• Pakistan welcomes mining consortium’s offer to work towards a negotiated settlement
• Says it reserves right to pursue legal remedies
ISLAMABAD: Reacting to the $5.9 billion penalty awarded in the terminated Reko Diq mining contract, Prime Minister Imran Khan on Sunday ordered formation of a commission to investigate as to how Pakistan ended up in this predicament.
The commission will also investigate which elements are responsible for making Pakistan suffer such a loss and what lessons are learnt so that mistakes made are not repeated in the future, according to an announcement issued from the office of Attorney General Anwar Mansoor on Sunday, terming the award disappointing.
However, it is not yet known who will be heading the commission and it is expected that the names of its members will be announced later.
Late on Friday, a tribunal of the International Centre for Settlement of Investment Disputes (ICSID) slapped the whopping $5.97bn award against Pakistan that includes $4.08bn penalty and $1.87bn in interest in a 700-page ruling.
The ICSID tribunal was seized with a dispute between Pakistan and the Tethyan Copper Company Pty Limited (TCC) which had claimed $ 8.5bn in damages for rejecting its application by the mining authority of Balochistan for the multimillion dollar mining lease in the province in 2011.
Earlier Pakistan had taken the plea before the tribunal that the agreement /mining licence for the Reko Diq project was procured through corrupt means and therefore, the claimant (TCC) could not ask for damages.
In 2013, the Supreme Court had also held the contract between Balochistan and the TCC as illegal.
Reko Diq is a small desert town in Chagai district of Balochistan, 70km north-west of Naukundi and close to Pakistan’s border with Iran and Afghanistan. The area is located in the Tethyan belt, that stretches all the way from Turkey and Iran into Pakistan.
Reko Diq, which means ‘sandy peak’ in Balochi language, is also the name of an ancient volcano and is famous for its vast gold and copper reserves and believed to be the world’s fifth largest goldmine.
In its press release, Antofagasta PLC — a joint venture held equally by Chilean and Canadian entities namely Antofagasta and Barrick Gold Corporation, the parent companies of the TCC — the damages include a compensation of $4.08bn by reference to the fair market value of the Reko Diq project at the time of the mining lease denial and $1.753bn in interest.
However, Pakistan said an internal review of this longstanding arbitration would also be conducted in due course for which the prime minister had ordered the formation of a commission.
Pakistan has welcomed a statement made by William Hayes, the chairman of the Board of Directors of the TCC, in which he expressed willingness to work towards a negotiated settlement.
In his statement, Mr Hayes stated that the company remained willing to discuss the potential for a negotiated settlement with Pakistan, but would continue to protect their commercial interests and legal rights until the conclusion of this dispute.
The announcement by the AG office said that the government of Pakistan had taken note of the July 12 press release issued by Antofogasta Plc and the statement of Mr Hayes, in which he expressed willingness to work towards a negotiated settlement.
“The government of Pakistan welcomes this approach to work towards a mutually beneficial solution that works for both sides,” the announcement said, adding that Pakistan was a responsible state and its government took its international legal obligations seriously.
“Pakistan welcomes all foreign investors and assures them that their lawful rights, interests and assets will always be protected,” the AG office said.
Reaction to award
On Sunday the AG office announced that Pakistan had noted with disappointment the award by the tribunal against their claim of $ 8.5bn.
The AG office and other stakeholders, particularly the Balochistan government, were studying the award and reflecting upon its financial and legal implications, the announcement said.
It explained that the government of Pakistan, in consultation with the provincial government of Balochistan, would take a position on the future course of action after carefully considering all aspects of the matter. But for now Pakistan reserved its right to pursue any and all legal remedies available to it under ICSID regime, international law and all other relevant laws to safeguard its interests, the AG office said.
The mineral resources in Reko Diq were collective resource of the people of Balochistan and Pakistan, the announcement said, adding that Pakistan was keen for development of this resource to ensure that development needs of some of the poorest people on the planet were addressed.
Pakistan also urged the international tribunal to consider the implications of its directives and the impact on the development and poverty alleviation.
In addition to Reko Diq fiasco, Pakistan is already facing around $900 million award, also by a tribunal of the ICSID, in the Turkish Karkey Karadeniz Elektric Uretim dispute over a rental power project (RPP) contract which was also terminated on the orders of the Supreme Court.
On March 30, 2012 a Supreme Court bench, headed by the then chief justice Iftikhar Mohammad Chaudhry, had held the PPP government’s power policy and the RPP contracts as non-transparent and ordered the then chairman of the National Accountability Bureau to proceed with corruption references against those who were at the helm of affairs when the contracts were signed between 2006 and 2008.
Karkey then initiated arbitration proceedings in 2013 against Pakistan for breach of the bilateral investment treaty and unlawful expropriation of different rights and assets of the power generating company. The dispute was decided in Aug 2017, but the decision still had not been made public.
The 232MW barge-mounted Karkey power plant was part of an initiative approved by the last PPP government to generate approximately 1,206 megawatts of electricity to plug crippling loadshedding in the country through installing rental power projects as a stop gap arrangement.
Supreme Court judgement in Reko Diq
In Jan 2013, a Supreme Court bench, again headed by then chief justice Iftikhar Chaudhry, while taking up a petition of Dr Abdul Haq Baloch, a politician, had declared the mining contract to the TCC for exploration of gold and copper illegal.
In his petition, Dr Baloch had also sought a restraining order against the federal and the Balochistan governments from approaching the ICSID and the International Chambers of Commerce in view of an earlier directive by the apex court asking the provincial government to request the international arbitrators to hold their hearing till the time the court decided the matter.
In the 2013 judgement, the apex court had held that the July 23, 1997 Chagai Hills Exploration Joint Venture Agreement (CHEJVA) was executed contrary to the provisions of the Mineral Development Act 1948, Mining Concession Rules 1970; Contract Act 1872 and Transfer of Property Act 1882, which was even otherwise not valid, therefore, the same was declared illegal, void and non est.
In pursuance of this declaration, the apex court had also decreed that the March 4, 2000, Addendum No. 1, Option Agreement of April 28, 2000, Alliance Agreement of April 3, 2002 and Novation Agreement of April 1, 2006, which emanated from the CHEJVA, were also illegal and void.
Published in Dawn, July 15th, 2019