PM directs to form commission to probe 'who’s responsible for Reko Diq predicament'

Updated July 14, 2019

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Reko Diq, which means sandy peak in the Balochi language, is a small town in Chagai district in Balochis­tan. — Abdul Razique/File
Reko Diq, which means sandy peak in the Balochi language, is a small town in Chagai district in Balochis­tan. — Abdul Razique/File

The Pakistani government will conduct an internal review of Inter­national Centre for Settle­ment of Investment Disp­utes' (ICSID) "long-standing arbitration" between the state and Tethyan Copper Company (TCC) while a commission will be formed to investigate who was responsible for the predicament that may cost Pakistan $5.976 billion, it emerged on Sunday.

A press release by the office of the Attorney General for Pakistan, dated July 13, was released after the ICSID announced a hefty award of $5.976 billion against Pakistan in the long-running Reko Diq case. The international tribunal which provides facilities for conciliation and arbitration of international investment disputes, rendered its judgement on Friday — a 700-page ruling against Pak­istan in the Reko Diq case.

The ICSID awarded a $4.08bn penalty and $1.87bn in interest. The full details of the case are yet to be released by the tribunal.

The press release said that Pakistan was "disappointed" with the decision and added that the prime minister has directed that a commission be constituted to "investigate reasons as to how Pakistan ended up in this predicament, who [was] responsible for making the country suffer such a loss and what are the lessons learnt, so that mistakes made are not repeated in the future".

It further said that all stakeholders, including the Balochistan government, were looking into the legal and financial implications of the decision "will take a position" on the matter after considering all aspects.

"For now, the government of Pakistan reserves its right to pursue any and all legal remedies available to it under the ICSID regime, international law and all other relevant laws to safeguard its interests," the statement read.

Explore: The Reko Diq gold and copper mining project

It also took note of a statement by Tethyan board chair William Hayes in which he had expressed willingness to work with the government in order to reach a mutually negotiated settlement and said that Pakistan "welcomed this approach to work towards a mutually beneficial solution that works for both sides".

Hayes had said in a statement the company was still “willing to strike a deal with Pakistan,” but added that “it would continue protecting its commercial and legal interests until the dispute was over.”

Reko Diq case

Reko Diq mine is famous because of its vast gold and copper reserves and is believed to have the world’s fifth largest gold deposit. Reko Diq, which means sandy peak in the Balochi language, is a small town in Chagai district in Balochis­tan. It is located in a desert area, 70km north-west of Naukundi, close to the border with Iran and Afgha­nistan. The area is located in the Tethyan belt that stret­ches all the way from Turkey and Iran into Pakistan.

According to the extensive technical and financial studies undertaken to secure optimal ‘economies of scale’ efficiencies, and lower mining and processing costs, a large scale, state-of-the-art mining and processing unit is required at Reko Diq.

The TCC completed an extensive and detailed bankable feasibility study establishing the basis for mine development at Reko Diq during August 2010 and submitted a mining lease application in February 2011, along with an environmental and social impact assessment report.

Progress on the project came to a standstill in November 2011, when the government of Balochistan summarily rejected the application by the TCC’s local operating subsidiary for a mining lease in respect of Reko Diq.

According to Reuters, TCC said it had invested more than $220 million by the time Pakistan’s government, in 2011, unexpectedly refused to grant them the mining lease needed to keep operating.

The international mining firm had lodged the case against Pakistan on January 12, 2012, and the ICSID constituted the tribunal on July 12, 2012. The case between the Pakistani government and TCC had continued for at least seven years.

The ICSID ruled against Pakistan in 2017, but until now had yet to determine the damages owed to the TCC.