Reko Diq challenge: government looking for out-of-court settlement

Business Recorder | 16 October 2019

Reko Diq challenge: government looking for out-of-court settlement


The government is exploring the possibility of an out-of-court settlement of Reko Diq issue with the Adviser to Prime Minister on Finance Hafeez Sheikh and Attorney General for Pakistan (AGP) Anwer Mansoor Khan in London for a meeting with the company’s board. A spokesman for finance ministry confirmed that Dr Shaikh was scheduled to leave for London on October 14 (Monday) for a meeting with the Reko Diq board on October 15 (Tuesday). He is then scheduled to proceed to the United States to attend the annual meetings of the International Monetary Fund (IMF) and the World Bank.

An AGP official confirmed to this correspondent that the AGP was in office on Monday but the office was informed on Tuesday morning that “AGP is not in the country." On July 13, 2019, International Center for Settlement of Investment Disputes (ICSID) awarded judgment regarding $5.976 billion against Pakistan in the Reko Diq case with a $4.08 billion penalty and $1.87 billion interest.

The TCC management of TCC claimed damages and filed a claim with ICSID in 2012 after the Balochistan government rejected a leasing request from the company. The then chief justice Iftikhar Muhammad Chaudhry in the Maulana Abdul Haque versus the government of Balochistan case held that the ‘Chagai Hills Exploration Joint Venture Agreement’ (CHEJVA) signed between the Balochistan Development Authority (BDA) and Broken Hill Properties Minerals Intermediate Exploration Inc (BHP) in 1993 was void ab initio.

The CHEJVA granted exploration and mining licenses to BHP in the Reko Diq area, which is located in the Chagai district of Balochistan. Public concern with respect to CHEJVA increased as amendments were made to the agreement, leading to ultimately attracting the attention of the apex court. The Balochistan High Court validated the agreement, but this ruling was reversed by the SC. Aggrieved by this decision, the foreign companies that were party to the litigation referred the dispute to the ICSID for arbitration, which ruled against Pakistan in 2017.

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 was the final penalty on Pakistan, which has now been announced. The verdict in the Reko Diq case was the first in a series of events that led to the massive award.