ToRs of Arbitration Agreement: ECC disapproves ‘equity and fairness’ clause

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has reportedly disapproved the clause "equity and fairness" proposed by KE in the Terms of Reference

(ToRs) of Arbitration Agreement on the written advice of Attorney General for Pakistan, well informed sources told Business Recorder.

"There was a consensus in the ECC on disapproval of equity and fairness clause of ToRs and important opinion was of Attorney General who said in writing that equity and fairness may have consequences which can go against the government or public sector entities/ organisations," sources added.

It is not a simple issue which is why KE is insisting on inclusion of clause "equity and fairness" in ToRs, the sources said, adding that the Power Division took a position from day one that the country's laws are adequate to sort out matters.

According to sources, stakeholders have reached an agreement over the appointment of former Chief Justice of Pakistan, Tasadduq Hussain Jilani as Arbitrator on settlement of claims of KE and government organisations/ entities against each other.

"Whatever decision the Arbitrator will finalise, it will be enforced through Islamabad High Court (IHC) and all the parties will be bound to accept it, which is why there is no reason to include the clause that the decision should be on the basis of equity and fairness, the sources maintained.

The clause of equity and fairness will have consequences which can go in favour or against KE or the government, so why complicate matters further," the sources continued.

Power Division and Petroleum Division gave their opinion against the clause of equity and fairness in ToRs; the Finance Division also opposed it.

Insiders claim that the former SAPM on Petroleum, Nadeem Babar had supported the equity and fairness clause, which has now been reviewed after SAPM on Power Tabish Gauhar was given the additional charge of Petroleum.

The sources said SSGC Board of Directors also gave its opinion in writing that the gas utility will not accept the clause of equity and fairness.

SSGC Board, sources said, maintains that it is due Rs100 billion late payment surcharge (LPS) while OGDCL and PPL have also claimed Rs100 billion as LPS.

"The opinion of SSGC Board has more weight than the Ministries," the sources further added.

Another decision the ECC took was that the parties should finalise new Power Purchase Agreement (PPA) and sort out disputes sans equity and fairness clause.

The ECC also opposed imposition of surcharge on consumers in case any delay in payment of subsidy by the Finance Ministry.

"This is not fair that the burden of late payment of subsidy by the Finance Division is passed on to the consumer who pays his/her bill on time. The claim of LPS should be the responsibility of Finance Division," the sources said adding that Nepra also claimed that it has already allowed KE working capital allowance in tariff of 2016.

Copyright Business Recorder, 2021