UK judge denies Pakistan corruption defence in Reko Diq case

Published July 8, 2021
A view of Reko Diq fields. — Reuters/File
A view of Reko Diq fields. — Reuters/File

LONDON: Pakistan does not have the right to mount corruption allegations as a defence to challenge the jurisdiction of an arbitral tribunal in the Reko Diq case, a UK judge ruled this week.

In the case, Province of Balochistan v. Tethyan Copper Company (TCC), Judge Robin Knowles of the High Court of Justice rejected Balochistan’s position in which it referred to a Supreme Court decision, saying it was not enough to demonstrate that the allegations of corruption had been raised before the tribunal. English arbitration law bars parties from raising issues before the court that were not raised during the arbitration, according to the decision.

The Balochistan government had argued that the International Chamber of Commerce (ICC) tribunal lacked jurisdiction in the Reko Diq case as the underlying agreement was void due to corruption.

For years, Balochistan has maintained that the mining company bribed government officials to get undue advantage into securing a mining licence in the province.

Balochistan govt loses bid to fight off second claim by Tethyan Copper Company

The UK judge found that although the Supreme Court of Pakistan had rendered the joint venture void, its ruling was not based on Pakistan’s allegations that the agreement was secured through bribes.

The judge said the apex court made no reference to those allegations when it found the agreement invalid.

“Descriptions of or references to corruption are insufficient: the question with which the corruption allegation is concerned is whether the Supreme Court of Pakistan found that the [agreement] and related agreements were void due to the existence of corruption,” Judge Knowles wrote.

“In my judgment, it did not. If the province has evidence relating to corruption that was not before the ICC tribunal ... then it is for the province to seek to address those matters with the arbitral tribunal; it does not make it legitimate for the province to raise them with the court as a challenge to the jurisdiction of the arbitral tribunal,” Judge Knowles wrote.

In 2019, the International Centre for Settlement of Investment Disputes (ICSID), too, had rejected Pakistan’s allegation that former Balochistan chief minister Nawab Aslam Raisani was offered a bribe of $1 million by Tethyan Copper Company in connection with Reko Diq mines in 2009.

The present case is part of the mining company’s second arbitration against Pakistan. The first was before the ICSID, in which the company secured a $6 billion award against Pakistan in July 2019.

What is Reko Diq dispute?

The TCC is a 50-50 joint venture of Barrick Gold Corporation of Australia and Antofagasta PLC of Chile. The Reko Diq district in the southwest of Balochistan is famed for its mineral wealth, including gold and copper.

The ICSID tribunal had taken up the dispute between Pakistan and the TCC after the latter claimed $8.5bn when the mining authority of Balochistan rejected its application for a multi-million dollar mining lease in the province in 2011.

According to details available on Tethyan’s website, the Reko Diq Mining Project was to build and operate a world class copper-gold open-pit mine at a cost of about $3.3bn. The company says its 1998 agreement with the Balochistan government entitled it to the mining lease, subject only to routine government requirements.

The project stalled in November 2011 after the application was rejected. Pakistani officials say the mining lease was terminated by the government because it was secured in a non-transparent manner.

By then, the company had invested $220 million in Reko Diq. The company sought help from the World Bank arbitration tribunal in 2012, and it ruled against Pakistan in 2017, rejecting an earlier decision by the Supreme Court.

The tribunal then opted to use a formula for calculating damages for the cancelled lease based on the assumed profits Tethyan might have earned from the mine over 56 years. In July 2019, the tribunal slapped a $5.97bn award against Pakistan for denying the mining lease to the company.

The fine, including the damages award and interest, is equal to about two per cent of Pakistan’s GDP.

Immediately thereafter, the TCC had commenced proceedings for enforcement of the award. In November 2019, Pakistan had challenged the award and initiated proceedings seeking its annulment.

In March 2020, the AGP office announced that it had filed a request on Nov 8, 2019, for the annulment of the award rendered by the ICSID.

Alongside the plea for annulment, Pakistan had also requested a provisional stay on the enforcement of the award issued against the country.

Pakistan was granted the provisional stay upon initiating annulment proceedings after which a hearing to confirm the stay order took place over video link in April last year.

On Sept 16, 2020, the tribunal finally ruled in favour of Pakistan, confirming the stay on the enforcement of the award.

However, on Nov 20, 2020, the company moved a separate case in the BVI High Court for the enforcement of the award, which included attachment of the assets belonging to Pakistan International Airlines Investment Ltd, a final decision on which came out in Pakistan’s favour.

The ICSID is still considering Pakistan’s appeal against the penalty over its decision to cancel the Reko Diq mining lease for the TTC.

Published in Dawn, July 8th, 2021

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