Pakistan Steel has decided to hire a Canadian legal firm for legal proceedings against Indian firm for release of coal loaded ship detained at Canadian port for past 15 days. Sources told Business Recorder on Monday that the Board of Directors of Pakistan Steel Mills Corporation (PSMC) has unanimously decided to initiate legal proceedings against Fomento, which has a claim of $13 million against Pakistan Steel.
The PSMC board in its emergency meeting on Saturday granted approval for hiring of a Canadian legal firm, Fasken Martineau, to make legal efforts for release of the detained ship. On May 11, 2011, a ship carrying 50,000 tons coal for Pakistan Steel, due to reach Port Qasim by June 13, 2011, was detained near Canadian shore on request of an Indian company Fomento, which has a claim of $13 million and obtained a decree against Pakistan Steel.
Sources said that the meeting decided to start legal battle through Pakistani High Commission in Canada and the legal firm was also recommended by the high commission. According to details, Canadian legal firm will charge 150,000 to 200,000 Canadian dollars for proceeding in ship detained case and Pakistan Steel board has approved this amount.
Pakistan Steel had already got approval from ministry of industries and law ministry for legal action against Fomento, which has obtained a decision from the Supreme Court of British Columbia (Canada). Sources said the board also allowed legal firm to deposit a guarantee of 10 million dollars for release of detained ship.
Reportedly, some insiders of PSMC are also involved in this case, who leak secret information of import of coal and with the help of information, and provide an opportunity to the Indian firm to take a timely action against Pakistan Steel mills.
Therefore, the meeting also asked the audit and finance committee to investigate the issue in detail and report in four weeks to take action against the culprits of the incident. Audit committee will also investigate that on whose instruction an appeal was not filed, when a decision was announced in favour of Indian firm.
Sources said that about $20,000 per day demurrage is being imposed on the detained ship, which will be paid by importer ie Pakistan Steel. A board member said that PS management is making all efforts for the release the ship along with coal and it will be released if serious efforts made along with the held of shipping company, exporters and port authorities.
Sources said port authorities were already informed by the Indian firm that they are going to take legal action against Pakistani coal ship. However, port authorities restricted them and said that this is not the right way to get claim. They said ship is still detained and Indian firm is trying to take delivery of the coal to sell it in the market and recover the amount. According to Pakistan Steel, in 2004 an agreement was singed with an Indian company Fomento for supply of good quality iron ore, but it supplied iron ore which was not up to international standard. Consequently, Pakistan Steel cancelled this agreement in 2005 as per clauses mentioned in tender document.
When the agreement was cancelled, Fomento lodged a case against Pakistan Steel in the International Court of Arbitration in London. The Court gave a divided judgement in this case. According to PSMC as per law and the agreement clauses, Fomento should have approached the relevant court in Pakistan to decide the legal validity of the agreement before approaching the International Court of Arbitration but Fomento did not follow this procedure.
Pakistan Steel representative further stated that Fomento obtained a decision from the Supreme Court of British Columbia (Canada) and detained the coal loaded ship, which is contrary to normal practice because the said Court did not issue any legal notice to Pakistan Steel nor did it provide any opportunity to Pakistan Steel to explain its position. Therefore, now it has decided to start legal proceedings.
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