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July 17, 2019

Turning gains into losses


July 17, 2019

It seems money slips away from us, mainly due to mismanagement and poor planning even as we face acute resource constraints which leave us desperate for revenue. The case of Reko Diq into which Prime Minister Imran Khan has now ordered an inquiry is an example of how badly things can go wrong. Pakistan will now have to pay $5.9 billion to a mining firm in the case after a series of poorly handled events. This is not the only case which is costing Pakistan large sums of money. Just days ago, Pakistan lost another important case against Broadsheet UK and will now have to pay $33 million to the company in damages as per the ruling of the London High Court. The matter involved the hiring of the Broadsheet company, incorporated in the Isle of Man, by NAB during former President Pervez Musharraf’s regime to investigate hidden assets of over 150 Pakistanis living overseas including the Sharif family. The agreement with the firm was however terminated by NAB in 2008. Broadsheet had at this point approached London courts and the London Court of International Arbitration had awarded Islamabad a penalty late last year. However, unhappy with this, NAB immediately filed an appeal to the London High Court under the UK arbitration act in March this year, which it has now lost once again, and is now liable to pay the cost of the case to the plaintiff amounting to some $11 million along with the original $22 million.

The Reko Diq case has some similarities but also more complexities. The matter begins back in 2011 when the Tethyan Copper Company, an amalgamation of a Canadian and Chilean mining company, applied for a mining lease at Reko Diq. The site, is situated in the Chaghai area of Balochistan and there have been suggestions that it may hold the world’s fifth largest deposits of gold and massive deposits of copper, worth trillions of dollars. Soon after the company began its exploratory work in November 2011, the Balochistan government rejected its application. TCC unsurprisingly brought a case against Pakistan before the World Bank’s International Centre for Settlement of Investment Disputes. Even as this was being heard, the Supreme Court of Pakistan declared the Reko Diq agreement void, with former CJ Iftikhar Muhammad Chaudhry presiding over the bench. Intervening in a matter under international arbitration falls beyond the jurisdiction of global courts. To add to the confusion, Pakistan atomic science Dr Samar Mubarakmand, involved in developing Pakistan’s nuclear bombs, suggested that if Pakistan mined the site itself, it could harvest material worth $1 to 3 trillion a year. Alas, this dream was never to come true. In 2017, the World Bank tribunal ruled against Pakistan, and in 2019, after further litigation, ordered Pakistan to pay $5.9 billion in damages to TCC.

While the prime minister can go ahead with his probe into the entire affair, the question of responsibility or the possible involvement of judges holding important posts at the time, this will not bring this money back. Under the agreement with TCC, it will have picked up a percentage of the mined profits. This has happened in other cases too. A Turkish independent power producer also won damages against Pakistan after the country astoundingly failed to deposit a small sum required to bring the agreement into affect. There is no doubt a longer list of such follies. It is difficult to estimate precisely what the Pakistani people have lost along the way as a result of personal ego, political maneuvering and what can only be termed sheer stupidity. Certainly, an investigation is needed but the fact is that this is unlikely to bring back even a cent or to build confidence in Pakistan as a country worth investing in.

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