Fiascos galore
Rashed Rahman
Prime Minister
Imran Khan has ordered the setting up of a probe commission to look into the
Reko Diq debacle in the case filed against Pakistan by the Tethyan Copper
Company Pty Ltd (TCC) before the International Centre for Settlement of
Investment Disputes (ICSID). The dispute alludes to the TCC case that after
investing $ 220 million in exploration and preparatory activities in the Reko
Diq project, its application for a mining licence was rejected by the then
Balochistan government in 2011. Subsequently, then Chief Justice of Pakistan
(CJP) Iftikhar Mohammad Chaudhry’s Supreme Court (SC) declared the contract
between the Balochistan government and TCC against existing laws governing such
projects and was therefore illegal and void ab initio. TCC went to the ICSID
with a damages claim of $ 8.5 billion. It has now been awarded $ 5.97 billion
that includes $ 4.08 billion as penalty, $ 1.87 billion interest, and the
balance for legal costs incurred by TCC.
The government
went into a huddle after the ICSID award was announced on July 14, 2019 to see
what, if any, remedies lay within its grasp. Short of the probe commission
announcement though, the government seems at sea on the issue. It is premature
to assess the makeup and terms of reference of such a commission if and when it
is set up. Meanwhile, the only available straw to clutch at was the statement
by William Hayes, chairman of TCC, that the consortium would be willing to work
towards a negotiated settlement. It should be kept in mind that the award is
not only the biggest in ICSID’s history, it is equivalent to the IMF loan the
government has recently obtained.
Pakistan had
argued before the ICSID in its defence that the TCC agreement had been obtained
by the consortium through bribery and corruption. However, as our present drive
against alleged corruption is showing, such charges are easier to bandy about
than prove. The ICSID did not lend an ear to this unproved allegation of
Pakistan and found for TCC. It is not without irony that Attorney General Anwar
Mansoor’s office responded to the development by reiterating Pakistan welcomes
all foreign investors. Not just that, his office described the Reko Diq
gold/copper site as the “collective resource” of the people of Balochistan and
Pakistan. Balochistan province has a 25 percent share in the project, with the remaining
75 percent going to the federal government and TCC. Of that 25 percent, how
much would the people of Balochistan in general, and the people of Chaghai
where the project is located specifically, benefit is up in the air if not
conspicuous by its absence.
This should not
surprise us as the history of the exploitation of Balochistan’s mineral
resources is full of such injustices. Sui gas has fuelled industry, commerce
and households throughout Pakistan since it was discovered in the early 1950s,
but vast tracts of Balochistan still cry out for gas. Even the earlier Saindak
gold/copper project was handed over to a Chinese company that has been busily
exporting these minerals back home, completely ignoring the project’s thrust to
set up a copper refining plant to add value for Pakistan to the raw minerals.
Not a single local denizen is employed in Saindak, a pattern that informs any
and all Chinese projects in Pakistan, including CPEC. So Saindak not only gives
a pittance (2 percent) to Balochistan, it deprives the province of transfer of
technology in the shape of the envisaged refinery and the value addition from
it, not to mention the absence of any local employment, let alone skills
training.
Our penchant for
inadequately protecting our national interests in contracts with foreign
investors is a constant in our history. The PPP government in power from
2008-13 sought to meet the major power shortage inherited from Musharraf’s
regime in the short term by setting up Rental Power Plants until permanent
capacity came on line. As part of this war footing approach to the yawning
power gap, it engaged a ship-based power plant docked at Karachi. That contract
too was terminated by CJP Iftikhar Mohammad Chaudhry’s SC in 2012. Now Karkey,
the Turkish company that owned the ship-based Rental Power Plant, has been
awarded $ 900 million in damages for breach of contract against Pakistan.
Naturally, this episode left a bad taste in the mouth as far as our friend
Turkey was concerned, and arguably queered the pitch for foreign investment.
One is at a loss
to know whether this track record of blunders is because we lack expertise in
international commercial law or is owed to vested interests that do not give a
fig for national interest. Whatever the cause, the country has suffered
financial penalties, loss of foreign investor confidence, and a bad name
globally as a result. The impact of the TCC award for the struggling economy
can only be imagined. As of now, the best bet for Islamabad is a compromise
with TCC, but the latter will probably extract its pound of flesh in the
bargain.
The Karkey and
Reko Diq fiascos also point to the unforeseen consequences of judicial
hyper-activism that became the hallmark of the restored CJP Iftikhar Mohammad
Chaudhry and later CJP Saqib Nisar. Judges have not only to resist the
temptation to see themselves as national messiahs, but also, in the light of
experience, return to the time-honoured principle of judicial restraint that not
only upholds the trichotomy of power in our constitutional construct, but
refrains from rushing into areas such as the executive and parliament’s remit,
where even angels fear to tread.
rashed-rahman.blogspot.com
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