Reko Diq Deal: A Work in Progress

DESPARDES — Islamabad reportedly is striking a deal with the plaintiff company that filed lawsuit against Pakistan and won a huge award on the multi-billion dollar Reko Diq issue.

A $1 billion payout is said to be under discussions. A spokesman for Finance Ministry, in response to a question with regard to the pay out, stated that there is nothing final yet and “things are in pipeline”, Business Recorder reported.

According to the paper, Finance Advisor Dr Abdul Hafeez Shaikh and Attorney General (AGP) Anwar Mansoor Khan flew to London in mid-October for a meeting with the complainant’s Board.

The complainant Tethyan Copper Company (TTC) is a joint venture between Chile’s Antofagasta Plc and Canada’s Barrick Gold which had the Reko Diq gold and copper mining contract, until the country’s top court in its 2013 verdict declared the agreement void ab initio, ruling that it conflicts with Pakistani laws.

TCC had filed for arbitration with ICSID, a part of and funded by the World Bank Group. ICSID is THE international arbitration institution established for legal dispute resolution and conciliation between foreign investors and host countries.

In July, the ICSID announced $6 billion award against Pakistan in Reko Diq matter which included $4 billion penalty and almost $2 billion in interest as damages payable to TCC.

How Much Pakistan May Have Lost While Contesting Reko Diq Challenge

During his official visit to the US in September, PM Khan said he received a message that the chairman of Barrick Gold — one of the JV partner’s of TCC, wanted a meeting with him.

“The company is interested to resume working on the project and negotiations are under way to bring them back”, Khan said while speaking at the inauguration ceremony of the 1,320-megawatt power plant in October– the plant is located in Hub, Balochistan– the country’s resource-rich province where Reko Diq copper and gold mines are situated.

The region where these mines are located, has over the years witnessed a constellation of competing geopolitical and geoeconomic interests. The “pot of gold” for the players have been akin to searching for the legendary King Solomon’s Mines in Pakistan, some observers say.

However, “It’s more than that”, said a highly reliable source working close to the remote area –which is near the Pak-Iran-Afghan border where several hundred kilometers of fencing is in progress –to keep the bad and the ugly guys out.

With the upcoming Pak-China Economic Corridor (CPEC) maize of road-rail network meandering through the western part of Balochistan, the said copper-and-gold, even rare earth-rich region, –is a $75 trillion+ hot spot (moonshot estimate) over its economic years, and has taken a gold-rush type interest from all sides– including a rethink from Pakistan as well as the grim-repear TCC.

Experts say the arbitration award cannot be challenged though,– not even be reviewed, but settled one way or another within the ambit of the contract and international best practices. “That means a business decision going forward” and a huge contour exists for such an approach, as expectations match– key to any win-win negotiations.

International arbitration for the independent settlement of disputes between foreign investors and the host countries in which they operate—Investor-State Dispute Settlement (ISDS)—has been one of the fastest growing areas of international law governing cross-border commerce.

So have been deals post award– recently PM Khan’s government settled (without the $1.2 billion payout) on a dispute with Turkish independent power producer Karkey.

Meanwhile, a group of local business tycoons have also shown interest in taking over Reko Diq interests from the foreign investors– they are willing to invest about $1 billion of their own cash in the project.

The group of four is being led by Shamsuddin Shaikh, who spearheaded a consortium to mine coal from Pakistan’s Thar desert.

However, some experts say that may not be achievable without TCC consenting to such an arrangement sans payout.

Notwithstanding post-award settlements, the overall ISDS arbitration framework remains one of the most controversial issues in global commerce today.

In part, this is an outgrowth of the perception of the erosion of sovereignty that has accompanied globalization.

Unlike the centralization of rules governing cross-border trade, there is–as of yet– no analogous regime for disputes arising from international investment.

The World Bank’s ICSID hears multinationals and foreign investors gripes against their host countries.

Before the 1990s, such disputes were generally heard before the sovereign’s local courts. In the 90s the region, including Pakistan, opened up with independent power sources backed by foreign investors foraying into several hot spots. They followed with CSID being arbitrator built into almost all their contracts.