Supreme Court endorses landmark Reko Diq deal

ISLAMABAD: The Supreme Court (SC) Friday declared as legal the new agreement of huge investment between the Government of Pakistan and Canadian mining company Barrick Gold for exploration of mines at Reko Diq in Balochistan. 

A five-member SC bench, headed by Chief Justice Umer Ata Bandial and comprising Justice Ijazul Ahsen, Justice Muneeb Akhtar, Justice Yahya Afridi and Justice Jamal Khan Mandokhel, announced its opinion on the presidential reference regarding new project of Reko Diq.

On Nov 29, the court reserved its decision on the reference. President Dr Arif Alvi had filed a reference under Article 186 of the Constitution in the Supreme Court, seeking the opinion of the apex court on two questions:

Firstly, whether the earlier judgment of Supreme Court reported as Maulvi Abdul Haque Baloch verses Federation of Pakistan PLD 2013 SC 641, the Constitution, laws or public policy prevent the Government of Pakistan (GoP) and the Government of Balochistan (GoB) from entering into the Reko Diq agreement or affect their validity.

And secondly, if enacted, would the proposed Foreign Investment (Protection and Promotion) Bill, 2022 be valid and constitutional?

The court heard the reference for over two months, with the assistance of amicus curies including former law minister Barrister Farogh Naseem, Advocate Salman Akran Raj, Advocate Zahid Ibrahim as well as counsel for the parties including Makhdoom Ali Khan for Barrick Gold Company, Additional Attorney General Chaudhry Aamir Rehman for the federal government as well as Salahuddin Ahmed, counsel for the Balochistan government.

The court said that the Constitution does not allow legislation against national assets, adding that the provinces can make changes in the laws related to minerals. The SC also shared that the agreement was not against the environment.

“As per the Riko Diq agreement, most workers will be Pakistanis. This is not for a single person but for Pakistan. There is nothing illegal in this agreement,” said the court. The court stated that Barrick Gold Corporation has assured it that labour laws will be implemented and the company will also fulfil its social responsibility.

“The foreign investment bill is not exclusively for Barrick Gold. The foreign investment bill is for companies that will invest more than $500 million dollars,” said the court.

“To sum up, we are of the view that the parameters set out in Abdul Haque Baloch case (PLD 2013 SC 641) and the reasons for the same, have been duly addressed by the federal and provincial governments,” CJ Umer Ata Bandial announced the short order in the open court.

The 13-page opinion given by the court held that the process for the reconstitution of the Reko Diq project had been undertaken transparently and with due diligence.

The court held that the agreements were being signed by the authorities, which were duly authorised and competent to do so under the law. The court noted that in order to ensure transparency and fairness, expert advice on the financial, technical and legal issues involved had been sought from both local as well as independent international experts/ consultants on the terms settled in the agreements.

“The agreements have been put in place after due deliberation and have not been found by us to be unconstitutional or illegal on the parameters and grounds spelt out in Abdul Haque Baloch’s case,” says the court short order.

Likewise, the court held that the rationale, basis, legality and vires of the FI Bill 2022 as well as the amendments to its schedules and annexures and the amendments incorporated through SROs, provided that the resolutions are passed by the Sindh and Balochistan provincial assemblies and the Bill is passed by the Parliament after following due process, shall be duly enacted as required under the Constitution. “And such laws and regulatory measures do not, in any manner, violate the Constitution or the law,” the order added.

The court noted that on hearing the parties, it found that the following issues arise from the Reference:

i). Whether the Constitution places any bar on the disposal of public assets through a negotiated agreement?

ii). Whether the Regulation of Mines and Oilfields and Mineral Development (Government Control) (Amendment) Act, 2022 (2022 Act) is within the legislative competence of the Balochistan Assembly?

iii). Whether the process through which the GoB is entering into the agreements is fair, transparent, reasonable and in accordance with law?

iv). Whether the terms of the agreements violate, or are in conflict with the judgment of this Court in Abdul Haque Baloch case (PLD 2013 SC 641)?

In the light of our answers to the foregoing issues which raise legal and constitutional questions, the first question referred to this Court by the President of Pakistan, reproduced in paragraph 6(i) above is answered in the negative for the following reasons:

i). It is settled law that while disposal of public assets through a competitive process is the ordinary rule, it is not an invariable rule.

The Constitution does not forbid disposal of public assets other than through a competitive process so long as such disposal has the support of the law and is justified on rational grounds, as is the case here.

ii). Ever since the enactment of the Constitution, legislative competence to deal with mines and mineral development (other than minerals used for nuclear energy) has rested exclusively with the provincial assemblies.

Therefore, the provincial assemblies of Sindh and Khyber-Pakhtunkhwa have already enacted comprehensive statutes dealing with mines and mineral development (other than minerals used for generation of nuclear energy),” the court held.

“As far as the amendment incorporated in the Regulation of Mines and Oil fields and Mineral Development (Government Control) Act, 1948 (1948 Act) is concerned, which has been introduced by way of the 2022 Act, to the extent that the said statute applies to the Province of Balochistan, it is intra vires the Constitution and the rules framed by the GoB under Section 2 of the 1948 Act,” the court further held.

The court noted that the 2022 Act can, therefore, be treated as a standalone provision that operates alongside the 1948 Act and the aforesaid rules insofar as the subject of mines and minerals development (other than oil fields and mineral resources necessary for generation of nuclear energy) falls within the exclusive legislative competence of the provincial legislature.

It held that the Balochistan cabinet has approved the decision to enter into the agreements on the basis of a detailed summary, a copy of which has been filed with this Court, adding that the summary considers ‘public interest’ inherent in the negotiated agreement and since the agreements pertain to an ‘international obligation’ in terms of the 2022 Act (i.e., Pakistan’s obligation to make payment of approximately US$6 billion under an ICSID award dated 12-7-2019, the formal obligations required under the 2022 Act for entering into a negotiated agreement stand fulfilled.

The court further noted that the federal government has placed on record documents to show that an apex committee, headed by the prime minister of Pakistan, and attended by all the relevant stakeholders (including the chief minister and chief secretary of Balochistan) had carefully negotiated the terms of the agreements with the help of international financial advisors, international legal advisors, international mining experts and international tax advisors, in addition to independent Pakistani advisors.

The court held that the provincial assembly of Balochistan was given a detailed in-camera briefing and was taken into confidence regarding the entire project and the terms and conditions of the proposed settlement between the parties were accepted without any objections being raised by the chosen representatives of the people of Balochistan.

“On our specific query relating to environmental considerations, particularly in relation to the use of water, we have been informed that the agreements contain no exemption from Pakistan’s environmental laws,” says the short order adding that rather, the agreements require Barrick to act in accordance with both international environmental standards and domestic laws.

Similarly, the court answered the second question of the Presidential Reference in the affirmative for the reasons, that Article 144 of the Constitution allows provincial assemblies to empower Parliament to pass a law dealing with issues within the legislative competence of the provinces.

“Similarly, Article 147 of the Constitution allows the provinces to entrust, either conditionally or unconditionally, to the federal government or to its officers, functions in relation to any matter to which the executive authority of the province extends,” the short order says.

The court held that it was provided the draft resolutions proposed to be passed by the provincial assemblies of Sindh and Balochistan to empower Parliament to enact the proposed FI Bill 2022.

Provided that the draft resolutions are passed, Parliament will be competent to enact the FI Bill 2022, including the notified exemptions specified in the Bill and the protected benefits listed in the Third Schedule.

“The provisions of Section 3 of the FI Bill 2022 do not in our opinion fetter the sovereignty of Parliament,” says the short order.

“On our query, we have also been informed that most of the exemptions proposed to be granted are already available under the regulatory regimes pertaining to Export Processing Zones and Special Technology Zones.

“Further, the exemptions being granted from the operation of Labour Laws do not denude the labour force of their rightful entitlement to fair wages, allowances and guarantees/benefits provided by law.”

The court noted that the counsel for Barrick has categorically assured it that the applicable minimum wage laws will be fully observed and the Agreements expressly provide that all operations will be carried out in accordance with International Mining Standards which are defined to include compliance with IFC Performance Standards, to the extent applicable.

Barrick also committed to act in accordance with the United Nations Guiding Principles on Business and Human Rights, says the short order, adding that the court was assured that Barrick would contribute substantially towards Corporate Social Responsibility by dedicating a percentage of its returns towards provision of fresh drinking water, health facilities, schools and local infrastructure to the people of Balochistan.

In addition, most of the labour force would be employed from amongst the local population of the province. In addition, programs for development of skills would also be put in place,” the short order added.

“A point that emerges from the Reference filed before us is whether the FI Bill 2022 can be challenged on the ground that it is a person specific law, the court noted that the FI Bill 2022 is not limited exclusively to the Reko Diq project instead, it provides a framework for grant of investment incentives which will, subject to the provisions of the Bill, be available to all investments of US$500 million or more.

“We also note that the proposed FI Bill 2022 will not only pave the way for implementation of the Reko Diq project in its present form but will also facilitate and encourage direct foreign investment in similar mining projects and other high capital intensive industries in which direct foreign investment is required to be encouraged through guarantees assured by laws and regulatory measures,” said the short order.