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Changes made in Reko Diq pact illegal: SC

January 08, 2013

ISLAMABAD, Jan 7: The Tethyan Copper Company — a consortium of international firms Antofagasta and Barrick Gold — suffered another setback on Monday when the Supreme Court declared amendments to Reko Diq exploration and mining agreements illegal and void ab initio.

“The Chagai Hills Exploration Joint Venture Agreement (CHEJVA) of July 23, 1993, is held to have been executed contrary to the provisions of the Mineral Development Act 1948, the Mining Concession Rules 1970 framed under it, the Contract Act 1872 and the Transfer of Property Act 1882. Even otherwise it is not valid.

“Therefore it is declared illegal, void and non est,” read an order issued by a three-member bench of the court.

The bench, headed by Chief Justice Iftikhar Muhammad Chaudhry and comprising Justice Gulzar Ahmed and Justice Azmat Saeed, also declared an addendum to the exploration agreement of March 2000, an option agreement of April 2000 and a novation agreement of April 2006 — all based on the CHEJVA — illegal and void.

Therefore, the order said, none of the instruments conferred any right on BHP and Mincor of Australia, TCC Pakistan and TCC Australia, Antofagasta of London and Barrick Gold of Canada regarding matters covered under the agreements.

The court also held that exploration under the exploration licence-5 violated rules and regulations as the TCC Pakistan claim was based on the CHEJVA, which had now been declared illegal and void.

Disposing of seven identical petitions in the Reko Diq case, the court held that Novation Agreement of 2006 had purportedly been made to replace the CHEJVA. The government of Balochistan was also made a party to the joint venture, an action not permissible under Balochistan Mineral Rules (BMR) of 2002 and rules of business of Balochistan.

It said the government, purportedly exercising powers vested in it under the rules, granted relaxations in violation of rules as no reason was assigned for the relaxation.

In addition to these defects, the court noted that after having invoked the jurisdiction of the original and appellate authority under the rules — the mines and minerals committee and the mines secretary of the province respectively — the TCC had submitted to the jurisdiction of a committee formed under the rules.

“Both the authorities (the mines and mineral committee and the secretary) derived their powers and jurisdiction from the BMR 2002 framed under the Act of 1848. Their findings are adversely operating against the Balochistan government. For all intents and purposes, the company has no claim against the Balochistan or federal government,” the order said.

The court noted that the Balochistan government had opposed a petition filed against the amendments to the agreements in the Balochistan High Court, but changed its position when the matter was taken up by the Supreme Court.

It said when BHP of Australia, the original holder of the exploration licence which sold its rights to TCC later, applied for 10 prospecting licences in 1996, it appeared that the original CHEJVA ‘was suffering from certain legal deficiencies’ and hence a addendum was executed in March 2002, “allegedly authorised by the then governor Justice (retd) Amir-ul-Mulk Mengal”.

The addendum brought about drastic changes in the CHEJVA as permission was granted for transfer of assignment of the party’s interests, almost changing the spirit of the joint venture agreement, the apex court said.

“There are question marks on the manner in which Mr Mengal granted authorisation by executing an undated document even though former governor Syed Fazal Agha had not signed the document when it was presented before him for authorisation.”

On top of that, the court observed, the addendum allowed signing of an agreement in the garb of reliance on one of the clauses of the CHEJVA through which an option was inserted in favour of Mincor Australia, enabling it to enter into an alliance agreement on behalf of BHP to sell half of its shares to Antofagasta of Chile. The firm later created a subsidiary, the UK-based Atacama, which was later partially sold to Barrick Gold of Canada.

The court said while the TCC Pakistan’s request for grant of mining licence was dismissed by the mines committee of Balochistan and then by the provincial secretary of mines, it did not challenge it anywhere.

However, Australia-based TCC invoked the jurisdiction of the International Centre for Settlement of Investment Disputes (ICSID) against the Balochistan government, seeking specific application of the CHEJVA and grant of mining lease.

The tribunal, the court noted, on Dec 13 last year rejected the application of the TCC and allowed the Balochistan government and Dr Samar Mubarakmand to carry out mining in H-4 (Tanjeel) in Reko Diq. The plea of the TCC regarding urgency and irreparable loss was also rejected, the court noted.