A court of appeal in the United Kingdom has rejected Pakistan’s final plea that challenged the jurisdiction and award of the Court of International Arbitration (LCIA) on a case initiated by the independent power producers (IPPs) for the recovery of payments from a power-distributing public utility.
The power purchaser had moved the court of appeal to challenge the jurisdiction and the ruling of the LCIA. The Court of Appeal held that LCIA had the jurisdiction over the case, stating its determination was ‘final and binding’ on NTDC.
The order of the Court of Appeal further noted that ‘once the seat of arbitration is decided as London, English courts have the sole supervisory jurisdiction over the arbitration and it is irrelevant to the conclusion that the governing law of the agreement is a foreign law.”
The LCIA Award
Earlier, LCIA ruled favor of nine IPPs naming Hub power Company (Narowal), Halmore Power Generation Company, Nishat Power Generation, Atlas Power, Liberty Power Tech, Sapphire Electric Company, Nishat Chunian Power, Saif Power, and Orient Power.
These companies claimed recovery of capacity payments worth of Rs 11 billion on the National Transmission and Dispatch Company (NTDC), which according to the IPPs, owed them this amount since 2012.
The LCIA directed NTDC to pay Rs. 14 billion (amount + 4.5 percent interest) to the IPPs. It further restricted the government in May 2018 to challenge its decision in any local court of Pakistan.
Nevertheless, the NTDC challenged the LCIA’s award pertaining to the unpaid capacity payments in London High Court. However, after the two days’ proceedings of the court, the state-owned company had withdrawn its case.
But, the high court charged the litigation cost on the company and ordered it to pay £400,000 to the IPPs on account of costs. The company paid the litigation cost to the power producers.
The Case of Unpaid Capacity Payments
In November 2015, nine IPPs had approached LCIA for the recovery of their unpaid capacity payments from NTDC.
The power purchaser had not followed the decision of the party that was mutually agreed in the contract for dispute resolution.
The dispute emerged in 2013 when the previous government discharged the payment of Rs.329 billion to the power producers. However, the amount billed by the IPPs was Rs.340 billion, but the government stopped the capacity payments.
All the nine IPPs approached the international arbitrator independently and took the NTDC to court.