The Attorney General (AG) Office has raised eyebrows at the modified draft of Arbitration Agreement (AA) sent by Karachi Electric (KE), saying the revised draft does not address the AG Office’s earlier concerns as noted in its April 2021 letter, well-informed sources in Privatisation Commission told Business Recorder.

On February 15, 2022, KE furnished a muddied draft of AA after replacing the words “equity and fairness” appearing in clauses 3 and 5 of the earlier draft.

KE, in its revised ToRs, made two points i.e. surrendering of principle of reciprocity and local arbitration rather than in London to convince the government.

The power utility also proposed that arbitration should be based on equity, fairness and Shariah, which implies that all the contracts i.e. Gas Supply Agreement (GSA) or Power Purchase Agreement (PPA) should be ignored while making settlement deal.

Last month, Finance Minister, Shaukat Tarin presided over a meeting of the Transactions Committee wherein the issue of KE also came under discussion.

After deliberation on the matter, Finance Minister directed that the fresh draft AA shared by the KE be forwarded by Privatisation Commission to AG Office for views/comments. Further, Power Division was directed to submit the draft PPAA, Inter Connection Agreement (ICA) and agreement on Tariff Differential Subsidy (TDS) to CCoE for its consideration/ decision in the next meeting.

The Attorney General Office, in a letter to PC, has stated that the Attorney General for Pakistan has examined the revised arbitration clauses as received from KE and reproduced in letters of Privatization Commission of March 2 and March 3, 2022.

The letter says, recitals, (v), (vi) and (vii) are based on facts and may be verified from the pleadings as claimed by KE. Insofar as ToR No. 2 is concerned, it may be pointed out that there was a consensus and agreement by all with respect to the name of Justice Tassaduq Hussain Jillani (Retd), former Chief Justice of Pakistan and who was thereafter consulted for his consent. Now, the name has been left vacant so the Office of the Attorney General for Pakistan cannot agree with the proposal in view of the foregoing.

In respect of the most sensitive provision as reflected in ToR No. 3, Attorney General office has reiterated its position as stated in its earlier letter of April 19, 2021 in which it had explained the implication of the words “on the basis of applicable laws, contracts and principles of equity and fairness”.

According to AG letter, in the revised draft sent by KE, there is no reference to applicable laws and contracts and instead the words (“so as to compensate each claimant for the delay in payments”)have been added..

“The Arbitrator in determining the claims and the quantum of compensation shall take into account all the relevant facts and circumstances which led to the current situation and apply fair methods of determining compensation including the costs of funds of a party where such is warranted”, said the AG Office.

The Attorney General Office is of the view that the revised draft goes beyond and does not cater to the concerns addressed in its earlier letter of April 19, 2021.

“The determination of quantum has to be based on applicable laws and contracts. Any other criteria may result in the award of interest/compensation beyond applicable laws and contracts. This is equally true in respect of revised provision by KE as conveyed in letters of March 2 and March 3, 2022,” it stated.

The sources said, PC has shared the response of AG Office with the Finance Minister, which, along with KE’s revised draft will be presented before the Committee established for the purpose by the Federal Cabinet in its meeting held on June 8, 2021.

Meeting of the Committee is intended to be convened once the PPAA, ICA and agreement on TDS are submitted by the Power Division for approval of the CCOE/ Federal Cabinet, the sources continued.

The story was originally published in Business Recorder on March 29, 2022.