PM’s mission to Turkey brings legal dispute with Turkish energy firm to forefront

Prime Minister Nawaz Sharif‘s visit to Turkey this week has once again brought to the forefront the multi-million dollar legal dispute between the Government and the Turkish energy company, Karadeniz Holding’s subsidiary KARKEY.

Prime Minister Sharif arrived in Turkey on Monday September 16 for a three-day official visit, his first since taking post in May, seeking to bolster Turkish investment into the country.

According to the media reports, the Prime Minister hoped to sign eight economic cooperation agreements with the Turkish counterparts and is seeking a $300m credit facility from the Export Credit Bank of Turkey.

In the discussions specifically pertaining to the energy sector, the Prime Minister will reportedly seek a framework agreement between Turkey and Pakistan on the power generation and distribution, as well as an enhanced cooperation agreement between the State-owned oil and gas companies and Turkish equivalents.

But the prospect of enhanced bilateral cooperation in the energy sector has been dimmed by the long-running legal dispute involving KARKEY and the government authorities. Since April 2012, four of KARKEY’s vessels including two Power ships – floating power plants and Turkish crew of thirty are being detained by the government authorities in the national waters.

Unable to reach an out of court settlement, KARKEY has taken its case for the compensation and damages to the World Bank-affiliated International Centre for Settlement of Investment Disputes (ICSID) in Washington DC.

The first ICSID hearing took place this past Monday, September 16, the same day when the Prime Minister Sharif arrived in Turkey.

Monday’s hearing included questioning by the arbitration tribunal of both parties to the dispute and resulted in the decision that the final hearing on provisional measures would be held on the 8th of October, just ten days after the Pakistani Counsel’s submission of Pakistan’s defense on September 29.

This decision was taken in the large part due to the consensus for the need of an urgent decision on the provisional measures requested by KARKEY.

A KARKEY spokesman said, “Increased economic cooperation between Turkey and Pakistan is in both countries’ best interest. This unnecessary dispute has clouded the climate for bilateral cooperation and damaged investor and business confidence. We hope it can be settled quickly and fairly, preventing it becoming an obstacle to successful future Turkish collaboration with the Government of Pakistan in the energy and other sectors.”