ISLAMABAD: The Government of Pakistan is facing a serious arbitration threat from Saudi and Kuwaiti investors — key shareholders in K-Electric — who have served a USD 2 billion notice over mounting financial, regulatory and governance disputes, sources told Business Recorder.
If initiated, this would mark the third major international arbitration in Pakistan’s power sector after cases involving Halmore Power Company and Star Hydropower.
A formal notice of dispute was issued by international law firm Steptoe LLP to the Attorney General for Pakistan on November 12, 2025, under the OIC Investment Agreement, following an earlier notice dated October 20, 2025. Copies were also sent to the Prime Minister’s Office, Energy Ministry, Law Ministry and the Special Investment Facilitation Council (SIFC).
Steptoe stated that despite more than three weeks having passed, the government has not acknowledged the notice nor designated any representative for settlement talks, as required under Article 17(1) of the OIC Agreement. The firm warned that the investors now intend to move directly toward arbitration under Article 17(2).
The law firm said it will soon nominate an arbitrator in accordance with Article 17(3), stressing that arbitration has become necessary due to ongoing financial and regulatory harm to investors. The notice outlined several key concerns:
- Failure to implement NEPRA’s 2025 Multi-Year Tariff decisions and government-driven review proceedings initiated by CPPA-G
- Erosion of K-Electric’s financial health due to delayed tariff differential subsidy payments and outstanding government dues
- Inaction by SECP, State Bank and FIA over alleged regulatory breaches
- Impairment of investors’ governance rights in K-Electric and related entities
Steptoe also attached a letter from AJPL and Denham sent to K-Electric’s board on November 9, 2025, objecting to attempts to convene a board meeting and alter the company’s management, including the proposed appointment of a new CEO. Investors argue these moves violate Sindh High Court orders and damage their investment.
The notice claims the government — as a shareholder and through its nominated directors — was aware of these actions yet took no steps to prevent them, amounting to a continued breach of the State’s obligations to ensure fair and equitable treatment and legal stability.
Steptoe urged Islamabad to begin immediate negotiations and nominate an authorized representative by November 14, 2025, warning that failure to comply will trigger the constitution of the arbitral tribunal.
It remains unclear whether the government has responded. A message sent to Minister for Power Sardar Awais Ahmad Khan Leghari seeking confirmation went unanswered.
The investors emphasized they have acted in good faith and expect the government to do the same, urging Pakistan to engage constructively to avoid escalation.
Steptoe reiterated that all rights under international law and the OIC Agreement remain fully reserved.
Story by Mushtaq Ghumman
