RED ZONE FILES: The price of Clause 4

Published January 21, 2021
Why did NAB make such a poorly drafted, loose and sloppy contract that would cost Pakistan 28 million dollars?  — Reuters/File
Why did NAB make such a poorly drafted, loose and sloppy contract that would cost Pakistan 28 million dollars? — Reuters/File

ISLAMABAD is in the grip of two sizzling issues: Broadsheet and the Foreign Funding scandal. Both are spreading and scaling like a raging forest fire consuming everything in its way. The political firefighters however seem to be sputtering their way through these twin infernos with leaking hoses.

The Broadsheet award handed down against Pakistan and NAB by UK arbitrator Sir Anthony Evans has enough incendiary material to burn people from all sides of the divide — which is exactly why all concerned are taking facts and trying to fry them like an egg — which is exactly why these facts need to be set out as they are, unvarnished and unspun.

What is the basis of this dispute? For the last two days explanations have varied from NRO to money laundering to protection of corrupt properties. The real story, as told in the Broadsheet documents, is an alloyed version of many such devious doings.

In the year 2000, when the contract between NAB and Broadsheet was signed, Lt Gen Amjad was the chairman of the organisation. This contract became the basis of Pakistan’s troubles that started then and continue till today. The problems in this contract came to the surface when NAB ended it in 2003. Specifically, Clause 4 of this contract became the key source of dispute. This clause says: “NAB and Broadsheet agree that any assets recovered as a result of the efforts of Broadsheet or as a result of a settlement between NAB and any person registered…shall be jointly shared…(F)or the removal of any doubt, the share of the assets recovered as set out in this Clause “4” shall also apply to any settlement reached by NAB and any registered person or entity with or without the involvement of Broadsheet…”

This contract was formally approved by the two parties and recorded in Clause 12: “NAB and Broadsheet confirm that they have consulted with their respective legal advisers before entering into this agreement and that the parties signing this agreement have done so with the full authority necessary to bind NAB and Broadsheet.”

The poor drafting of this contract however ultimately cost Pakistan 28 million dollars. Here’s what the arbitrator writes on page 20 of the Liability Award: “NAB contends that “any assets recovered” is limited to assets recovered from outside Pakistan, essentially because that is the scope of the ARA itself and Broadsheet was not concerned with assets inside Pakistan. Broadsheet however relies on the dichotomy in the first sentence of the clause between “any assets recovered as a result of the efforts of Broadsheet” — which, given the limited scope of Broadsheet’s undertaking, can only mean assets situated outside Pakistan — and on the other hand the words which follow, “or as a result of a settlement between NAB and any [registered person]…”…Such a settlement, Broadsheet contends, might include the transfer of assets inside as well as outside Pakistan.”

The arbitrator then states his opinion clearly: “After long and careful consideration, I have come to the conclusion that Broadsheet’s contention is correct.”

In other words, the arbitrator said the contract was clear that Broadsheet was entitled to a commission of 20 per cent from assets that it recovered, and those that NAB recovered and even from those that NAB recovered without any involvement of Broadsheet — and, in addition, this would include assets recovered not just from abroad but from within Pakistan itself. This allowed Broadsheet to claim a commission, for example, from all the Sharif family properties inside and outside Pakistan even when it had nothing to do with identifying, or pointing out, the existence of these properties.

The obvious question therefore is: why did NAB make such a poorly drafted, loose and sloppy contract that would cost Pakistan 28 million dollars?

The arbitrator says in his award on page 22 that the then chairman Lt Gen Amjad was not personally involved in the negotiations and drafting of the contract and had delegated this responsibility to a senior NAB official Farouk Khan. Broadsheet maintained a team in Pakistan and had an office in the NAB headquarters. The team included Ghazanfar Sadiq Ali, a former banker, and Tariq Fawad Malik.

However, there is another interesting piece of information in the award. In the words of the arbitrator on page 31/32: “Mention must also be made of Farouk Adam Khan…He was appointed the Prosecutor General of NAB by its first chairman, Lt Gen Amjad, in November 1999 and he continued in that post until he resigned…one year later. Soon afterwards, as he put it, he “met” Mr (Tariq Fawad) Malik and agreed to act as a consultant for Broadsheet by giving them advice regarding its dealings with the NAB on a consultancy basis.”

Rather convenient

In light of current developments, it may be important for the government to open all files relating to the negotiations and drafting of this contract in NAB offices and investigate how such a contract was allowed to be finalised, and more importantly, who was responsible for it.

This is just one aspect of the Broadsheet that requires deep and thorough investigation. There are many more such matters mentioned in the legal document of the arbitrator that will need the rigour of enquiry to cleanse the smell that is currently emanating from it. The PTI government has formed a committee entrusted with getting to the bottom of this matter. If the members of this committee approach this important issue from a politically partisan perspective — as their initial press conference suggests — then there is a genuine fear that facts may get overshadowed by political agendas.

This matter presents Prime Minister Imran Khan with a unique opportunity to prove that he means when he says that his governance will be transparent and he will never lie to the nation. There is more to this matter than a political witch hunt. An impartial reading of the documents will make this amply clear even to those who are drenched in the sweat of partisanship.

Published in Dawn, January 21st, 2021

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