Higher costs for Pakistan if multi-billion Reko Diq penalty review fails — experts

Special Higher costs for Pakistan if multi-billion Reko Diq penalty review fails — experts
This is a file photo of the site of the gold and copper mine exploration project of Tethyan Copper Company (TCC) in Reko Diq, in Balochistan, Pakistan. (Photo Courtesy - TCC)
Updated 23 September 2019
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Higher costs for Pakistan if multi-billion Reko Diq penalty review fails — experts

Higher costs for Pakistan if multi-billion Reko Diq penalty review fails — experts
  • On Friday, Pakistan’s attorney general left for the US to seek a review petition of the $5.8 billion penalty
  • Reko Diq a test case for Prime Minister Imran Khan, who is struggling to attract foreign investment into the country

KARACHI: Legal experts have said Pakistan could incur additional costs if the country seeks and loses a review petition against the decision of a World Bank arbitration court that imposed a $5.84 billion penalty on the country in the terminated Reko Diq mining contract case in July.
The International Center for Settlement of Investment Disputes (ICSID) ordered the Pakistani government to pay the amount in damages to Tethyan Copper (TCC), a joint venture company of Barrick Gold of Canada and Antofagasta Minerals of Chile, due to the country’s unilateral and unexpected termination of the contract.
The $3.3 billion investment project was for a copper-gold open-pit mine, and TCC said it had invested more than $220 million by the time Pakistan’s government, in 2011, suddenly refused to grant them the mining lease needed to keep operating.
On Friday, Pakistan’s Attorney General, Anwar Mansoor flew to Washington to seek a review of the expensive verdict. But experts have questioned the legal grounds of Pakistan’s shaky case.
“On merit, Pakistan’s case is very weak because Pakistan’s government had no objection to the contract agreement and the contract (was) not terminated (due to) any violation of agreement terms,” Barrister Masroor Shah, a senior legal expert and advocate of the Supreme Court of Pakistan, told Arab News on Sunday.
“To say the agreement was not in the interests of Pakistan...are not legal grounds to terminate the contract,” he said.
The total amount includes compensation of $4.087 billion by reference to the fair market value of the Reko Diq project at the time of the mining lease denial, and interest accrued until the date of the award of $1.753 billion. The court also awarded TCC just under $62 million in costs incurred in enforcing its rights, according to a statement issued by Antofagasta in July 2019.
Soon after the verdict, Pakistan vowed to pursue all legal remedies available to it under the ICSID regime, international law and other relevant laws, with the Reko Diq mine becoming a test case for Prime Minister Imran Khan, who is struggling to attract foreign investment to the country amid an economic meltdown. Earlier, Khan had announced that a commission would be set up to investigate the case leading up to the verdict.
“Pakistan will have to pay the cost of review if it fails to prove its case and also the interest on the awarded amount,” Shah said, and warned that in case Pakistan lost its review petition or failed to make the payment in compliance with the orders of the court, Pakistan’s national assets abroad could be legally confiscated.
In July, Pakistan secured a $6 billion bailout package from the International Monetary Fund (IMF). The ICSID verdict amount is almost equal to the Fund’s stabilization program.
Earlier, William Hayes, chairman of the board of TCC had expressed his willingness to work with Pakistan toward a negotiated settlement.
Law experts in Pakistan have also suggested the formation of a judge’s panel to resolve investment related disputes within the country, to send out a positive signal to foreign investors.
“A suggestion to constitute a panel of retired judges is...valid,” Ahmer Bilal Soofi, a senior lawyer and member of Pakistan’s Board of Investment, told Arab News on Sunday.
“The arbitration panel could be approached by investors and resolve the matter,” he said.
Reko Diq is a remote location in the Chagai district in Pakistan’s southwestern Balochistan province. The mining project has an estimated mine life of 56 years, with annual production estimated at 200,000 tons of copper and 250,000 ounces of gold, according to TCC.