IFC has an active project with Karot Power Company Limited (KPCL), a special-purpose vehicle incorporated in Pakistan and majority-owned by China Three Gorges South Asia Investment Limited (CSAIL). The project involves providing a long-term corporate loan facility of up to US$100 million to support the construction, operation, and maintenance of a 720MW run-of-the-river hydropower plant being developed on the Jhelum River, in Pakistan. Construction began in January 2016, with Three Gorges Technology and Economy Development Co., Ltd (TGDC) as the engineering, procurement and construction contractor, and the project achieved commercial operations on June 29, 2022.

In May 2022, CAO received a complaint submitted by eight community members of the Azad Jammu and Kashmir (AJK) community, citing concerns related to labor issues, including unfair hiring practices and unfair dismissal and forced resignation of those who were employed by the Karot project.

In June 2022, the CAO found the complaint eligible for assessment. At the complainants' request, the case was referred to the IFC. In March 2023, the complainants expressed their desire for the complaint to be referred back to CAO. During the assessment, both parties expressed interest in engaging in a dispute resolution process to address the issues raised in the complaint. The Assessment Report is available in English and Urdu. 

In August 2023, CAO conducted in-person capacity-building sessions with the complainants and the company to prepare them for a CAO-facilitated dispute resolution process. Between October 2023 and February 2024, the parties held three joint sessions and 18 bilateral meetings to discuss the issues raised in the complaint and potential solutions. Despite the parties' efforts, no consensus was reached on how to resolve the issues in the complaint, and the dispute resolution process ended. The Dispute Resolution Conclusion Report is available in English and Urdu. 

In September 2024, in accordance with the CAO Policy, the case was transferred to CAO’s Compliance function for appraisal to determine whether an investigation of IFC’s environmental and social performance was warranted concerning the issues raised in the complaint.

In December 2024, CAO completed its compliance appraisal. CAO’s appraisal concluded that the issue of unfair hiring practices would be closed at the appraisal. Regarding the issues of unfair dismissal practices and forced resignation, CAO determined that the complaint met the criteria for a compliance investigation, and CAO decided to partially merge the Karot-04 case with the ongoing Karot-02/03 compliance investigation process for the purposes of the investigation of the outstanding issues. The terms of reference for the investigation are outlined in Annex C of the Karot-02/03 Appraisal Report available in English.