The legal regime of CPEC

Pakistan should immediately constitute a high-profile CPEC Assessment Commission consisting of renowned legal and technical experts

The war on terror in Afghanistan resulted in human, financial and material losses for both Afghanistan and Pakistan. Pakistan lost billions of dollars in war and security-related expenses and witnessed damage to infrastructure; thousands of its people lost their lives. Unfortunately, the US did not fulfill its post-war obligations and left behind broken communities, economy and infrastructure. The development and economic voids are now being filled by the People’s Republic of China in the form of the China-Pakistan Economic Corridor (CPEC) project under its Belt and Road Initiative (BRI) and the 21st Century Maritime Silk Road vision.

Pakistan and China have consolidated their all-weather friendship, mutual respect and development support mechanisms through the CPEC project. China has been one of the major sources of foreign direct investment (FDI) in Pakistan; it brought $25 billion in direct investment and created more than 75,000 jobs in Pakistan. It has been said that Chinese loans and investment are unlike other international lenders, including the IMF, and investors.

China has not only provided financial and technical resources to Pakistan to undertake huge development projects, including the CPEC-related projects, it has also supported the country at the G-20 summit where a decision was recently taken to defer repayment of loans by developing countries, including Pakistan. China itself provided a similar facility to Pakistan. China has also supported Pakistan on various diplomatic forums on the issue of Jammu and Kashmir. China has frustrated the Indian designs against Pakistan and beaten back Indian troops in Ladakh.

Globally, China acknowledges Pakistan’s responsible and strategic role in regional affairs. Pakistan, for its part, supports One-China and has maintained close liaison with its northern neighbor on all diplomatic fronts. This deep and close relationship between the two countries speaks of mutual trust and understanding of each other’s interests and stand points.

However, the United States and some of its allies continue to stress the need for Pakistan to critically examine the CPEC projects. They say there are legal questions which need to be looked into and answered in line with international laws.

We need to analyse the legal framework available or would-be available in terms of the CPEC Authority Bill 2020, which is pending in the parliament. We need a vibrant legal mechanism to respond strongly to the criticism of all CPEC-related projects in terms of transparency and legality. Mere political statements are not an adequate response.

The Constitution of Pakistan, global trade agreements, including the WTO agreements, regional and bilateral agreements and international investment norms and standards provide the required legal framework regarding the issues raised by CPEC-sceptics. The US has expressed concerns about CPEC projects in terms a ‘lack of transparency’ and ‘unfair’ rates of profit guaranteed to the Chinese firms executing these projects.

Let us not to be hesitant to discuss legal implications of agreements before they become problems at a later stage. We should aim at resolving all outstanding issues in a mutually beneficial manner.

The US has been demanding also that China offer relief to partner countries from BRI’s ‘predatory loans.’ Pakistan has clarified that public debt related to the CPEC projects is less than 10 percent of the total CPEC debts from China. Furthermore, these loans have a maturity period of 20 years and the interest rate is 2.34 percent.

The CPEC Authority Bill 2020 has been passed by the National Assembly. It is now pending for the Senate’s approval. It is feared that the Bill does not address appropriate functionality of a legal regime for the CPEC.

There is no provision for setting up a legal team or an advisory board comprising financial experts, environmentalists and engineers with a mandate to evaluate the CPEC agreements in terms of risk management, profit and benefit-sharing, ownership of projects, duration of lease, proprietary rights, protection of interests of the local people, growth rate targets, observance of labour standards, cost effectiveness of the projects, environmental and climate change impact assessment of the projects, accountability, checks against corruption and transparency in procurements and other matters.

It is said that the legislation does not ensure that CPEC projects are spread across the country as there is no specific complaint redressal mechanism built within the Bill.

The CPEC Authority Bill is also criticized for not containing provisions for arbitration and negotiation in case of disputes and conflicts among the stakeholders. Having already suffered huge monitory losses on account of poor handling of some international investment projects due to weak negotiation, ill-drafted and vetted agreements and expensive international judicial forums.

Given the state of affairs, Pakistan has to be conscious and smart while making CPEC-related agreements and MoUs with China. It cannot afford the penalties imposed by international forums due to non-compliance of poorly understood agreements.

Legal and contractual obligations and appropriations in negotiation and legal vetting of agreement documents by legal and technical experts should not be taken as granted despite the all-weather strategic partnership with China and a shared vision of progress and prosperity.

Pakistan should listen to the international concerns and voices over CPEC in line with national and international laws and practices regarding the cooperation and investment agreements.

Pakistan should immediately constitute a high-profile CPEC Assessment Commission consisting of renowned legal and technical experts and professionals dealing with such international agreements and development projects.

The commission should monitor, review and scrutinise the pros and cons of all projects. A special provision should be made for this commission in the CPEC Authority legislation, empowering it to advise the CPEC authority on the effective and transparent implementation of the project activities. The commission should have clearly defined terms of references (ToRs).

Looking at the legal side of CPEC agreements should be a priority so that transparency prevails and adequately responds to all sorts of criticism by vested interests and protects the rights of the Chinese investors, Pakistani companies, labourers, contractors and others. The CPEC should be a win-win project as envisioned by its initiators.

China and Pakistan have common goals of development and prosperity for the peoples of the two counties and the region. Let us not to be shy of discussing legal implications of the agreements before they become problems. We should aim at resolving all outstanding issues in a mutually beneficial manner.

The writer is a former judge and senior lawyer based in Islamabad

The legal regime of CPEC