The Supreme Court has effectively certified that the reconstituted Reko Diq mining project is legally bulletproof, paving the way for work to finally start on one of the world’s largest open-pit copper-gold mines. The ruling comes as an endorsement of a settlement reached between provincial and federal governments on the one hand and Barrick Gold Corporation on the other. The settlement provided for a reconstitution of the project, stalled since well before January 2013, when the Supreme Court voided it. While this looks like a welcome development, it may not hurt to ask: why did it have to be this way? This, after all, is not how mining concessions are granted anywhere in the world. And why and what held up this lucrative project for more than ten years after its original date? And, finally, why did it have to take expensive and unseemly litigation and arbitration at home and abroad to get this far?
But let us start with why Prime Minister Shehbaz Sharif deemed it expedient to get the apex court’s seal of approval before going ahead with the implementation of the settlement. For one thing, the SC’s nod was symbolically important because it was here that the original project had been voided. Equally important, the reconstitution deal was reached in March under former prime minister Imran Khan. To the PM, the project looked good, but not good enough to share blame with a bitter rival for anything found amiss later on. Well played then, Mr Prime Minister, but you are the chief executive of the republic, and the buck stops with you. You may need to dust up the proposal you once floated as the charter of democracy.
Returning to the more momentous question, it is amply clear in hindsight that some have been at pains to stop Reko Diq in its tracks. For a cash-strapped country like Pakistan, this is as good as economic sabotage, irrespective of intentions. Or perhaps especially if intentions are invoked. Reko Diq is Exhibit A for the case that the road to hell is paved with good intentions. Asking questions to bring out the reality is important because this was not the last mining concession granted by Pakistan, and we need serious disincentives to any project going the way of Reko Diq.
The Reko-Diq saga began in 2006, when the legality of the Chaghi Hills Exploration Joint Venture Agreement (CHEJVA) between the government of Pakistan and Tethyan Copper Company (TCC) was challenged in the Balochistan High Court (BHC). The challenge was based on the assertion that CHEJVA was executed contrary to the provisions of Pakistani law; that the parties had failed to properly register CHEJVA; and that the government of Balochistan had improperly relaxed local legislation to execute CHEJVA. The challenge was however struck down by the BHC, which ruled that CHEJVA was legal and valid. In November 2011, the provincial government rejected a mining lease application from TCC on objections to some provisions of the contract. TCC took the matter to the World Bank Group’s International Centre for Settlement of Investment Disputes (ICSID) to seek compensation of $11.43 billion in damages. In January 2013, the SC declared the CHEJVA as void, and in July 2017, the ICSID ruled that Tethyan had a legitimate expectation of receiving the mining permit because Pakistan had advanced such assurances in the CHEJVA, which it said would remain its regulatory framework. On July 12, 2019, the ICSID awarded Tethyan nearly $6 billion, about two per cent of Pakistan's GDP, in damages. On November 20, 2020, Tethyan approached the High Court of Justice in the British Virgin Islands in order to enforce the $6 billion award and sought attachment of Pakistani assets of a government-owned Pakistani company also incorporated in the British Virgin Islands.
The ICSID stayed the enforcement of the $6 billion award on an appeal from Pakistan – on the condition that Pakistan provide an “unconditional and irrevocable” bank guarantee within 30 days. The situation led Pakistan to enter negotiations with Tethyan, which culminated in a settlement with Barrick Gold for reviving and developing the Reko Diq project in March 2022. This was a broad synopsis of the story, leaving out a lot of detail and some quite ugly chapters. Hopefully, the episode will be adequately instructive for all concerned in Pakistan to prevent a repeat. The prime minister may find that what we need to achieve real separation of powers, and a national determination to keep Pakistan’s economic interests above the fray.