Pakistan fined Rs950 bn in Reko Diq case

WASHINGTON: The International Center for Settlement of Investment Disputes (ICSID) of World Bank has rendered almost $6 billion (Rs950 billion) award against Pakistan in Reko Diq case.

The arbitration case started in July 2012 with the constitution of the tribunal, and the final award announcement had been awaited since last year. On Friday, the tribunal concluded the case in 700-page verdict awarding a massive $4 billion in penalty and around $2 billion in interest and the expenditure incurred on the case by the TCC. Since this is the largest award in the history of the tribunal, Pakistan now faces a serious threat of assets seizure abroad.

According to sources of Pakistan’s Ministry of Law, the legal team of Pakistan made efforts to bring down the TCC claim to $6 billion from $16 billion. Still Pakistan claimed that it would challenge the ICSID verdict.On page 171 of the verdict, it was said that Pakistan Supreme Court was quite oblivious to international law and conventions regarding the agreements and contracts and lacked professional skill.

The Reko Diq case began when Tethyan Copper Company (TCC) mining contract with the Balochistan government was terminated by the Supreme Court, then headed by Iftikhar Muhammad Chaudhry. The company had filed claims for damages worth $11 billion with the international arbitration tribunal. The tribunal had found last year that suspension of the agreement from the Balochistan and the federal government was unlawful. It then started quantum hearing and ruled against Pakistan in 2017. Pakistan filed a counter-memorial, but the case was once again decided against Pakistan. Pakistan had presented various other briefs and evidence, which did not meet the requirements put forward. The tribunal had then said, "The Tribunal cannot assume that Claimant [TCC] does not have the rights or remedies to which it asserts it is entitled, including any right capable of enforcement by specific performance. To make this assumption would be tantamount to deciding the merits of the case in respondent’s favour based only on the evidence and argumentation that has been presented thus far. Accordingly, for the purpose of deciding on the request, the Tribunal will assume that claimant will succeed on these points, and turn its focus to the question of whether the circumstances in the present case require that provisional measures be ordered for the preservation of the asserted rights."

Pakistan at least twice made efforts for an out of court settlement that could not come to fruition due to various reasons such as the ruling handed down by the Supreme Court, lack of consensus amongst various stakeholders, and slow decision-making. The Tethyan Copper Company (TCC) was a joint venture of Chile's Antofagasta, and Canada's Barrick Gold. It had started working in Balochistan's Reko Diq to explore and mine copper and gold deposits. The consortium had said that it had invested over $220 million (Rs35 billion), until it was pushed out. According to its own findings, the Reko Diq Mining Project was a $3.3 billion investment project that promised to build and operate a world class copper-gold-open-pit mine at Reko Diq. It had established the basis for mine development until August 2010 and submitted a Mining Lease Application in February 2011. The progress came to a halt in November 2011, when the government of Balochistan rejected the application by TCC's local operating subsidiary.

In order to protect its legal rights, TCC commenced international arbitration proceedings. It says that "despite the initiation of arbitral proceedings in order to protect its rights, TCC remains hopeful of an opportunity to reach a negotiated resolution to the case." Pakistan was represented by Dr Samar Mubarakmand at the ICSID. He stated that $2.5 billion annually and $131 billion would be generated from the project. According to sources, Pakistan had to bear millions of dollars burden in the case as three international law firms were hired at different stages of the case. At the initial stage, the law firm Omnia owned by former UK prime minister’s wife Sherry Blair was hired and $0.37 million was paid to the firm. At the second stage UK based law firm Allen and Overy was given $17 million and on the third stage American law firm GST was hired and $10 million was paid. Other than the expenditure, Pakistan had to pay for the travelling and boarding and lodging of the Pakistan officials and lawyers. Just a day before, Pakistan had lost its appeal in London High Court against Broadsheet LLC, for which Pakistan has to pay $33 million.