Reko Diq: A crisis of governance

ISLAMABAD: Supreme Court of Pakistan on Friday endorsed a settlement for Barrick Gold to resume mining at the Reko Diq project.

Here's what you need to know about the project:

What was Reko Diq case about?

The case titled “Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan”, commonly known as the Reko Diq case, was a legal contest between the government of Pakistan and Tethyan Copper Company (TCC). The dispute arose after the government of Blochistan denied Tethyan’s mining lease application November 2011. Tethyan had inherited a concession agreement for the exploration and mining of copper and gold at Reko Diq under the Chaghi Hills Exploration Joint Venture Agreement (CHEJVA), signed in 1993, from the Australian mining company BHP Billiton.

Tethyan argued the government could not deny the mining permission under the provisions of CHEJVA, which was also governed the Australia-Pakistan Bilateral Investment Treaty (BIT), which treaty moreover was breached by the government’s action.

Why did the Supreme Court annul the contract with Tethyan?

Reko Diq it a lucrative project. The open-pit mine sits over a known copper belt, reputedly the world’s fifth largest gold and copper deposits. The Supreme Court, headed by the then Chief Justice Iftikhar Muhammad Chaudhry, held the agreement of July 23, 1993 in conflict with the laws of the land. Based on this, the court maintained that Tethyan no longer had any rights in relation to the Reko Diq agreement.

Why did Pakistan go into settlement?

The government had to go into settlement after the World Bank Group's International Centre for Settlement of Investment Disputes (ICSID) held Pakistan’s actions illegal and awarded Tethyan almost $6 billion, the equivalent of about 2 percent of the country’s GDP, in compensation.

The immediate trigger of the move was a series of attachment orders obtained by Tethyan from a British court against the Pakistan International Airlines Investment Ltd (PIAIL) – a Pakistani company incorporated in the British Virgin Islands. These assets included New York’s Roosevelt Hotel, owned by PIA.

What was the out of court settlement?

In an out of court agreement this year, Barrick Gold ended a long-running dispute with Pakistan, and agreed to restart development. Under the deal, the company withdrew its case in an international

arbitration court, which had slapped a penalty of $11 billion on Pakistan for suspending the contracts of

the company and its partners in 2011.

Partner, Chile's Antofagasta had agreed to exit the project, saying its growth strategy was focused on production of copper and by-products in the Americas.

What does the current SC ruling mean?

The latest Supreme Court order clarifies some key points in the award of contracts like Reko Diq . It lays down that the Constitution does not forbid the disposal of public assets other than through a competitive process, as long as the process is based in law and reason. The reconstituted Reko Diq project meets all these conditions.

The apex court has also declared that provincial assemblies have the only and exclusive legal competence to deal with mines and mineral development within the province.

This means, among other things, that provincial assemblies are “competent to alter, amend or repeal” any existing law.