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Wednesday, May 22, 2024

The truth about the ‘indemnity clause’ in CPEC Authority Bill 2020

The media's claims that the new CPEC Authority Bill, 2020 gives the Chairman 'immunity' are misleading, said MOP in a statement released on Twitter

The Ministry of Planning, in a series of tweets, released a ‘clarification’ yesterday regarding reports in the media that the new CPEC Authority Bill, 2020, gives the chairman of the CPEC Authority’ immunity.’

The statement read, “The news is misleading.” According to the tweet, the news refers to the ‘indemnity clause’ in the bill. The indemnity clause is standard across most similar laws.

An indemnification provision, also known as a hold harmless provision, is a clause used in contracts to shift potential costs from one party to another.
In a one-way indemnification, only one party provides this indemnity. An indemnification provision’s primary benefit is to protect the indemnified party against losses from third-party claims related to the contract.

What does the indemnity clause entail?

To understand this, an example would be a public office holder commissioning a writer to prepare a speech for him/her on a work-for-hire basis. Instead of delivering an original speech as promised under the contract, the writer incorporates passages from a speech by another person who then sues the officeholder for copyright infringement, claiming that the intellectual property was used without consent.

Read more: China, Pakistan willing to add the third country into CPEC for regional security, stability

The agreement with the writer includes a representation and warranty that the work product provided under the contract is original. It also has a standard indemnification provision that promises to hold office holders harmless from any losses or damages, including attorney fees, incurred as a result of any breach of the agreement. Under the indemnity clause, the writer would be obligated to handle the legal defense related to the other writer’s intellectual property infringement lawsuit against the office holder and cover all of the losses and expenses incurred due to the infringement claim.

Indemnification provisions are generally heavily negotiated clauses. They are typically used in agreements where the risks associated with a party’s non-performance, breach, or misconduct are high.

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CPEC is a multi-layered and complex project. The indemnity clause is usually a standard in contracts with high risks.

The statement also cited examples of other laws that had a similar indemnity clause, “The indemnity clause is provided for in Public Procurement Regularity Authority (PPRA) Ordinance 2002 (Section 23), Oil & Gas Regulatory Authority (OGRA) Ordinance 2002 (Section 39), Alternate Energy Development Board (AEDB) Act 2010 (Section 21), Competition Commission of Pakistan (CCP) Act 2010 (Section 48) and Public-Private Partnership Authority (PPPA) Act 2017 (Section 26) and similar other laws.”

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The tweet further clarified that the clause was not first introduced in the new bill but had already existed, “It is further clarified that the clause in question was also a part of the CPEC Authority Ordinance promulgated in Oct 2019 and is not a new insertion. It is in consonance with other similar laws. The speculation regarding this clause is therefore misplaced and unfounded, the statement added.”

Other changes in the new bill

Further changes in the 2020 bill include a proposal to abolish the position of chief executive officer of CPEC Authority, reduce the powers of CPEC Authority chairman in decision making process and an end to the CPEC Authority’s powers to constitute CPEC Business Council.

Read more: The Karakoram Highway – A forerunner of CPEC

Also as per the draft law, “The authority may call for any pertinent information, required by it from any person, institution or body that is or has been involved directly or indirectly in any CPEC-related activity, while any person or its authorized officer will be bound to provide this information within the period prescribed by the authority or such officer.”

Similarly, the authority, in the performance of its functions, can seek assistance or facilitation of office, authority, or agency working under the government or a representative designated by the provinces and territories. In this regard, provinces and territories may appoint a representative to provide input and assist the authority in the performance of the functions under the new law.

GVS News Desk