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ICSID Issues Decision In Favor Of Antofagasta, Barrick In Reko Diq Case

World Bank tribunal rules against Pakistan in Reko Diq project case

An arbitration tribunal of the World Bank's International Center for Settlement of Investment Disputes (ICSID) had on Monday ruled against the Islamic Republic of Pakistan in relation to the unlawful denial of a mining lease for the Reko Diq project in 2011, Chilean mining company Antofagasta plc announced on Tuesday.

The arbitration claim had been submitted in 2012 by the Tethyan Copper Company Pty Ltd (TCC), a joint venture between Antofagasta and Australia's Barrick Gold Corporation.

"Yesterday's decision by the ICSID tribunal rejected Pakistan's final defence against liability and confirmed that Pakistan had violated several provisions of its bilateral investment treaty with Australia, where TCC is incorporated," a press release issued by the company said.


The claim could not be verified with Pakistan's legal representatives in the case.

The tribunal is presided over by Klaus Sachs from Germany. The arbitrators are Stanimir A. Alexandrov from Bulgaria, appointed by TCC, and Leonard Hoffman from England, appointed by Pakistan.

From March 22, it will start assessing the damages that are to be paid by Pakistan to TCC. The tribunal will consider both parties' claims to determine the amount that Pakistan must pay.

At the conclusion of this phase, Tethyan will receive an award entitling it to the fair market value of the project at the time that mining lease application was denied/

A ruling on the amount of damages to be paid is expected in 2018, Antafogasta said.

"We are pleased with this decision and now the damages phase of the arbitration can begin. We expect that, at the conclusion of this phase, Tethyan will receive an award entitling it to the fair market value of the project at the time that the mining lease application was denied," Antofagasta's chief executive officer, Iván Arriagada, said.

Mired in legal issues
The government of Balochistan had in 2011 refused to grant a mining licence to TCC for the Reko Diq gold-cum-copper project.

“Yes, the Balochistan government has rejected the application of TTC for a mining licence,” the then chief secretary of Balochistan, Mir Ahmed Bakhsh Lehri, had said in Nov 2011.


The project's feasibility report, submitted by TCC on Feb 15 the same year, was also rejected.

“The feasibility report was found unsatisfactory by experts,” Lehri had said.

He alleged that the company had not mentioned anything in its report about the processing of gold and copper, which was the main concern of the Balochistan government.

The provincial government, he said, had already announced a decision to install its own refinery for the processing of gold and copper and allocated substantial funds for it.

“TCC can go to court against the decision,” the chief secretary had added.

"It's been difficult to define what their actual issues were," Tim Livesey, then CEO of TCC, had told Reuters in 2012 in an exclusive interview. "We went back to them for clarification, as many of their issues are not covered in the Balochistan Mining Regulations."

A local government official, who requested anonymity, said at the time that TCC took 'too long' to complete its feasibility study and that it was "cheating" Balochistan by under-valuing the worth of the copper and gold.

Agreement 'null and void'
The Supreme Court had in January 2013 declared the Reko Diq agreement void and in conflict with the country's laws.

The Supreme Court had been hearing a case constituting identical petitions filed against the federal government’s decision to lease out gold and copper mines in Reko Diq in Balochistan’s Chagai district to TCC.

In its ruling, a three-judge bench of the apex court, headed by then chief justice Iftikhar Muhammad Chaudhry, had stated that the Chagai Hills Exploration Joint Venture Agreement — signed between the Balochistan government and Australian mining company BHP in 1993 — was in conflict with the laws of the country.

BHP had later sold its stakes to a then unknown TCC, which ran the mine till the case started in 2008.

The bench added that all amendments made to the agreement after its signing were unlawful and in contradiction with the agreement.

It further stated that TCC no longer had any rights in relation to the Reko Diq agreement.

As litigation continued, TCC approached the International Centre for Settlement of Investment Disputes (ICSID), initially citing breach of contract.

However, the ICSID had initially denied its contention of mine ownership.

The company then argued for loss of investments amounting to $400 million and appeared to have presented a case for a favourable verdict.

However, it had also appeared willing to reach a compromise if allowed to maintain a stake in the lucrative venture.
 
Get some one serious to negotiate with them for out of court settlement...

And for God's sake .... can we start the reko dake project???? Seems like it needs another cpec like solution (like that for thar coal)
 
Get some one serious to negotiate with them for out of court settlement...

And for God's sake .... can we start the reko dake project???? Seems like it needs another cpec like solution (like that for thar coal)

Too late for that now.
 
World Bank tribunal rules against Pakistan in Reko Diq project case
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An arbitration tribunal of the World Bank's International Center for Settlement of Investment Disputes (ICSID) had on Monday ruled against the Islamic Republic of Pakistan in relation to the unlawful denial of a mining lease for the Reko Diq project in 2011, Chilean mining company Antofagasta plc announced on Tuesday.

The arbitration claim had been submitted in 2012 by the Tethyan Copper Company Pty Ltd (TCC), a joint venture between Antofagasta and Australia's Barrick Gold Corporation.

"Yesterday's decision by the ICSID tribunal rejected Pakistan's final defence against liability and confirmed that Pakistan had violated several provisions of its bilateral investment treaty with Australia, where TCC is incorporated," a press release issued by the company said.

The claim could not be verified with Pakistan's legal representatives in the case.

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The tribunal is presided over by Klaus Sachs from Germany. The arbitrators are Stanimir A. Alexandrov from Bulgaria, appointed by TCC, and Leonard Hoffman from England, appointed by Pakistan.

From March 22, the tribunal will start assessing the damages that are to be paid by Pakistan to TCC. The tribunal will consider both parties' claims to determine the amount that Pakistan must pay.

At the conclusion of this phase, Tethyan will receive an award entitling it to the fair market value of the project at the time that mining lease application was denied.

A ruling on the amount of damages to be paid is expected in 2018, Antafogasta said.

"We are pleased with this decision and now the damages phase of the arbitration can begin. We expect that, at the conclusion of this phase, Tethyan will receive an award entitling it to the fair market value of the project at the time that the mining lease application was denied," Antofagasta's chief executive officer, Iván Arriagada, said.

Mired in legal issues
The government of Balochistan had in 2011 refused to grant a mining licence to TCC for the Reko Diq gold-cum-copper project.

“Yes, the Balochistan government has rejected the application of TCC for a mining licence,” the then chief secretary of Balochistan, Mir Ahmed Bakhsh Lehri, had said in Nov 2011.

The project's feasibility report, submitted by TCC on Feb 15 the same year, had also been rejected.

“The feasibility report was found unsatisfactory by experts,” Lehri had said.

He alleged that the company had not mentioned anything in its report about the processing of gold and copper, which was the main concern of the Balochistan government.

The provincial government, he said, had already announced a decision to install its own refinery for the processing of gold and copper and allocated substantial funds for it.

“TCC can go to court against the decision,” the chief secretary had added.

"It's been difficult to define what their actual issues were," Tim Livesey, then CEO of TCC, had told Reuters in 2012 in an exclusive interview. "We went back to them for clarification, as many of their issues are not covered in the Balochistan Mining Regulations."

A local government official, who requested anonymity, said at the time that TCC took 'too long' to complete its feasibility study and that it was "cheating" Balochistan by under-valuing the worth of the copper and gold.

Agreement 'null and void'
The Supreme Court had in January 2013 declared the Reko Diq agreement void and in conflict with the country's laws.

The Supreme Court had been hearing a case constituting identical petitions filed against the federal government’s decision to lease out gold and copper mines in Reko Diq in Balochistan’s Chagai district to TCC.

In its ruling, a three-judge bench of the apex court, headed by then chief justice Iftikhar Muhammad Chaudhry, had stated that the Chagai Hills Exploration Joint Venture Agreement — signed between the Balochistan government and Australian mining company BHP in 1993 — was in conflict with the laws of the country.

BHP had later sold its stakes to the then unknown TCC, which ran the mine till the case started in 2008.

The bench added that all amendments made to the agreement after its signing were unlawful and in contradiction with the agreement.

It further stated that TCC no longer had any rights in relation to the Reko Diq agreement.

As litigation continued, TCC approached the International Centre for Settlement of Investment Disputes (ICSID), initially citing breach of contract.

However, the ICSID had initially denied its contention of mine ownership.

The company then argued for loss of investments amounting to $400 million and appeared to have presented a case for a favourable verdict.

However, it had also appeared willing to reach a compromise if allowed to maintain a stake in the lucrative venture.
 
Well after reading a bit about this case/issue

The summary of the issue is

Someone did a deal with BHP in 1999 (Origional Agreements )

"CONDITIONAL Contract demanded the company develop fields in 5-8 years in 1999, Full fledge development, not just feasability studies or 5-7%: They failed miserably "

BHP sold their stake to TTC (When people demended answer to poor speed of development)
(Pakistan objected to this transfer and objected to one sided ammendments) - Contract nullified at this point , The state of Pakistan did not recognize TTC as partners in business )

  • Technically from Pakistan's side the ammendments done to origional contract were not acceptable, and this was reviewed by Supreme courts and they deemed the agreement Nullified

  • Supreme court has to check if changes made to contract are legal or not, that is why we have courts to look after such items

  • TTC sold their stake to Barrick Gold and Antofagasta. They technically sold them a paper or agreement which was already nullified by Pakistani Government

  • Nothing done on Site till 2008 , no impact by Gold / ntofagasta

"Ammendments were done to origional contract" discoverd by Supreme court of Pakistan after it was signed in 1999. This was deemed illegal by Supreme court of Pakistan" Important note Supreme court of Pakistan found "Ammendments to origional agreement was illegal"

Province was against TTC . So they logged a case in court Supreme court of Pakistan. The contract as a result was "Nullified". Due to "ammendments to origional contract which was illegal"

The new company TTC or Barrick Gold and Antofagasta were never granted a licence to excavate in Baluchistan


So technically Pakistan does not owes anything because the deal was "Nullifed" due to objection by Provincial authorities to the deal , which is legal right of Pakistan. Also Supereme court stated Ammendments are not aggreable the contract is VOID

  • Can't Ammend a contract without Supreme courts agreement from Pakistan side

  • The deal is not recognized if it is nullified by Supreme Court of Pakistan


Actual Parties (Pakistan / BHP)

  • Pakistan/ BHP deal in 1999 (Agreed between Pakistan / BHP) VALID, Pakistan has to validate any change in agreement (Parliment/Province/Courts). Review if it is constitutionally ok for national level contract

"Conditional Approval was given that BHP only would develop the field in 5-8 years to full 100% capacity not 1-5%. When performance goals were not met the Contract was approaching cancellation for failiure to bring project to 100% capacity !!!! "

The problem started when Ammendments were made and shares were sold with out Pakistan's approval

Un Recognized Transactions from Pakistan's Legal System:
  • BHP sold their stake to TTC (Ammendments not agreed by Pakistan: INVALID) Where is Supreme Court of Pakistan agreement on sale of shares? Did Pakistan issue no Objection letter?
  • TTC sold to Barrick Gold and Antofagasta (Ammendments not agreed by Pakistan: INVALID) Where is Supreme Court of Pakistan agreement on sale of shares? Did Pakistan issue no Objection letter?

Nothing is due from Pakistan's side as the contract was broken by 1 sided sale from BHP violating Sovreign Right of Pakistan , as to who gets to be new member in project
 
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Cut the losses. That is the only way out of this. The fools shouldn't have made the deal at the time. This is now a terribly self inflicted loss.
 
the supreme court has a good history of ***king pakistan
first with steal mills causing loss of 300+ billion rupees(= worth a full equipped teriery care hospital in every district or 70 imran khan cancer hospitals) than the PTCL deal(700 million dollars) than the rek o diq which has cost an unimaginable loss
the rest is taken care by stupid politician

where as chinese are given extra ordinary profits for their investment because of monopoly
 
the supreme court has a good history of ***king pakistan
first with steal mills causing loss of 300+ billion rupees(= worth a full equipped teriery care hospital in every district or 70 imran khan cancer hospitals) than the PTCL deal(700 million dollars) than the rek o diq which has cost an unimaginable loss
the rest is taken care by stupid politician

where as chinese are given extra ordinary profits for their investment because of monopoly


Regrettably, in Pakistan it is the personality cult which decides the issues; not the principles nor the merit.

This had been true for the political parties, but the worst CJ in Pakistan‘s history also managed to convert the Supreme Court into his personal fief. Unfortunately, the lawyers community, supposedly guardian of the law; were the real culprits. Remember their slogan

“Chief terey jaan nisaar, Bey shumaar bey shumaar”

(Chief Justice, your diehard supporters are in-numerable)

In my opinion, the Supreme Court ruling in the Steel Mill as well as Reko dek case was based not on merit but on the CJ Iftikhar’s strong dislike of anything associated with the Musharraf regime.
 
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Regrettably, in Pakistan it is the personality cult which decides the issues; not the principles nor the merit.

This had been true for the political parties, but the worst CJ in Pakistan‘s history also managed to convert the Supreme Court into his personal fief. Unfortunately, the lawyers community, supposedly guardian of the law; were the real culprits. Remember their slogan

“Chief terey jaan nisaar, Bey shumaar bey shumaar”

(Chief Justice, your diehard supporters are in-numerable)

In my opinion, the Supreme Court ruling in the Steel Mill as well as Reko dek case was based not on merit but on the CJ Iftikhar’s strong dislike of anything associated with the Musharraf regime.
causing direct losses of over 300 billion rupees and indirect causes of probably over 1 trillion rupees
I call it the second shock after the first one we received in the 70s and this literally killed all sort of investment
co operation are taxed nearly 20-30% even if they are mining it for free(which they were not) the benefits just in taxation, local jobs and investment friendly picture would have been enormous

now the Baluchistan govt has set money and will be extracting gold (since 2013)
 
It could actually be a blessing in disguise to Pak. Pak could chose to pay damages- since they wont have the cash upfront they can hand it over the Chinese (without attracting protests from the aam junta) in return for them taking over the debts. With Chinese expertise and financial muscle and Pak fauj managerial skills, they could easily extract value from the Reko Diq mines. The Pak Govt would get royalties and taxes and the Chinese could use the profits to pay off the debt. Looks like win win for everyone.

Regards
 

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