Why the Reko Diq ‘deal’ is illegal

"I will not sell a stone of Balochistan; Reko Diq is something very big”. This is what Dr Abdul Malik Baloch, chief minister of Balochistan told an overcrowded press conference on December 11, 2014, to dispel the impression that a deal had been made with any company with regard to Balochistan’s tempting copper-gold project, Reko Diq.
The CM not only refuted media reports and opposition parties’ claims of Reko Diq having been given away to the Tethyan Copper Company (TCC), a Canadian-Chilean mining consortium, but he also rejected the idea of granting a mining contract to TCC.
However, there are ‘authentic’ reports that on the special instructions of Prime Minister Nawaz Sharif, a delegation headed by the federal minister of natural resources and chief minister of Balochistan has entered into an ‘out of court’ agreement with TCC on the Reko Diq project.
TCC was disqualified by the Supreme Court of Pakistan in 2013 after a lengthy legal fight. In 2006, Maulana Abdul Haq and others filed a constitutional petition in the Balochistan High Court, challenging the legality of the Chagai Hills Exploration Joint Venture Agreement (Chejva), validity of the act of relaxation of BMCR 1970 by the government of Balochistan and the failure of BHP to complete the exploration at a reasonable pace.
The high court dismissed the petition and found CHEJVA, the ‘relaxation’ of BMCR 1970 and other acts of the government of Balochistan and the Balochistan Development Authority to be legal and valid.
However, subsequent other petitioners filed before the Supreme Court under Article 184(3) of the constitution, questioning the validity of the grant of licence(s) to BHP/TCC on the ground of absence of fairness, non-transparency, violation of laws/rules, and also alleged possible risks to the vital interests of the province of Balochistan and Pakistan in the grant of mining lease to BHP/TCC. All the titled petitions and miscellaneous applications were heard together and in a final judgement the SC termed the Reko Diq mining lease ‘illegal’
And the following points explain better why the governments of Pakistan and Balochistan cannot enter into an out of court – or ‘under the table’ deal – with TCC.
• On January 7, 2013 the Supreme Court of Pakistan declared that the agreement on Reko Diq signed on July 23, 1993 was void and in conflict with the laws of the country. The Supreme Court also stated that TCC no longer had any rights in relation to the Reko Diq agreement. In preview of the Supreme Court’s clear decision, the central and provincial governments’ decision to enter into a deal with a company that has been disqualified in a sixteen-page detailed verdict is a direct violation of the constitution and the Supreme Court.
• The apex court had also declared invalid the Chagai Hills Exploration Joint Venture Agreement (CHEJVA), the initial 1993 exploration agreement between the Balochistan government and Australian mining group BHP from whom TCC had purchased Reko Diq exploration rights.
All relaxation and leases were granted to TCC in a very hasty manner during the caretaker setup in Balochistan. The Supreme Court clearly mentioned in its decision that TCC attempted to take undue advantage of the political instability of the time. The foreign companies, by means of CHEJVA, Addendum No1 and other agreements, preyed upon the huge gaps in understanding on the part of the Balochistan government of large-scale mineral extraction and were in a distinct position to manipulate and dominate.
• The Supreme Court further clarified that under Article 3.2.7 of the Rome-based International Institute for the Unification of Private Law (Unidroit) Principles of International Commercial Contracts under the title of gross disparity, a contract that has been conceived by a party seeking to take unfair advantage of the other party’s dependence, economic distress or its improvidence, ignorance, inexperience and lack of bargaining skill cannot be enforced.
• Another big setback for TCC was when it also lost its case in the International Centre for Settlement of Investment Disputes (ICSID) on December 13, 2012 to block the government of Balochistan from any activity in 14 blocks of Reko Diq. The ICSID has allowed the government of Balochistan to continue with their mining project in Reko Diq. These developments were a landmark victory for the Balochistan.
• The Supreme Court repeatedly lamented the Balochistan government’s ‘inefficiency’ and ‘haste’ in disposing of a multi-billion dollar project without exploring best possible deals in the public interest.
• The Supreme Court raised the following valid questions: Were any steps taken by the Balochistan government to fully understand the nature of gold and copper mining in Reko Diq and the global business norms for large-scale gold and copper mining and the terms of agreement between national governments and foreign corporations?
Were competitive offers from successful mining companies operating in other countries obtained for comparison and negotiation? Were any tenders floated internationally for the extraction of gold from the Reko Diq mines, which were proven by the year 2000 when Respondent No 4 (TCC) bought the share of Respondent No 8 under CHEJVA for $60 million? Did the government of Balochistan make the decision on the basis of relevant facts brought on record related to rationality and competence, and technical and financial considerations?
• In view of the Supreme Court’s clear stance and recommendation any deal without following global business norms – like floating an international bid through a competitive process – is against the roadmap drawn by the Supreme Court in its decision. Unlike Pakistan ‘gifting’ Balochistan’s copper-gold, in late 2007 Afghanistan awarded a $3 billion contract to China Metallurgical Group Corp through an international bidding process.
• In desperation, after exhausting all legal venues, in May 2013 a frustrated TCC announced that it had withdrawn its request for ‘specific performance/ mining licence’ in both international arbitrations (ICC & ICSID) and was now only seeking claims for monetary damages, including lost profits for the mining operations.
• Indeed, without a clear CSR blueprint and plan natural resources become a curse for countries, as has happened in the case of many resource-rich African countries. The major challenge today’s Balochistan is facing is lack of accountability and the proper tools to translate resources into development. Pakistan Petroleum Limited sucked trillions of dollars worth of gas without leaving a single mark of human and economic development.
Saindak’s copper-gold was exploited beyond imagination – without helping a single Baloch. Saindak and PPL gas fields are barricaded and protected – completely no-go zones for Baloch people. The people of these areas live and sleep on empty stomachs and hundreds of thousands of children are without schools and books. The fate of Reko Diq will be no different from PPL and Saindak since everything has been decided far away in cities like Paris and London.
• The last but most valid reason that invalidates any out of court settlement is that Balochistan is going through a live conflict and natural resources are the major reason. Before any political and economic settlement of the conflict such a shadowy deal will increase distrust and frustration among the already disgruntled Baloch masses.
No doubt, the fate of Balochistan’s wealth and its strategically massive land and resources are always decided by Islamabad and its powerful elite. A weak and handpicked provincial government, in the intimidating presence of Islamabad’s powerful bureaucracy and forces, has no ‘moral’ courage to stand against the ill-fated decisions of the central government.
The writer is a former senator from Balochistan.
Email: balochbnp@gmail.com