- Yet, another massive blow to Pakistan’s government had been awarded $5.9 billion penalty last year
A poor country was jolted with a penalty worth billions of dollars last year for losing its battle against two global giants of the mining industry. The giants, Antofagasta PLC of Chile and Barrick Gold Corporation of Canada, filed a lawsuit in the World Bank’s corrupt Investment Arbitration Tribunal for an illegal project that Pakistan’s government claimed was never approved or carried out.
In 1993, Pakistan entered into a joint venture (JV) through its provincial government’s public corporation, Balochistan Development Authority, with the United States’ mining company, BHP, to explore the gold and copper mining prospects in the challenging terrain of Balochistan. The company’s license premised on discoveries and extraction of minerals, but the profit margin wasn’t favorable to BHP which made the project drag longer than usual.
Later, in 2000, the company assigned its exploration to an Australian company and created a new subsidiary, Tethyan Copper Company (TCC), for the project.
Pakistan’s government at the time had no clue, until in 2006 Antofagasta of Chile, acquired TCC for $167million and sold half of it to Barrick Gold. Unusual activity was noticed by the government officials and they challenged the originally signed JV agreement with BHP in the country’s apex court, the Supreme Court of Pakistan. The JV agreement was declared “null and void” with further mentioning of curtailing TCC’s right and was a landmark judgment announced by the Supreme Court in 2013.
The tribunal’s capricious judgment asked Pakistan to reimburse TCC fully, with the accrued interest including legal fees that sky-rocketed the bill to a whopping $5.9 billion or nearly 2% of Pakistan’s Gross Domestic Product (GDP). The country has yet to repay a bailout loan of $6 billion it received from the International Monetary Fund (IMF) to prevent an economic crisis back home.
The court was of the opinion that the JV terms signed by the BDA with BHP contravened with Pakistan’s mining and contract laws on multiple levels. It further questioned the provincial public corporation’s authority to bind Balochistan to the JV terms, and specifically raised concerns over tendering this project without any competition and transparency, which was compromised to favor BHP. The compromise reached between the public and private entity was made at the cost of deviating from the rules mandatorily compiled for mining purposes. The JV made no efforts to seek permission from the federal and provincial government in a timely fashion.
The apex court in any country is the last resort of appeals, but its verdict can rarely be challenged. After years of public interest litigation carried out in Pakistan against the mining companies for breach of domestic laws and public right’s infringement, the TCC dragged Pakistan to the World Bank’s international Center for Settlement of Investment Disputes after losing its battle in the Supreme Court. A panel of three judges with no expertise in Pakistan’s legal system at the arbitration tribunal asked Pakistan to pay compensation for all the future profits that TCC would have made in the event of its working on a non-existent project. No project ever existed for which arbitrators passed judgment to pay for the royalties, corporate taxes, and other basic provisions, and was never discussed with the Balochistan and Pakistan governments. Perhaps, there was disagreement on terms that went for years which hampered the negotiations.
Sadly, the system we live in is polluted with arcane policies, has undermined and threatened the existence of poor countries which are badly struck with the International arbitration court’s decision in favor of rich companies.
The tribunal’s capricious judgment asked Pakistan to reimburse TCC fully, with the accrued interest including legal fees that sky-rocketed the bill to a whopping $5.9 billion or nearly 2% of Pakistan’s Gross Domestic Product (GDP). The country has yet to repay a bailout loan of $6 billion it received from the International Monetary Fund (IMF) to prevent an economic crisis back home. With recent statistics, Pakistan’s entire public spending on health care for 200 million people is twice less than the bill, especially in a country where 7% of children die before their fifth birthday.
Unfortunately, the death of Pakistan’s economy with unreasonable penalties reveals the inner story of ICSID, as a dishonest broker. To our surprise, one of the tribunal members in the TCC case against Pakistan is counsel for the same company in another case. However, the arbitrator continues to work at the same position in ICSID, as if nothing happened.
To correct what seems as “malpractice,” prevailing in the World Bank’s arbitration tribunal, action should begin with a reversal of this flawed judgment against Pakistan, and a thorough investigation of flawed corrupt practices.