Money Matters

Under-mined and over-fined

Money Matters
By Zeeshan Haider
Mon, 07, 19

A London-based international arbitration court this month imposed a penalty of $6 billion on Pakistan for unilaterally cancelling a mining contract with Tethyan Copper Company (TCC) for Baluchistan’s Reko Diq reserves.

A London-based international arbitration court this month imposed a penalty of $6 billion on Pakistan for unilaterally cancelling a mining contract with Tethyan Copper Company (TCC) for Baluchistan’s Reko Diq reserves.

In 2013, the Supreme Court, led by then chief justice Iftikhar Chaudhry, had declared the mining license for the TCC, a joint venture between Chile’s Antofagasta and Cananda’s Barrick, invalid on the grounds that it violated mineral and development laws as well as mining concessions ruled of the country.

Aslam Raisani, the then chief minister of Baluchistan from Pakistan People’s Party (PPP), as well as the current Pakistan Tehreek-e-Insaf (PTI) leader Azam Swati were among the petitioners who sought cancellation of the deal with the former asking the court to award the contract to the provincial government.

The penalty, considered as one of the biggest fines levied against a country by the international arbitration court, came days after a London court imposed a fine of $33 million on Pakistan for unilaterally annulling a contract with Broadsheet, a British asset recovery company. The company was hired by National Accountability Bureau (NAB) during the government of former dictator General (retired) Pervez Musharraf for unearthing the “ill-gotten” money stashed away overseas by politicians.

Reko Diq is a treasure trove of gold, copper and other mines and the project was expected to fetch billions of dollars that could have been used for the development of Pakistan’s most backward and militancy-hit province but unfortunately the project was grossly mishandled and mismanaged from the day one.

Foreign investors have always been wary of the countries which indulge in litigation over such deals, prompting them to seek relief through international arbitration tribunals.

Foreign investors shy away from putting their money into such countries and unfortunately Pakistan has been in such awkward position for the past few decades.

Former chief justice Chaudhry Ifrikhar had thrown away several such international deals that caused a big blow to the foreign investment in the country.

During Musharraf’s time, he cancelled Pakistan Steel Mills deal, while during the PPP government, led by former President Asif Ali Zardari, he annulled contracts with the rental power companies, an Liquefied Natural Gas (LNG) import deal with a French company besides Reko Diq agreement.

The London-based arbitration tribunal in its 700-page judgement observed that it seemed that the judges who handed down the judgement were oblivious of the international implications of such decisions.

The huge penalty prompted Prime Minister Imran Khan to order formation of a commission to look into the reasons and personalities responsible for earning this predicament for Pakistan and also find ways to avoid recurrence of such incidents.

At the same time, he assured the foreign investors that their capital, assets, and other benefits would stay safe in Pakistan.

The Prime Minister’s assurance should be a source of satisfaction for the private investors but developments that have taken place afterwards demand that much more needs to be done to implement these assurances in letter and spirit.

While there should not be any compromise in ensuring transparency in such deals and in several cases huge kickbacks and wrongdoings are involved in it but in Pakistan it seems that political and vested interests are served more than national interests, while dealing with such international obligations.

The PTI government since coming into power and even before that has been questioning the transparency of the deal signed by the former government to import LNG from Qatar.

Ghulam Sarwar, its former petroleum minister, who is now holding the portfolio of aviation, had held several press conferences doubting the fairness of the deal.

Last week, the NAB arrested former Prime Minister Shahid Khaqan Abbasi in the same case.

While accountability is a much for the development political culture and national progress, the authorities should also be well aware of the risks involved in unscrupulous handling of such issues.

Railways Minister Sheikh Rashid had petitioned the Supreme Court to order probe into LNG deal but the former chief justice Saqib Nisar refused to entertain his plea saying such litigations cost national exchequer heavily and referenced to the litany of cases pending for international arbitration.

Pakistan’s economy is in dire straits and private and foreign investment is one of the major policy planks of the government to spur economic activity in the country which has significantly slowed down in recent years.

Mishandling of such cases has the potential of scaring away foreign investors from the country.

Therefore, the government needs to tackle such issues with utmost care and prudency.

Pakistan needs to strengthen its accountability watchdog so it handles such issues professionally and should ensure these institutions have the required expertise to probe such matters with fairness and merit.

The TCC was jubilant over the arbitration court’s ruling in its favour but it still expressed readiness for an out of court of settlement.

“We remain willing to discuss the potential for a negotiated settlement with Pakistan and will continue to protect our potential interests and legal rights until the conclusion of this dispute,” TCC chairman William Hayes said in his statement.

Pakistan expressed its disappointment over the verdict but welcomed TCC offer for an out of court settlement.

While it would be unwise to speculate on the outcome of the talks, if they happen, but future developments in this regard would be watched very minutely by the foreign investors and their outcome would go a long way in helping them to consider Pakistan as a safe destination for their investment in the country.

If handled properly, it would have fetched one of the largest foreign investments and may be the biggest one in the mining sector of the country. According to initial estimates, it has the potential of earning $60 billion for the country in 60 years.

According to the TCC, Reko Diq is one the world’s largest underdeveloped copper and gold deposits.

At a time when the country is in desperate need of foreign investment, it is important for the government to take up this issue on priority basis and seek an early and amicable settlement of the dispute.

The writer is a senior journalist based in Islamabad