Pakistan’s Appeal Against an Award in Favor of the IPPs for Recovery of Dues, Dismissed by the U.K. Court of Appeal

Pakistan’s Appeal Against an Award in Favor of the IPPs for Recovery of Dues, Dismissed by the U.K. Court of Appeal

United Kingdom: On Monday, October 22, the U.K. Court of Appeal dismissed the final plea by Pakistan, which challenged the jurisdiction of the London Court of International Arbitration (LCIA) in a suit filed by the Independent Power Producers (IPPs) for the recovery of dues from a Government-owned company.

The decision of the Court of Appeal came as a big blow to Pakistan, earlier the LCIA had pronounced orders in favour of the nine IPPs in regard to retrieval of approximately Rs.11 billion unpaid capacity payments from the National Transmission and Despatch Company (NTDCL).

Thereafter, the National Transmission and Dispatch Company (NTDC) had approached the London High Court against the award of the International Tribunal pertaining to the payment of the recovery amount to the IPPs. NTDC is a Pakistani power transmission company. Pursuant to a two days proceedings, NTDC withdrew its case. The London High Court ordered the NTDC to pay £400,000 to the IPPs on account of costs by June 29, 2018, which was duly paid.

The IPPs claiming recovery of dues include the Hub Power Company (Narowal), Sapphire Electric Company, Halmore Power Generation Company, Liberty Power Tech, Atlas Power, Nishat Chunian Power, Nishat Power, Orient Power and Saif Power.

The power purchaser, NTDC approached the Court of Appeal, challenging the sole seat of arbitration i.e. LCIA’s jurisdiction and the International Arbitrator award in favour of the IPPs. The Applicant also contested the Judge’s consequential orders.

On October 4, the Court of Appeal upheld the previous orders and observed that the Judge had rightly decided upon the supervisory jurisdiction of the proceedings.

In its appeal, the NTDC had challenged the conclusion of the order and claimed that as per the Law of Pakistan, it makes it unlawful for Pakistani parties to seek to expel the jurisdiction of the Pakistani Courts. However, the claim was objected by the Court of Appeal, wherein the Court observed,

“If there were any merit in this argument, it could and should have been advanced before the LCIA and the arbitrator which it was not.”

In accordance with the law, once the seat of arbitration is decided as London, English courts have the sole supervisory jurisdiction over the arbitration. Therefore, making the governing law of the agreement, irrelevant on grounds of being foreign law.

It is pertinent to note that NTDC was already intimated and restrained by Judge Justice Phillips of the LCIA from challenging the Partial Final Award in proceedings before a Court in Pakistan or anywhere other than England and Wales on a permanent basis.

It has been observed by a Senior lawyer that in case the NTDC challenges the award by the International Arbitrator in England before a Pakistnai Court. The appeal will amount to contempt of Court in England.

As per experts, Pakistan is in a tough spot as it is facing more than 40 cases of various nature at International Courts. In order to seek clearance of dues amounting to more than Rs. 1 trillion, majority of the IPPs have resorted to International Arbitrators.

Considering the dire financial state of Pakistan, the legal experts have urged the Courts to refrain from adjudicating matters pertaining to monetary deals involving arbitration clauses.