PD to spend billions, arbitration costs to be passed on to consumers
ISLAMABAD: Power Division is to spend billions of rupees to contest a Notice of Arbitration served by Halmore Power Generation Company Limited (HPCL) which will later be recovered from the consumers, sources in CPPA-G told Business Recorder.
On the notice of arbitration by Mian Karim-Ud-Din, the owner 225 MW Halmore Power Company, a high level meeting was held at the International Disputes Unit, Attorney General Office pursuant to the Standard Operating Procedures (“SOPs”) for engagement of foreign law firms.
The participants were informed that Mian Karim-Ud-Din has formally initiated investor-State arbitration proceedings against the Federation by service of a Notice of Arbitration to the Office on October 8, 2025.
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The arbitration proceedings are premised on allegations of violations by Pakistan of the UK-Pakistan Bilateral Investment Treaty, and the amount claimed has not been quantified but estimated at $ 80 million. The dispute revolves on allegations that Pakistan’s conduct has negatively impacted the Claimant’s investment in Pakistan, in particular, a company named Halmore Power Generation Company.
The Claimant claims declaratory relief on violations, injunctive relief to cease violations, compensation to be quantified but estimated at USD80 million, and interests and legal costs.
In accordance with the dispute resolution mechanism of the Treaty, the arbitration would be conducted as per UNCITRAL arbitration rules 2021 which provides that Pakistan must file a Response to the Notice of Arbitration within one month of receipt of the Notice of Arbitration (i.e. by 8 November 2025).
For the purposes of preparing a Response to Notice of Arbitration, a preliminary factual position/stance would be required on each allegation raised by Mian Karim-Ud Din. Subsequently, a detailed factual account and witness statements would be required to assess the merits of the case and in order to frame a counter narrative for detailed pleadings in the arbitration.
The meeting was further informed that the contested investor state arbitrations span several years and may involve legal costs in excess of USD5 million.
Mian Karim-Ud-Din has engaged a well-known and reputable international law firm, Messrs Gaillard Banifatemi Shelbaya, led by their lead partner Yas Banifatemi, who has substantial expertise in investor state disputes.
It was suggested that a well reputed international legal team of comparable standing to Messrs Gaillard Banifatemi, would need to be engaged as per requisite Standard Operating Procedures in place and practice, and that additionally a sub-committee should be formed to closely ensure effective liaisons with respective concerned government departments.
The participants also noted and discussed the key features of the Notice of Arbitration and the allegations contained therein.
In this regard, participants from Task Force claimed that the allegations by Karim-ud-Din are false, denied, and lack evidentiary and probative value, adding that no conduct has been pursued which amounts to coercion, intimidation and tarnishing of reputation.
“Meetings with Halmore officials were arranged upon invitation and with consent, related to queries on willingness to engage in negotiations, and were concluded respectfully upon receipt of a negative reply,” Task Force official said.
The settlement agreements in 2021 involved no coercion, and the said settlement agreement contained express provisions on consent.
As per Terms of Reference of the Task Force and mandate of concerned investigation agencies, Karim-ud-Din and Halmore is under investigation for several instances of contraventions of the laws of Pakistan.
In view of existing situation and considering the urgency in preparing a Response to Notice of Arbitration by November 8, 2025, the participants unanimously agreed as follows: (i) concerned officials of the Task Force and Power Division will conduct detailed assessments of the allegations made by Karim-Ud-Din and revert with a factual position by 23 October 2025; (ii) the Office of the Attorney General will shortlist reputable international law firms and initiate selection process against capped fee proposals, and the Power Division will subsequently proceed with execution of letters of engagement and bear responsibility for expenses of the same ; and (iii) after further deliberations and review of the factual position in reply to allegations contained in the Notice of Arbitration, a draft Response to the Notice of Arbitration will be prepared for confirmation by November 5, 2025.
Key Features of the Notice of Arbitration:
a- Pursuant to assurances contained in the 2002 Policy and the 2005 Guidelines, several investors invested in the Pakistani energy sector. The power plants that they established became known as Independent Power Producers (“IPPs”).
b- The Claimant was part of this wave of investment, and on 31 March 2005 incorporated a company named Halmore Power Generation Company .
c- Relying on Pakistan’s assurances and guarantees, including the 2002 Policy and the reference tariff determined by National Power Regulatory and Authority (“NEPRA”), Halmore constructed and put into operation the Bhikki Power Plant, and realization of the project required substantial foreign investments of over USD100 million.
d- The Bhikki Power Plant began commercial operations on 25 June 2011 and the special regime for operation of the project was to remain in place until June 24, 2041.
e- On January 8, 2014, NEPRA adjusted its reference tariff which included payments on reservation of generation capacity, a minimum 15% return on equity, and dollar exchange rate indexation.
f- Following the publication of a committee’s report in March 2020, Pakistan put pressure on IPPs to reduce their tariffs, resulting in the forcible revision of several IPP tariffs in 2021.
g- In 2024, despite having forced Halmore to reduce the said adjusted tariff in 2021, Pakistan intensified its efforts to terminate or, once again, forcibly re-negotiate terms under which the IPPs were operating. Specifically: (i) constitution of a Task Force, which immediately proceeded to employ brutal and coercive means to extract concessions from IPPs ;(ii) illegitimate pressure on the Claimant into accepting various concessions and attack on the Claimant and his investment ;(iii) intimidatory tactics inclusive of in person meetings with Halmore’s CEO at the Lahore headquarters of the ISI on August 29, 2024 where a set of pre-drafted documents were urged to be signed without delay ;(iv) had Halmore accepted Pakistan’s proposed terms, Halmore would have been financially crippled, threatening the viability of the Bhikki Power Plant and the jobs associated with it ;(v) threatening of Halmore’s CEO at the Army Air Defence Command Centre in Westridge, Rawalpindi ;(vi) monitoring of communications and restrictions on travel whereby Halmore’s CEO was stopped from boarding two flights and put on a no-fly list ;(vii) initiation of investigations into the Claimant and his investment in Pakistan, inclusive of parallel investigations by NEPRA ;(viii) withholding of payments whereby Pakistani authorities have withheld approximately Rs. 6.6 billion rupees owed under the respective Power Purchase Agreement;(ix) Pakistan’s conduct vis-à-vis the Claimant violates its international obligations under the Treaty, namely fair and equitable treatment and full protection and security set out at Article 2(2) of the Treaty inclusive of obligation to ensure “management, maintenance, use, enjoyment or disposal” of investment ; and (x) observing obligations with regards to investments of UK nationals set out in Article 2(2).
According treatment no less favourable than that accorded to investments made by nationals of third States, as set out in Article 3(1) of the Treaty.
According treatment no less favourable than that accorded to investors of a third State as regards the “management, maintenance, use, enjoyment or disposal of their investments”.
The last paragraph of Article 8(2) of the BIT, entitles the Claimant to submit the dispute to arbitration under the 2021 UNCITRAL Arbitration Rules, which the Claimant hereby does.
As per default provisions in Article 7(1) of the UNCITRAL Rules, the Claimant proposes the present dispute to be resolved by 3 arbitrators, one appointed by each party and the third appointed by the party appointed arbitrators.
The Claimant has appointed Brooks Daly to serve as an arbitrator and proposed Geneva Switzerland as the legal seat of the arbitration and that the case be administered by the Permanent Court of Arbitration.
Copyright Business Recorder, 2025
