These narratives show how foreign investors are a double-edged sword for Pakistan. TCC was suspected of lending support to Baloch separatists.
Pakistan has recently been garnering a lot of attention in international tribunals. A recent case is the Reko Diq case, which led to arbitration in the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). In Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan (ICSID Case No. ARB/12/1), ICSID has ruled that Pakistan has to pay a $5.8 billion penalty to a mining company, the Tethyan Copper Company (TCC). It is an oddity that the Pakistani public has been disabled from knowing the full details of the ICSID arbitration judgment. The condition for the publication of the award is that both parties must consent to its publication and apparently there is no consensus that it should be published, or alternatively there is consensus that it should not be published. Either way that is rather opaque and lacks transparency. Yet we do know the identities of the arbitrators and the costly law firms employed by the parties and all the procedural steps in the arbitration (which is rather pointless indeed without knowing the full and exact details of the final arbitration award).
It is rather appalling that the award is not in the public domain and the people of Pakistan are being denied access to the full details of the decision. Reko Diq is a region in Balochistan that has large gold and copper reserves. TCC acquired an exploration license in 2006, buying it from the company BHP Minerals. Though this seems a very recent mining project, TCC itself is a joint venture by other foreign companies, and BHP had been granted licenses since 1993 by the Balochistan Development Authority (BDA) under the Chagai Hills Exploration Joint Venture Agreement (Chevja). Now that TCC was exploring Reko Diq’s reserves, it completed its feasibility study in 2010, and applied for a mining lease, but it was denied. Chevja had been challenged by petitioners before. In 2013, the Supreme Court decided that the agreement (Chevja) was void ab initio. In 2009, the provincial government had already terminated Chevja.
International arbitration helped the TCC in 2017, ICSID ruled that Pakistan had breached a bilateral investment treaty, and in July 2019 further ruled that it would have to pay $5.8 billion in damages to the TCC. Imran Khan has asked that a commission be formed to investigate the ruling. While it is being suggested that Pakistan seek an out-of-court settlement to find another way out, it is worth exploring what happened before the international arbitration, and especially why an agreement with a foreign mining company would be considered void ab initio.
It is important to examine why the Supreme Court ruled that Chevja was void ab initio; most of them have to do with the justification that the licenses granted under this agreement were unlawful, and without authorisation by the provincial government. Moreover, the relaxations in the Balochistan Mining Concession Rules 1970, provided to the mining company, were without sufficient reason. The idea that foreign investment is ‘good’ for Pakistan was also considered, but the Supreme Court ultimately decided that the breach in law showed disloyalty to the State. Notably, the case was Maulana Abdul Haque v. Government of Balochistan, see also the short order passed by the Supreme Court. In the latter document, Iftikhar Chaudhry CJ, Gulzar Ahmed and Azmat Saeed JJ held at paragraph 12 that:
The Chagai Hills Exploration Joint Venture Agreement dated 23.07.1993 is held to have been executed contrary to the provisions of the Mineral Development Act, 1948, the Mining Concession Rules, 1970 framed thereunder, the Contract Act, 1872, the Transfer of Property Act, 1882, etc., and is even otherwise not valid, therefore, the same is declared to be illegal, void and non est. The Addendum No. 1 dated 04.03.2000, Option Agreement dated 28.04.2000, Alliance Agreement dated 03.04.2002 and Novation Agreement dated 01.04.2006, which are based upon, and emanate from, CHEJVA are also held to be illegal and void. All these instruments do not confer any right on BHP, MINCOR, TCC, TCCP, Antofagasta or Barrick Gold in respect of the matters covered therein. It is further held that EL-5 is tantamount to exploration contrary to rules and regulations as the claim of TCCP is based on CHEJVA, which document itself has been held to be non est. Therefore, before exploration it was incumbent upon it to have sought rectification of its legal status.
However, behind such rulings are other tales to explore. Petitioners against Chevja claimed that this agreement, and its ensuing agreements, were done without proper procedure, and rules and regulations governing such processes were not followed. However, ethnographic fieldwork by Herald in 2015 explains that there could be other reasons why the agreement was terminated. Considered a foreign influence in the region, the mining company was suspected as lending support to separatists in the province. TCC teams travelled freely and the time they spent in a field survey coincided with when the activities of separatists were at their peak.
Hence, there are several narratives at play here. Firstly, there is the argument that Pakistan refused to grant a license to a company that had already invested money in exploring a district rich in copper and gold. Secondly, another narrative propelled is about how the license should have been granted, and would have resulted in many jobs, as well as profit for the province too. There is the idea that the Supreme Court was giving weightage to procedure rather than to a profitable venture. Thirdly, there is a narrative that a lot of ‘corruption’ happened in the agreements for Chevja, with a foreign investor given undue advantages. Finally, a less popular idea is about how people living in the region itself saw other causes for the agreement being terminated and the SC thereafter calling it void ab initio. And, of course, there is concern over how Pakistan will have to wriggle its way out of the penalty which is a huge sum of money for a cash strapped economy which is headed for disaster.
These narratives show how foreign investors are a double-edged sword for Pakistan. If anything the mining company, or companies, in question were gold diggers who could bring monetary returns and employment for many people. However, they are also suspects who raised the alarm of support for separatists, and lobbied for many relaxations in legal procedures as they surveyed Reko Diq. They are now to be dealt with carefully for they have successfully pulled Pakistan into a ruling by an international tribunal.
Yet, none of the analyses, apart from Herald’s report from 2015, give any clue about the people who are living in the districts where the mining company conducted explorations. It is the people who live there who petitioned against it, and there are also the people who allowed workers from the mining company to stay in their homes. A bottom-up approach is important to understand how foreign companies work in such regions, and how they garner either support or antagonism.
Several questions arise:
- How did the TCC conceptualise the region and the national interests of Pakistan?
- Was it about capitalist intervention in a poor country that was relying on the expertise of foreign miners? Was it a case of too big to fail?
- What did the people living there think about this intervention?
- How does a foreign investor such as a mining company fit into a political landscape?
- What sort of trails of exploitation has Chevja left behind?
- How was the feasibility study portraying the mining project, and what environmental factors did it consider?
- There are these and more questions that need to be answered if we are to escape from simplistic and one-dimensional narratives about this complex issue.
The author, Ilsa Abdul Razzak has a Bachelor’s degree in Social Sciences from IBA, Karachi. Her views are her own. She writes at www.ilsarazzak.wordpress.com, and has an interest in reading on, and teaching history and literature.
Ahmed, Maqbool. “Magic Mountains: The Reko Diq Gold and Copper Mining Project.” Herald, July 2015. https://herald.dawn.com/news/1153283
Siddiqui, Abdul Rafay. “Pakistan’s Need for Amicable Resolutions Concerning Foreign Investment Disputes: The Reko Diq Case.” LUMS Law Journal, 4. https://sahsol.lums.edu.pk/sites/default/files/pakistans_need_for_amicable_0.pdf
Dawn. “Reko Diq fiasco.” July 16, 2019. https://www.dawn.com/news/1494359