The Water and Power Development Authority (WAPDA) in Pakistan has terminated two of its key contracts with a Chinese firm, even before the formal launch of USD 4.5 billion Dasu hydropower project, citing 'fundamental breaches' of the agreement.
WAPDA encashed the performance guarantees of the two contracts awarded to China Railway First Group (CRFG) in November 2015 - worth Rs. 5.4bn - and ordered the contractor to vacate the project area immediately, while calling for fresh tenders to make up for lost time, reports the Dawn.
The World Bank is the major financier of the 4,320MW Dasu project.
The project's terminated contracts include the 'construction of colony and infrastructure' worth Rs. 4.806bn and 'resettlement of village Choochang and construction of Shatial Museum' worth Rs. 572 million.
Meanwhile, CRFG project director Fan Lingang said, "The termination of the contract is un-contractual, illegal and fiercely unfair."
He claimed it was WAPDA's responsibility to complete the land acquisition process and hand over the required area to the contractor, adding that all Dasu contracts were suffering due to its default.
"We are going to approach the local courts to allow us to approach an international court of arbitration to protect our rights because WAPDA is not willing to resolve [the issue] amicably," said Lingang.
He maintained that his firm would complain to the World Bank as well.
He claimed that the contract had been terminated without prior legal notice and without being provided the opportunity to rectify any violation, if any, by the contractor.
The authority, however, defended its decision, saying: "The contracts were terminated due to fundamental breaches of the contract by the contractors. In these circumstances, no legal notice was required to be served on the contractor to rectify under the conditions of the contracts.
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