Prime Minister Imran Khan has ordered investigations into the $5.84bn penalty imposed on Pakistan by the international arbitration tribunal of the World Bank following the denial of a mining lease in 2011.
A special commission will investigate those responsible for making Pakistan suffer such a loss, the Dawn newspaper reported yesterday.
On Friday, the International Centre for Settlement of Investment Disputes (ICSID) ruled after more than seven years of arbitration on claims filed against the country by the Tethyan Copper Co Pty Limited (TCC).
“The government of Pakistan reserves its right to pursue any and all legal remedies available to it under the ICSID regime, international law and all other relevant laws to safeguard its interests,” a statement issued by the attorney-general’s office said.
The TCC, a joint venture held equally by Antofagasta and Barrick Gold Corp, had claimed $8.5bn in damages against Pakistan for rejecting its lease application for mining in Reko Diq, in the restive province of Baluchistan.
“We remain willing to discuss the potential for a negotiated settlement with Pakistan and will continue to protect our commercial interests and legal rights until the conclusion of this dispute,” TCC chairman William Hayes said.
Pakistan said it welcomes the offer to work towards a negotiated settlement.
The TCC had completed a feasibility study before the denial of the mining lease application.
The study showed that Reko Diq had one of the world’s largest undeveloped copper and gold deposits, and had a potential mine life of over 50 years and an estimated initial capital investment of over $3bn.
The $5.84bn penalty is made up of $4.087bn compensation by reference to the fair market value of the Reko Diq project at the time of the mining lease denial, and interest award of $1.753bn.
The ICSID also awarded the TCC just under $62mn in costs incurred in enforcing its rights.
“We are pleased to reach this milestone after more than seven years of arbitration,” Ivan Arriagada, Antofagasta plc’s chief executive officer, had said in a statement.
The award is binding on the parties.
There are limited grounds for challenging the award under the ICSID Convention.
It is not expected that proceeds of the award will be recognised in Antofagasta’s financial statements until it is received.
The Reko Diq gold and copper mines project case was decided by the Supreme Court of Pakistan in its original and appellate jurisdiction simultaneously in 2013 and 2014.
Initially, gold and copper resources were discovered by another leading global resources company, BHP Billiton, after signing a joint venture with the Baluchistan Development Authority for exploration of minerals at Chagai Hills in 1993.
The agreement led to accusations of shady deals, alleged corruption, bribes and kickbacks from foreign investors, which clouded the future of Reko Diq project.
Media reports alleged that $260bn assets at Reko Diq were sold for nothing.
Alleged irregularities included signing of Reko Diq accord by the governor of the province without cabinet approval, buying of project files by Antofagasta and Barrick Gold in $200mn, approval of a 30-year lease without considering the expiry of exploration licence, relaxation in the mining rules, mysterious transfer of entire of Baluchistan’s share without any compensation/consideration, and conducting 270,000m of drilling in violation of Baluchistan Mineral Rules, among others.
Some reports described it as “the mother of all the deals and grandfather of all the corruption cases in Pakistan, put together”.
It was alleged that Baluchistan would shoulder most of the costs of the projects but only had a 25% share.
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