Shearman & Sterling secured a favorable award on October 29, 2017 for our clients—nine independent power producers that generate electricity in Pakistan—in a commercial arbitration conducted under the London Court of International Arbitration (LCIA) Rules involving a dispute over delayed payments. The tribunal awarded our clients over US$135 million, consisting of the full amount of the payments they sought, pre- and post-award interest, and legal and arbitration costs. The recently issued award is the final award in the dispute, bringing the arbitration to a close.
The nine independent power producers (IPPs) had each concluded a contract for the generation and sale of electricity in Pakistan, to which the counterparty was the National Transmission and Despatch Company (NTDC), an entity owned and controlled by the Government of Pakistan. Following many years of delayed payments, the IPPs and NTDC agreed to have their disputes settled by expert determination, as provided for in the contracts. The expert issued a determination favorable to our clients, with which NTDC refused to comply. The IPPs then sought to recover the amounts they were due in nine international arbitration proceedings initiated by each of the IPPs separately, which were consolidated with NTDC’s agreement.
In parallel with the arbitration, another entity of the Government of Pakistan, the Private Power and Infrastructure Board (PPIB), applied to the courts of Pakistan in order to have the expert determination declared void. Both PPIB and NTDC appeared multiple times before the courts of Pakistan seeking to void the expert determination and restrain our clients from proceeding with the arbitration.
PPIB’s and NTDC’s conduct before the courts in Pakistan led the IPPs to mount a claim for damages arising from NTDC’s breach of the arbitration agreement. In a Partial Final Award issued on June 8, 2017, the tribunal found in favor of the IPPs on the key issue of whether the expert determination had become final and binding, and also granted the IPPs’ request for security for the amounts in dispute.
The tribunal’s Partial Final Award was followed by a Final Award on October 29, 2017. In a comprehensive victory for our clients, the tribunal awarded them the entirety of the amounts they sought pursuant to the Expert Determination, as well as their full legal costs in defending against PPIB’s and NTDC’s applications before the courts of Pakistan, by way of damages for breach of the arbitration agreements. In addition, the IPPs recovered pre- and post-award interest at a favorable rate, and the entirety of their legal costs in the arbitration as well as their share of arbitration costs.