement of the claim may lead to arbitration proceedings involving expenditure of significant financial resources and detailed rebuttal of legal and factual allegations, the participants unanimously proposed that views on allegations made by the Claimant be obtained from concerned officials of the Ministry of Energy (Power Division) and the Task Force constituted for settlement of IPP disputes. In this regard, the Task Force constituted for settlement of IPP disputes shall convene a meeting of concerned stakeholders at the earliest.
It was also decided that the Claimant’s requests for amicable settlement discussions may be considered.
The notice says that Pakistan’s aggressive methods have had damaging consequences: five IPPs have been pressured into terminating their electricity supply contracts with Pakistan, as widely reported. Karim-Ud-Din’s investments in Halmore have similarly been harmed by Pakistan’s actions. He, along with Halmore, has faced relentless coercion to renegotiate the company’s tariff and contractual terms, stripping him of the guarantees that initially encouraged his investment in Pakistan’s electricity market.
The notice further states that on November 11, 2024, Halmore’s CEO was summoned and threatened with detention unless Mr. Karim-Ud-Din—who resides in London—authorized the acceptance of pre-determined terms that could potentially lead to Halmore’s bankruptcy. Although the CEO was eventually released, Pakistan has continued to exert pressure on Mr. Karim-Ud-Din to compromise on his rights, placing Halmore’s future, as well as the security of its personnel, in immediate danger.
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