NTDC wins legal battle against Iranian company: Int’l Court directs to pay US $ 4.5 million compensation

F.P. Report

KARACHI: In what is a significant international victory, National Transmission and Despatch Company (NTDC) a company falling under the Ministry of Energy (Power Division) has prevailed in an international commercial arbitration initiated by an Iranian company (GAM ARAK Ind. Co.) in 2017 against NTDC before an arbitral tribunal constituted under the rules of the International Chamber of Commerce (ICC), Paris.

The spokesmen said that in its detailed Award released on 24 April 2020, the arbitral tribunal has dismissed all the claims brought by the Iranian company and accepted and granted several counterclaims of NTDC amounting to approximately PKR 714 Million (approx. 71 Crore or US$ 4.5 Million) plus interest at the rate of 7.925 % per year as of the date of NTDC’s counterclaims dating back to July 2018 until full payment.

While dilating upon the details, the spokesman said that the dispute arose out of a contract between the Iranian company and NTDC executed in February 2011 for the design, supply, installation, testing, and commissioning of 500 kV Guddu-Multan 3rd Circuit at Rahim Yar Khan 500kV substation. NTDC had terminated the contract due to persistent delays on the part of the Iranian contractor and the project was eventually completed by another contractor.

The spokesman said that the Iranian company, GAM ARAK initiated the arbitration in early 2017 claiming an amount of approximately PKR 180 Million (approx. US$ 1.1 Million) on account of unpaid invoices and damages. NTDC, apart from defending the claims, had filed its own counterclaims alleging the Iranian company’s delays, the costs required to complete the project from another contractor, and claims related to liquidated damages, mobilization advances, customs duties, and demurrage.

On NTDC’s counterclaims, the arbitral tribunal held that NTDC had validly terminated the contract as the Iranian company was responsible for the delay in the project. Accordingly, NTDC was awarded liquidated damages in the amount of JPY 93,591,449 and PKR 57,493,057 to compensate NTDC for the delay in project completion. Furthermore, NTDC was also awarded the amounts of JPY 151,699,145 and PKR 167,546,831 as differential costs in respect of the new contractor engaged by NTDC to complete the project.

The tribunal also ordered the Iranian company to repay NTDC the unadjusted portion of the mobilization advance given to it at the time of the project commencement amounting to JPY 49,830,686 and PKR 12,212,346 and a portion (PKR 28,133,604) of the demurrage charges paid by NTDC when shipments were stuck at port.

The spokesman further said that NTDC is also entitled to interest at the rate of 7.925% per annum for the Pakistani Rupee portion of the damages awarded in its favour. The interest will accrue from 6 July 2018 and run until such time as payment of the award is made. Given NTDC’s near-total success on its counterclaims, the sole arbitrator also awarded NTDC 78% of its legal and other costs in the arbitration.

During the hearing, NTDC was represented in this matter by Mr. Zafar Abbas (Managing Director), Hamza Randhawa (Chief Legal Officer) and Arslan Akhtar (Manager Legal). NTDC had engaged the services of Pakistani law firm, Axis Law Chambers led by Partner, Syed Shahab Qutub and assisted by Sameer Khosa, Maria Farooq, Abdullah Tariq, Hira Jaleel, Salman Ijaz, and Yumna Baloch. NTDC did not engage any foreign lawyer or experts for this arbitration.

It is pertinent to mention here that in the context of international arbitrations where the success rate of Pakistan is extremely low, this award constitutes as a welcome victory at the international stage for the Government of Pakistan.