Reko Diq Copper Gold Mining project in District Chagai of Balochistan

Background

In the year 1993 the Balochistan Development Authority (BDA) and Chagai Hills Exploration Joint Venture Agreement (CHEJVA) entered into a joint venture in which the shareholding constituted of Foreign Investor at 75 % and BDA at 25 % and BDA was entitled to 2 % Royalty of foreign investment .The Foreign Investor in the year 2006 was succeeded by Tethyan Copper Company Pty. Ltd (TCC) which was in turn acquired by Barrick Gold Corporation of Canada and Antofagasta at 50 % share each. Barrick Gold Corporation of Canada and Antofagasta (Chile) had the exclusive rights to prospect and explore for Copper and Gold in the Reko Diq Area.

International Arbitration

Subsequently the leasing authority of Government of Balochistan (GoB) declined the mining lease application of TCC .Then TCC in the year 2011 initiated arbitration proceedings under the provisions of the Pakistan Australia Bilateral Investment Treaty (BIT) .Its claim was registered as an arbitration case with the International Center for Settlement of Investment Disputes (ICSID) .It also commenced arbitration proceedings against the GoB at the International Chambers of Commerce (ICC) for claims arising out of CHEJVA.

Structure of the Reko Diq Copper Gold Project

The present shareholding pattern of the Reko Diq Copper Gold Project comprises of Barrick Gold Corporation of Canada at 50 %, GoB 25 % out of which 10% is direct and 15 % through a GoB Special Purpose Vehicle (SPV) to be financed by the Federal Government and State Owned Enterprises (SOE’s) namely OGDCL and PPL and GHPL to contribute 25 % through SPV . Finally a Framework Agreement dated 20th March 2022 was signed followed by an Implementation Agreement (IA) .Visa Policy for foreigners was also announced , an Export Processing Zone (EPZ) status was granted by Ministry of Industries and employment regime was to be made as prevailing in EPZ.

Out of Court Dispute Settlement in International Arbitration Proceedings

Earlier the Supreme Court of Pakistan in a case titled as Abdul Haque Baloch vs Government of Balochistan (reported at PLD 2013 SC 641) and CHEJVA had declared an earlier agreement as void on the ground that it had been entered into without lawful authorisation and was a non- transparent agreement that failed to comply with the regulatory provisions of law regarding mining operations in the province. Subsequently the President of the Islamic Republic of Pakistan filed  a Presidential Reference No 2 of 2022 before the Supreme Court of Pakistan. The Supreme Court of Pakistan  (Advisory Jurisdiction)  announced its decision on the Presidential Reference on 09-12-2022 in which it was held ;

Disposal of public assets through a competitive process is the ordinary rule, it is not an invariable rule. The Constitution does not forbid disposal of public assets other then through a competitive process as long as such disposal has the support of the law and is justified on rational grounds.

The Summary of the Balochistan Government considers “ public interest “ inherent in the negotiated agreement and since the Agreements pertain to an “ international obligation “ i.e Pakistan’s obligation to make payment of approximately US $ 6 billion under an ICSID award.

Obligation to act in accordance with “ Applicable Law “ contained in the Agreements……

Relating to environmental considerations , particularly in relation to the use of water , agreement contain no exemptions from Pakistan’s environmental laws.

The Supreme Court of Pakistan concluding para 13 ;

Parameters set out in Abdul Haque Baloch case (PLD 2013 SC 641) and the reasons for the same have been duly addressed by the Federal and Provincial governments….,, To ensure transparency and fairness expert advice on the financial, technical and legal issues involved has been sought from both local as well as independent international experts / consultants on the terms settled in the agreements.

Guiding Principles of International Agreements ;

What arises from the judgement of the Supreme Court of Pakistan is that all international agreements have to comply and abide by the ratio and principles enunciated by the Supreme Court of Pakistan in its judgement arising from the Presidential Reference. Any transgression from the logic of the judgement would place the investor in a precarious position while adherence would provide economic security, predictability and sustainability for international investors.

C0-Authored by Hafiz Munawar Iqbal Advocate Supreme Court of Pakistan and Nadir Mumtaz