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Lessons from Reko Diq


August 8, 2019

Pakistan’s abundant natural resources belong to the state and its people, and are held in public trust. Under the constitutional scheme, mineral oil and natural gas within the provinces or the territorial waters adjacent thereto are vested jointly and equally in that province and the federal government. All other minerals, gold, silver, copper, coal and salt etc vest in the provinces, for which laws, rules and regulations have been put in place. These state assets are the greatest attraction and source of corruption, particularly in the grant of leases, concessions, licences and exploration rights and people have made fortunes by getting these state assets cheaply.

Like many other developing countries, Pakistan is far behind in the mining industry/sector and thus it is dependent on foreign investment and technological know-how. It is only natural that these foreign companies, in connivance with local officials and businessmen, strive to obtain undue advantage of the situation.

The cases of Reko Diq and Saindak are a good example. Balochistan is far richer than all other provinces. Natural gas (Sui gas) was discovered in 1952 in the Dera Bugti district of Balochistan and put to commercial use in 1955 but it has been a grievance of Balochistan that its people are mostly deprived of their rights. Copper, gold and many other precious metals and minerals there remain untapped. What's the point in having gold and copper that glitters but when right nearby animals and people drink from the same stinking pond?

Reko Diq is a sad story of greed, incompetence and neglect. The most precious national asset was allowed to be squandered for a song. When the nation was mourning its martyrs, some greedy people found an opportunity to inflict a fatal blow. It was too late when this plunder came to light. The means employed to retrieve the situation were flawed. The decision to take the matter to the Supreme Court, in hindsight, seemed less than effective.

The Supreme Court’s judgment lacked judicial reasoning acceptable at an international forum – though the conclusion might be correct. This was due to the lack of proper legal assistance. Arguments of public trust doctrine and public policy properly put for rescission of the contract obtained in an unequal bargain by unfair means might have carried the day. But the existing judgement, with all due respect, could hardly be defended before a hostile forum by a legal team that lacked experience. And it is not as though Pakistan could not defend itself before such forums. The country's track record shows that it has ably defended cases before such forums.

The IMF agreement had come as a respite when this international liability propped up and sank all hopes of revival. Catch 22: There is no money to pay off the award, and if the award is not honoured, no foreign investment is coming. An argument is being made that it should not be talked about as it would weaken Pakistan’s position aboard. Pakistan has already lost it. There could be nothing worse. Experts on the subject would tell you that there are very remote (read: none) chances of the award’s reversal.

The only option left now is to either delay it (but that would add to the liability) or negotiate with the TCC. It will not be easy now to get any favourable terms but it seems that this is the only wise option. It would have been much easier had the award not come.

The decision-makers were led to believe that the tables would be turned. History teaches a lesson: tactical mistakes cost dearly. The results are obvious. It is a travail of blunder after blunder. The damage had already been done by the time some corrective measures were taken by bringing in new legal team(s) and efforts were made to build up a case of corruption. Some evidence was collected to support a new case for which Herculean efforts were made by some people. The question of liability having already been decided and only the issue of quantum having been left, every effort at attacking the merits and arbitrators however proved counter-productive.

In view of some recent decision(s), it is apparent that Pakistan lacks the in-house capacity to handle such matters. It has been reported that there are more than 40 cases in the pipeline. Starting from Kishan-Ganga, Agility, Karkey, and now this case, the apprehension is that Pakistan will lose every legal battle abroad unless a centralized committee consisting of all stakeholders is constituted to deal with these matters.

Such matters should not be entrusted to inexperienced hands even if they are considered brilliant. According to their estimates, the TCC and the Canadian company and the advice given to them by their counsel, the figures were around $1 billion. They never thought that Pakistan’s mistakes during the proceedings would in effect find them a jackpot. The TCC and the Canadian company understand that they cannot recover this amount from Pakistan in the near future and therefore in all probability they would like to have the matter settled, since being corporations they may not be able hold on for a long. It is equally good for Pakistan that it seeks advice from foreign experts for its future course and ends the matter – the earlier the better.

The prime minister has constituted seven members commission to look into this matter. The commission should undertake this task and reach just and fair conclusions by assuming its work immediately. The report of the commission should also be made public. And, while performing its functions, the commission should not enter into a blame-game because that would hardly be of any help. Its foremost objectives should be to make recommendations on how to deal with this matter from here onward, and also lay down written guidelines for pending and future cases. It is hoped that some lessons will have been learnt.

The writer is an advocate of the Supreme Court and former additional attorney general for Pakistan.

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