United States District Court, District of Columbia
In re Application of THE ISLAMIC REPUBLIC OF PAKISTAN for an Order Permitting Discovery Pursuant to 28 U.S.C. § 1782, Petitioner,
ARNOLD & PORTER KAYE SCHOLER LLP, Respondent.
ROSEMARY M. COLLYER UNITED STATES DISTRICT JUDGE.
Islamic Republic of Pakistan submits an Application to this
Court for an order permitting it to take discovery of the law
firm of Arnold & Porter Kaye Scholer LLP. Pakistan
contends that Arnold & Porter possesses backup tapes of
electronic records that evidence corrupt activities by the
firm's client, Karkey Karadeniz Elektrik Uretim A.S., in
relation to the award of a large government contract from
Pakistan in 2008. Those alleged corrupt activities are the
subject of both an official Pakistani corruption
investigation and an international arbitration. Arnold &
Porter objects to discovery on multiple grounds, most crucial
being that it does not now have, and has never had,
possession, custody, or control of the backup tapes. For the
reasons discussed below, the Court will grant in part and
deny in part the Application.
are no disputes about the facts below unless identified.
experienced a major energy crisis between 2006 and 2007. In
response, it initiated a policy of power generation through
the Rental Power Projects Program. Karkey builds and operates
“Powerships”-ships with mounted power generation
equipment that can be sailed around the world and connected
to the electric grid of countries in need of power. Like
other power providers, Karkey bid for and was awarded a
contract (as specific to Karkey, the Contract) with Lakhra
Power Generation Company Ltd., a company owned by the
Pakistani government, to set up ship-mounted power generation
units near Karachi, Pakistan.
member of Parliament complained to the Supreme Court of
Pakistan about the Rental Power Projects Program, that Court
opened a case into government corruption and convened a
three-judge panel to hear it. In a January 2010 report, the
Asian Development Bank reported that there were “many
inconsistencies” in the Rental Power Projects
contracts. See Ex Parte Appl. for an Order
Permitting Discovery Pursuant to 28 U.S.C. § 1782
(Appl.) [Dkt. 1], Ex. B, Asian Development Bank, Islamic
Republic of Pakistan: Rental Power Review (2010) [Dkt. 1-2]
¶¶ 7, 11. On March 30, 2012, the Supreme Court of
Pakistan issued a judgment that held that all contracts under
the Rental Power Projects Program violated Pakistani
Procurement Rules because government functionaries and
project contractors had been “prima facie involved in
corruption”; the Supreme Court of Pakistan declared
that all such contracts were void ab initio. Appl.,
Ex. A, Karkey Karadeniz Elektrik Uretim A.S. v. Islamic
Republic of Pakistan, ICSID No. ARB/13/1 (Aug. 22, 2017)
(ICSID Award) [Dkt. 1-1]. Without making any specific or
general finding of corruption beyond “prima facie,
” and without any general or specific findings as to
Karkey, the Supreme Court ordered Pakistan's National
Accountability Bureau (occasionally, NAB) to investigate
possible corruption by Pakistani officials and all
contractors, including Karkey. Id. ¶ 126.
result, Karkey's bank accounts in Pakistan were frozen,
as were its vessels, until the NAB inquiry was complete.
See Appl., Ex. E, Letter from NAB to the Maritime
Security Agency (April 2, 2012) [Dkt. 1-5]. Thereafter, the
National Accountability Bureau conducted “a detailed
examination of all accounts and documents” related to
Karkey's power supply contract and agreed, by
“Deed” dated September 7, 2012, to settle
Karkey's account for $17 million USD and expressly to
clear Karkey of all liability under the Pakistani National
Accountability Ordinance. ICSID Award ¶ 136.
Deed stated that “KARKEY has no liability, and there
remains no basis or evidence for proceeding(s) by NAB or any
of the other Parties or GoP [Government of Pakistan] entities
against KARKEY and/or its project/investment and that NAB has
completed and closed its enquiry in respect of KARKEY.”
Id. The Deed was signed by the Director General of
NAB and provided for payment by Karkey of $17.2 million USD
to settle all matters arising from the contract, the Supreme
Court's judgment, and the NAB inquiry. Id.
¶ 136. In addition, in October 2012, the National
Accountability Bureau issued a “No Objection
Certificate” confirming that it was satisfied that
Karkey had no liability under Pakistan's anti-corruption
law, and that the National Accountability Bureau had
“completed and closed its inquiry [in respect of
Karkey]” so that Karkey could retrieve its ships and
equipment. Id. ¶ 138. The Supreme Court of
Pakistan then unilaterally abrogated the Deed and No.
Objection Certificate and ordered the National Accountability
Bureau to recover $120 million USD from Karkey before
Karkey's vessels could be released. Id.
¶¶ 140-42. Again, however, the Supreme Court of
Pakistan made no findings and stated no conclusion as to
whether Karkey had engaged in corruption.
January 2013, the Supreme Court of Pakistan directed the
National Accountability Bureau to pursue criminal charges
against individuals involved in the Rental Power Projects and
even to arrest them. Id. ¶ 145. In response,
the Chairman of the National Accountability Bureau wrote to
the President of Pakistan expressing concern with these
directives: by “becoming involved in guiding
investigations, ” the Supreme Court was encroaching on
NAB's independence and “placing extreme pressure on
NAB personnel who appear before” the Supreme Court.
Id. ¶ 147. The NAB Chairman also warned that
pressure from the Supreme Court created a “danger of
unfair investigation being resorted to.” Id.
The Supreme Court responded by issuing a contempt order
accusing the NAB Chairman of “causing interference with
and obstruction in the process of the Court and . . . the
administration of justice.” Id. ¶ 148. As
a result, since 2013 the National Accountability Bureau has
pursued and continues to pursue charges against those
involved in the Rental Power Projects. Karkey states that one
of its vessels was detained for more than two years and its
other three vessels remain in Pakistan's possession.
January 2013, Karkey initiated arbitral proceedings against
Pakistan before an International Centre for Settlement of
Investment Disputes (ICSID) Tribunal, pursuant to the
Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States. See Id. ¶
5; see also ICSID Convention, Mar. 18, 1965, 17
U.S.T. 1270. Pakistan consented to the submission of
investment disputes by Turkish investors to ICSID through a
Bilateral Investment Treaty (BIT). See ICSID Award
tribunal of three international arbitrators was selected to
conduct the arbitration and pre-arbitration proceedings. In
the arbitration, Karkey claimed that Pakistan violated the
Contract when the Supreme Court of Pakistan made the
“arbitrary” decision that the Contract was void
ab initio. Opp'n at 9. Pakistan argued that
Karkey was not entitled to relief because it had fraudulently
or corruptly procured the Contract and, thus, the Arbitral
Tribunal lacked jurisdiction to hear Karkey's case under
the Bilateral Investment Treaty.
preparation for the actual arbitration hearing, the parties
engaged in discovery for years under procedures established
by the Arbitral Tribunal, for which the International Bar
Association (IBA) Rules on the Taking of Evidence in
International Arbitration (2010) provided guidance. Under the
IBA Rules, a party seeking discovery must identify “a
narrow and specific requested category of Documents that are
reasonably believed to exist” and satisfy the
arbitrators that that the requested documents are
“relevant to the case and material to its
outcome.” IBA Rules Arts. 3.3(a), 3.7. The IBA Rules
permit a party to object to the production of evidence if it
would entail an “unreasonable burden to produce the
requested evidence, ” or based on “considerations
of procedural economy, proportionality, fairness or equality
of the Parties that the Arbitral Tribune determines to be
compelling.” Id. Arts. 9.2(c), 9.2(g).
ICSID Convention also contains ICSID Arbitration Rules.
See ICSID Convention, Arts. 6(1)(c), 44; ICSID
Arbitration Rules. Rule 34(2) of the ICSID Arbitration Rules
provides that “[t]he Tribunal may, if it deems it
necessary at any stage of the proceeding: (a) call upon the
parties to produce documents, witnesses and experts . . .
.” Article 43 of the Convention also provides that
“the Tribunal may, if it deems it necessary at any
stage of the proceedings, (a) call upon the parties to
produce documents or evidence . . . .” ICSID Convention
the course of pre-hearing discovery, both sides produced
documents to the other. Early in that process, Karkey
informed Pakistan that some (but not all) of Karkey's
electronic files from prior to April 2010 had been archived
to 70 backup tapes (the Backup Tapes) and that those
documents would not be accessible without undue burden and
expense and may not be recoverable at all due to outdated
complained volubly about not receiving relevant documents
from the Backup Tapes and submitted three separate requests
to the Arbitrators, seeking orders to Karkey to restore and
search the tapes. Since the Backup Tapes are at the heart of
the instant request for assistance, the Court details those
requests to the Arbitral Tribunal.
Pakistan's First Request
filed its first application for a Tribunal order in April
2015, explicitly recognizing the Tribunal's discretion to
“exclude from production any document which it would be
unreasonably burdensome to produce” and that
“recovering documents from backup tapes is not a
straightforward task.” Resp't's Opp'n to
Appl. For an Order Permitting Discovery Pursuant to 28 U.S.C.
§ 1782 (Opp'n) [Dkt. 13], Ex. A, Karkey's
Counter-Memorial on Annulment (Counter-Mem.) [Dkt. 13-1]
¶ 58. Karkey replied that “[b]ecause of the number
of Backup Tapes and their format, restoring the data on them
in a manner that would allow Karkey to search for responsive
documents would be extremely costly and time-consuming, and
might not even be possible.” Id. ¶ 59.
Instead, Karkey certified to the Tribunal that it had
collected, searched, reviewed, and produced all accessible
and responsive pre-April 2010 documents, including email.
Id. ¶ 61. The Tribunal made no decision on the
Backup Tapes before the next request from Pakistan.
24, 2015, Pakistan again asked the Tribunal to order Karkey
to restore the Backup Tapes. Id. ¶ 62. Karkey
objected, repeating that it had already collected, reviewed
and produced responsive electronic and hard copy files from
prior to April 2010, to the extent that they had been
maintained by individual custodians or found in databases or
in files. Id. Karkey also noted that Pakistan had
failed to identify a narrow and specific category of
requested documents, as required by the IBA Rules.
Tribunal denied Pakistan's request on August 31, 2015. It
concluded that, in light of Karkey's previous production
and the absence of any evidence of spoliation,
“restoring 70 pre-April 2010 backup tapes is
excessively burdensome.” Id. ¶ 63; ICSID
Award ¶ 529. It also required Karkey to submit a
declaration confirming that the search for pre-April 2010
documents had been exhaustive, which Karkey then submitted.
See Counter-Mem. ¶ 64.
Pakistan's Second Request Based on New Evidence
months later, on December 11, 2015, Pakistan submitted its
second request for an order requiring Karkey to restore the
Backup Tapes. Id. ¶ 65. Pakistan based its
second request on information it had received from “a
Lebanese individual” who had shown Pakistan's
counsel redacted copies of two alleged “Consultancy
Agreements” that suggested the existence of a
“scheme” to secure Karkey's rental service
contract through illicit payments. Id. The Lebanese
individual refused to give copies of the Consultancy
Agreements to Pakistan's counsel and demanded millions of
dollars in exchange before turning over the redacted copies.
Id. ¶ 67; see also ICSID Award ¶
528. Karkey denied the existence of the alleged
“scheme” and argued that the third application
was “based wholly on hearsay, innuendo, and
speculation.” Counter-Mem. ¶ 66.
considering the arguments from both parties, the Tribunal
once again denied Pakistan's request. ICSID Award ¶
Pakistan's Third Request
arbitral hearing began in London on February 29, 2016. On
March 1, the second day, Pakistan again proffered evidence of
corruption and asked the Tribunal to order Karkey to restore
and search the Backup Tapes. Id. ¶ 531. The
Tribunal “dealt with the application on Day 2 of the
Evidentiary Hearing” and decided to admit some, but not
all, of the evidence proffered by Pakistan; ...