Saudi and Kuwaiti investors have filed a $2 billion arbitration case against Pakistan over K-Electric, the country’s largest private power utility. The dispute escalates tensions over unpaid government dues, regulatory interventions, and a stalled $1.77 billion sale. Pakistan K-Electric investors argue that the prolonged delays undermine investor confidence and threaten the stability of the power sector.
The investors submitted the arbitration notice on January 16, 2026, under UNCITRAL rules and the OIC Investment Agreement. London-based law firms Steptoe International (UK) LLP and Omnia Strategy LLP represent the claimants. Consequently, Pakistan must appoint its arbitrator within 60 days to advance the proceedings.
The claimants include 32 Saudi individuals and entities linked to the Al-Jomaih family, along with five Kuwaiti companies. They collectively hold a 30.7% indirect stake in K-Electric and have acted as cornerstone shareholders since the 2005 privatization. The investors appointed Professor Stephan Schill as their arbitrator and proposed the Permanent Court of Arbitration to manage the case.
According to the 39-page Notice of Arbitration, the investors have invested over $4.7 billion in Karachi’s power infrastructure. They reduced technical and commercial losses, expanded generation and distribution, and saved the Pakistani exchequer more than $3 billion. Furthermore, they reinvested all profits instead of taking dividends.
The dispute traces back to October 2016, when the investors agreed to sell 66.4% of K-Electric to Shanghai Electric Power Company. Regulatory delays and contradictory instructions stalled the transaction for over eight years. The investors claim Pakistan forced Shanghai Electric to withdraw, which they call indirect expropriation under international law.
The investors also highlight longstanding unpaid government receivables, including tariff differential subsidies. These arrears have constrained K-Electric’s cash flow. Despite entering mediation agreements in 2024 and completing findings in 2025, Pakistan reportedly blocked the resolution, worsening the standoff.
Additionally, the investors argue Pakistan politicized K-Electric’s multi-year tariff framework. After NEPRA issued final determinations in May 2025, the government reopened the cases and imposed revised tariffs. Investors estimate the changes would cost K-Electric around Rs85 billion annually, stripping the business of economic viability.
The arbitration further claims domestic investors attempted to seize control through offshore structures. Authorities also diverted $66 million from a Cnergyico share sale without approvals. Investors argue Pakistan violated OIC Investment Agreement protections, including expropriation, fair treatment, free fund transfer, and access to remedies.
Finally, the claimants invoked most-favored-nation clauses from Pakistan’s bilateral investment treaties with Bahrain and Switzerland. The case highlights risks for foreign investors in Pakistan’s energy sector and could influence future infrastructure deals.
