Pakistan makes final push for Reko Diq settlement

Express Tribune | 26 January 2019

Pakistan makes final push for Reko Diq settlement

By Hasnaat Malik

ISLAMABAD: Pakistan is making a last-ditch effort for an out-of-court settlement in the Reko Diq mining case, wherein the complainant company whose contract was terminated is claiming $11.43 billion in damages in an international tribunal.

In a related development, Law Minister Dr Farogh Nasim and Attorney General for Pakistan Anwar Mansoor Khan are currently in the United States (US). Though there is no official confirmation about the agenda of their visit, government sources have confirmed that they are trying to negotiate on the Reko Diq issue, wherein the International Center for Settlement of Investment Disputes (ICSID) has already declared that Pakistan is liable to pay liability. The hearing on the quantum of the award has also concluded, but the final award has not been announced yet. The announcement will likely come in about five months.

Before the announcement of the award, consultations had been initiated to avoid a huge penalty being placed on the country. Sources said that both senior officials undertook the US visit after taking all stakeholders into confidence.

Earlier, efforts for an out-of-court settlement were not fruitful. The Pakistani legal team, led by Cherie Blair – the wife of former British prime minister Tony Blair – and judges of the ICSID had also advised that negotiations should be initiated for an out-of-court settlement. Likewise, ex-AGP Salman Aslam Butt also tried to do the same, but was unsuccessful.

Legal experts appreciated the government making an effort to negotiate for a lower out-of-court settlement as the country is already facing penalties running into billions of rupees in the Karkey and Broadsheet cases. They also expect that Tethyan Copper Company’s (TCC) management must also realise that execution of the award would take time and annulment will also take another couple of years.

However, it is still not clear what are Pakistan’s chances of getting to a more reasonable out-of-court settlement. The AGP and law minister are due back in Pakistan on January 28.

Uphill battle

After the case was filed, Pakistan lost its first jurisdictional challenge, when the international tribunal said that it has the jurisdiction to adjudicate the Reko Diq matter. After that, the tribunal declared that there was no wrongdoing in the agreement – the grounds on which the Supreme Court of Pakistan terminated the deal in 2013 – and eventually, the tribunal held that Pakistan is liable to pay the damages.

The only remaining issue in the case is the final quantum of liability, which will be announced in summer.

In 2012, TCC filed claims for international arbitration before the ICSID of the World Bank after the provincial government turned down a leasing request from the company.

In the ICSID proceedings, the jurisdiction and liability have been decided against Pakistan, as the tribunal has found that Pakistan has breached the Bilateral Investment Treaty of 1998 between Pakistan and Australia, the Balochistan mines secretary had informed the PAC.

According to the ICSID, the Supreme Court’s decision to declare the joint venture agreement illegal did not diminish the TCC’s Investment. According to the provincial government, even malpractices and corruption by the TCC did not deny it investment rights.

In 2013, the Supreme Court declared that Chejva and all of its successor agreements were void ab initio (from the start) and that TCC had no legal rights to explore and mine in Reko Diq. As of March 2017, Pakistan has incurred $15.5 million in expenses on the arbitration case, while the TCC’s expenses are estimated at $39.2 million.

A number of senior lawyers have been critical of former chief justice Iftikhar Muhammad Chaudhry for passing judgments which in ensuing years have caused headaches for policymakers and concern for international investors. “Why would international investors come to invest Pakistan when your local courts are passing judgment without considering the prevailing circumstances,” said a senior lawyer.

Reko Diq is part of the Tethyan Magmatic Arc, which is a mineralised belt that originates in Eastern Europe and runs through to Iran, Afghanistan and into Pakistan. It holds an estimated 5.9 billion tons of mineral resources, with an average copper grade of 0.41 per cent and gold 0.22 grammes per tonne.

Major losses

Pakistan recently lost another legal battle at an international forum, as the London Court of International Arbitration (LCIA) awarded a penalty of $21 million (Rs2.92 billion) in the infamous Broadsheet LLC case.

At present, Pakistan is facing more than three dozen cases of different types at international courts. Many of these have been filed by independent power producers (IPPs) seeking clearance of their pending dues, which amount to more than a trillion rupees.

Earlier, on August 22, 2017, the ICSID had awarded $846 million in damages to Karkey Karadeniz Elektrik Uretim, a Turkish power company whose rental power project was cancelled by a Supreme Court bench headed by Iftikhar Chaudhry.

According to the ICSID award, Pakistan will not only pay damages amounting to more than $800 million, but is also bound to pay $5.6 million (Rs590 million) per month in interest to Karkey.

source: Express Tribune