ICSID takes cognizance of Turkish firm’s claim against Pakistan

ISLAMABAD: The International Center for Settlement of Investment Disputes (ICSID) has decided against Pakistan declaring that it assumes jurisdiction over Turkish company Bayindir’s claims for having breached its international obligations.

The ICSID Tribunal decided to proceed with adjudication on the quantum of amounts owed to Bayindir by Pakistan for non-fulfillment to settle accounts.

In its latest verdict, the ICSID assumed jurisdiction over Bayindir’s claims, and decided to proceed with adjudication of the matter. The Tribunal in its verdict stated that the Tribunal finds that Pakistan has exercised a high degree of control over the National Highway Authority’s (NHA) actions pertaining to the Impugned Measures in relation to the issues in the current arbitration, which can be attributable to Pakistan under Article 8 of the International Law Commission (ILC) Articles.

In 2001, the Turkish construction company Bayindir was expelled from its $650 million contract to build Pakistan’s M-1 Motorway, its equipment seized, payments withheld, and bank guarantees encashed. Bayindir’s plea for fair treatment and compensation for expropriation in 2003 before ICSID under the Turkey-Pakistan Bilateral Investment Treaty (BIT) was dismissed.

The arbitral tribunal, in 2009, ruled that NHA’s actions were permissible within the bounds of the contract, dismissing the Turkish company’s claims. While the tribunal confirmed Pakistan’s responsibility for the acts of the NHA, it concluded that Bayindir’s residual contractual rights — such as a final accounting — precluded a treaty breach.

At this point, many had viewed the case closed. However, in 2020, after waiting for 10 years after the award for Pakistan to follow through on its promises, Bayindir filed a second arbitration under the BIT and standards promised under the Organisation of Islamic Cooperation (OIC) Treaty (Bayindir II).

In this second suit, the essential argument rested on the post-award conduct of Pakistan, with analysis of Pakistan’s obligations under international law.

The Tribunal has directed Pakistan to appoint an independent engineer within two months of the date of the decision (January 8, 2025), failing which the Tribunal will appoint the engineer. This will ensure the settlement of accounts that have been due since the completion of the project for more than a decade.

When contacted, Pakistani officials they said that they had defended the case earlier and would continue to do so at available forums with the expectation that they would be able to protect the rights of the country.