PM asked to facilitate out of court resolution

The News - International, Pakistan

PM asked to facilitate out of court resolution

By Khalid Mustafa

24 November 2012

ISLAMABAD: The Ministry of Petroleum and Natural Resources (MoPNR) has written a letter to Prime Minister Raja Pervez Ashraf to persuade the Balochistan government to settle the Reko Diq issue out of court, fearing a penalty of Rs39 billion by the International Centre for Settlement Investment Disputes (ICSID).

Tethyan Copper Company Limited of Australia (TCCA) moved the ICSID against Pakistan and sought the highest ever penalty of $10 billion against the refusal by the government of Balochistan to grant the Reko Diq mining lease.

The ICSID held the hearing of the case on Reko Diq in London this month and reserved the verdict, which may be made public sometime next week, with the expected penalty of Rs39 billion to the government of Balochistan. During the hearing, Pakistan was represented by foreign legal experts Arther Marriott and Sherry Blair, the spouse of former British PM Tony Blair. Eminent Pakistani lawyers Aamir Bilal Sufi, Mehnaz Malik and others were also present during the meeting.

According to well placed sources, the MoPNR has sent a letter to the chief executive seeking his intervention to ask the Balochistan government to settle the issue out of court otherwise Pakistan may have to pay the penalty.

Prior to moving ICSID, the government of Canada had warned of the largest arbitration award (penalty) in history in the case of Reko Diq and sought an out-of-court settlement but the Pakistani government remained unmoved.

The government of Canada had sent a letter written on June 13 by Senior Trade Commissioner Robbert Webb to the government of Pakistan through its High Commission. The letter was directly addressed to Prime Minister Secretariat, MoPNR and the Board of Investment.

“The Canadian High Commission wishes to assist Pakistan in avoiding what we are informed could be the largest arbitration award in history, even through similar awards have recently been made of one billion dollars to two billion dollars and the Reko Diq award could be several times higher,” said the letter

The TCCA sought arbitration at ICSID and the International Chamber of Commerce (ICC) against the government of Pakistan and the government of Balochistan. The TCCP claims to have spent more than $345 million on project acquisition, exploration, scoping and feasibility studies and refusal to grant the mining lease has caused deprivation constituting expropriation within the making of Article-7 of Pakistan-Australia Treaty on Promotion and Protection of Investment 1998.

According to the latest working paper on settlement of the Reko Diq copper-gold project investment dispute, the story started in the early 90s, when in 1993 the government of Balochistan entered a joint venture agreement with Broken Hill Proprietary (BHP), Australia, to explore copper-gold for an area situated near Reko Deq in District Chagai and established TCCP with 25 percent shareholding of the government of Balochistan and 75 percent shareholding of the BHP.

“Currently the joint venture has two components: Tethyan Copper Company Limited of Australia (TCCA) with two partners Barrack Gold Canada and Antofagasta Chile and; TCCP having shareholding of the government of Balochistan (25 percent), Barrack Gold Canada (37.5 percent) and Antofagasta Chile (37.5 percent).”

The paper says that the joint venture was challenged through civil/constitutional petitions in the Supreme Court. The TCCP is impleaded as a necessary party. It has been contesting the proceedings before the Supreme Court and the final disposal is pending.

In the meanwhile, the licensing authority, Director General Mines and Minerals and the government of Balochistan declined the request seeking conversion of exploration license (EL-5) into mining lease under Balochistan Mining Rules, 2002. The government of Balochistan also rejected company’s appeal on March 3, 2012.

The papers also reveal that the government of Balochistan has been working on a project titled ‘Reko Diq Copper-Gold project,’ having an estimated cost of Rs8.81 billion with a foreign exchange component of Rs3.6 billion. The government aims to convert the copper-gold project into value added products such as sheets, pipes and roads. The project was approved by Executive Committee of National Economic Council (ECNEC), subject to funding by the Balochistan government.

The official dealing with this subject said that the TCCP had invested approximately $345 million so far but now the government of Balochistan wants to take over the project. The country may land in trouble if the ICSID and ICC extend the highest ever arbitration award.