Pakistan may face $11.5 b penality

An arbitration tribunal of  World Bank has ruled in favor of Tethyan Copper Company Pvt Ltd (TCC) in Reko Diq gold mine project case. As a consequence, Pakistan may face a penalty of $11.5 billion for not awarding the project to TCC. World Bank’s International Center for Settlement of Investment Disputes (ICSID) had earlier rejected Pakistan government’s application to dismiss TCC’s claims on grounds of corruption and malpractices by the latter. Both the federal and provincial governments submitted applications before ICSID and International Criminal Court (ICC) in The Hague during 2015-16, seeking admittance of new evidence showing TCC’s corrupt practices in Reko Diq affairs for illegal and undue gains. The move turned futile as the court ruled against Pakistan government for unlawful denial of the mining lease for Reko Diq to TCC which is a joint venture of Chile’s Antofagasta and Canada’s Barrick Gold Corporation. The TCC had initially filled the claim in 2012. Later in 2017, the company filed for compensatory damages amounting to $9.1 billion based on fair market value of its investments in the project till November 15, 2011. In addition, it also filed a claim of $2.3 billion as pre-award compound interest. Now, the government has to submit its reply to TCC’s damages claims. It merits mentioning that the PPP government had made an unsuccessful attempt to settle the dispute with TCC and, had also warned the Balochistan government of not paying pay damages in case of any adverse ruling from international tribunals. TCC held 75% shares while Balochistan had a 25% stake in the project. The company claims to have invested over $500 million in exploration, scoping and feasibility studies of the project. The total investment in the project was projected as $5 billion over a period of five years. TCC and Balochistan reached a deadlock in 2009 because of two major issues. One that Balochistan refused to take financial responsibility against its 25 percent stake. Two, the TCC was not in favor of the involvement of a Chinese company. A letter written by Pakistan’s Ambassador to Chile Burhanul Islam to then Petroleum Minister Naveed Qamar in September 2009 had advised against involving Metallurgical Corporation of China in the same mining site. In a feasibility report submitted to the Balochistan government, TCC projected a turnover of over $60 billion for the gold and copper project over a span of 56 years. This projection was based on a price of $2.2 per pound of copper and $925 per ounce of gold, in the year 2009. The mine has estimated reserves of 11.65 million tons of copper and 21.18 million ounces of gold.