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Featured Pakistan seeking relief from $5.8B fine over mining lease

Arsalan

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ISLAMABAD (AP) — Pakistan is seeking the reversal of a $5.8 billion penalty imposed by an international tribunal for denying a mining lease to an Australian company, saying that paying the fine would hinder its handling of the coronavirus pandemic.

The Reko Diq district in southwestern Pakistan’s Baluchistan province is famed for its mineral wealth, including gold and copper. Prime Minister Imran Khan’s government considers it a strategic national asset, though instead of yielding a bonanza the Reko Diq mining project may cost the country dearly.

The World Bank’s International Center for Settlement of Investment Disputes is considering Pakistan’s appeal against enforcing the penalty over its cancellation of the Reko Diq mining lease for Tethyan Copper Corp., a 50-50 joint venture of Barrick Gold Corp. of Australia and Antofagasto PLC of Chile.
https://apnews.com/38600f6a7ead6b16f1b4919af4b8a444/gallery/08b869e1d1ca4da7aaf9352ad77917ff
In the meantime, the Baluchistan government has set up its own company to develop the mine: As prices for commodities surge, with gold recently at more than $2,000 an ounce, turning fiasco to fortune is all the more appealing.
Pakistan and Tethyan both have signaled a willingness to discuss alternative solutions, such as a settlement, but the status of any talks on a deal is unclear. Officials on the Pakistan side said they have not been in direct contact and no specific settlement has been proposed.
“Despite the initiation of arbitral proceedings in order to protect its rights, TCC remains hopeful of an opportunity to reach a negotiated resolution to the case,” says a statement on the company’s website issued after the 2019 arbitration ruling.
Asked recently, Tethyan officials said there were no updates.
An official in Pakistan’s attorney general’s office said an out of court settlement with Tethyan Copper Corp. , or TCC, was possible pending a final decision on the award, which might not come until next year.

The Reko Diq case is testing Khan’s ability to use back channel diplomacy to settle disputes and keep alive efforts to lure more foreign investors.

According to details available on Tethyan’s website, the Reko Diq Mining Project was to build and operate a world class copper-gold open-pit mine at a cost of about $3.3 billion. The project could be “a beacon for further investment into exploration and mining sectors in Baluchistan and Pakistan in general,” the company said.
Tethyan says its 1998 agreement with the local Baluchistan government entitled it to the mining lease, subject only to “routine” government requirements.

After an extensive and detailed feasibility study, the company’s local subsidiary submitted a mining lease application in 2011. The project stalled in November 2011 when the Baluchistan provincial government rejected the application.

Pakistani officials in both Islamabad, the capital, and Baluchistan say the mining lease was terminated by the Baluchistan government because it was secured in a non-transparent manner and granted too many concessions to the company, violating government rules and regulations and ignoring national interests.

By then, Tethyan had invested $220 million in Reko Diq. The Australian mining company sought help from the World Bank arbitration tribunal in 2012, and it ruled against Pakistan in 2017, rejecting an earlier decision against Tethyan by the Pakistan Supreme Court.

The miner originally sought $8.5 billion. The tribunal opted to use a formula for calculating damages for the cancelled lease based on the assumed profits Tethyan might have earned from the mine over 56 years, said an official at the Justice Ministry who spoke on condition he not be named because he was not authorized to speak to media about the case.

The resulting fine, of nearly $6 billion including the damages award and interest, is equal to about 2% of Pakistan’s GDP and is on a par with a recently agreed upon bailout package for Pakistan from the International Monetary Fund.

Economist Jeffrey Sachs described it as a “mugging” of Pakistan. Other experts also have questioned the reasoning behind huge award, which is more than double the size of the largest similar arbitration award, in the case between Dow Chemical and Kuwait Petrochemical Corp.

Documents explaining the award suggest one intention was to penalize Pakistan for having violated its investment treaty with Australia.

Regardless, paying compensation equivalent to 40% of the country’s foreign exchange reserves would be a challenge as the impoverished Islamic nation struggles to revive its economy. The pandemic has infected nearly 300,000 of Pakistan’s 212 million people and killed more than 6,300, while the economy contracted for the first time in decades in the fiscal year that ended in June.

Reko Diq’s proximity to the Saindak copper mine operated by Minmetals Corp. of China has raised speculation that Pakistan might tap help from Beijing in resolving the problem if its latest effort to get the award revoked fails.

Baluchistan’s Gwardar port is an anchor in the China Pakistan Economic Corridor, part of Beijing’s vast Belt and Road infrastructure initiative.

Minmetals’ chairman, Guo Wenqing, met with Khan, the prime minister, in Beijing last year. But both Pakistani officials involved in the Reko Diq project and Minmentals said there is no discussion of a bailout by China.

Mahfooz Ali Khan, who retired as finance secretary in Baluchistan province, told The AP the regional government initially agreed to the project hoping to see the mine developed but cancelled after it found rules had been violated.

“I personally feel that both sides should consider an out of court settlement as both sides have solid legal points to continue a legal battle, but it would be better if they renegotiate and resume work on the project,” he said.

Link to Story
 

Sheikh Rauf

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Zardari and nawaz tried hard to sell anything which can lift Pakistan, they were the biggest hurdle of building dams, cuz of that country was in extreme shortage of electricity which was opportunity for them to import expensive electricity and then nawaz made almost the same deal on gas deal with Qatar.
now we have to deal with these issues exact the same way like first 5 years of musharaf when he paid all IMF loan and on zardari and nawaz term they took it from IMF as much as they cud to gain vote.. now they hoping imran will pay off and then their snakelet will come in power to put Pakistan where it was.
 

ProblemSolver

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That's just plain mugging. Invest 220 million, don't follow rules and then appeal and get 6$ billion, a decision made by god knows who. Who cares, why pay lol. For good measure pay the firm 250 million, and just walk away from the case lol. If anything just walk out of these stupid treaties in the first place. They are used to exploit the resources of nations with less money. I'm not sure about the implications of this but we shouldn't have international arbitration on cases that involve our resources in the first place. If you are in Pakistan, you follow Pakistani rules and regulations.
 

PakFactor

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Pakistan should ignore the verdict and go about it’s life and not pay any heed to this charade, and we have no reason to pay any sort of fine. That company didn’t do any work besides surveying and not hard assets were brought to mine.
 

Dalit

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That's just plain mugging. Invest 220 million, don't follow rules and then appeal and get 6$ billion, a decision made by god knows who. Who cares, why pay lol. For good measure pay the firm 250 million, and just walk away from the case lol. If anything just walk out of these stupid treaties in the first place. They are used to exploit the resources of nations with less money. I'm not sure about the implications of this but we shouldn't have international arbitration on cases that involve our resources in the first place. If you are in Pakistan, you follow Pakistani rules and regulations.
I agree. The ruling is obviously a joke. LOL at international tribunal. Simply make a reasonable offer out of tribunal since losses were incurred by the company due to India's best friend Nawaj Sharif. If the mining company doesn't take the offer show them a middle finger and pretend nothing happened at all. What are they going to do? Make threats? Apply sanctions? LOL Laughable.
 

ps3linux

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ISLAMABAD (AP) — Pakistan is seeking the reversal of a $5.8 billion penalty imposed by an international tribunal for denying a mining lease to an Australian company, saying that paying the fine would hinder its handling of the coronavirus pandemic.

The Reko Diq district in southwestern Pakistan’s Baluchistan province is famed for its mineral wealth, including gold and copper. Prime Minister Imran Khan’s government considers it a strategic national asset, though instead of yielding a bonanza the Reko Diq mining project may cost the country dearly.

The World Bank’s International Center for Settlement of Investment Disputes is considering Pakistan’s appeal against enforcing the penalty over its cancellation of the Reko Diq mining lease for Tethyan Copper Corp., a 50-50 joint venture of Barrick Gold Corp. of Australia and Antofagasto PLC of Chile.
https://apnews.com/38600f6a7ead6b16f1b4919af4b8a444/gallery/08b869e1d1ca4da7aaf9352ad77917ff
In the meantime, the Baluchistan government has set up its own company to develop the mine: As prices for commodities surge, with gold recently at more than $2,000 an ounce, turning fiasco to fortune is all the more appealing.
Pakistan and Tethyan both have signaled a willingness to discuss alternative solutions, such as a settlement, but the status of any talks on a deal is unclear. Officials on the Pakistan side said they have not been in direct contact and no specific settlement has been proposed.
“Despite the initiation of arbitral proceedings in order to protect its rights, TCC remains hopeful of an opportunity to reach a negotiated resolution to the case,” says a statement on the company’s website issued after the 2019 arbitration ruling.
Asked recently, Tethyan officials said there were no updates.
An official in Pakistan’s attorney general’s office said an out of court settlement with Tethyan Copper Corp. , or TCC, was possible pending a final decision on the award, which might not come until next year.

The Reko Diq case is testing Khan’s ability to use back channel diplomacy to settle disputes and keep alive efforts to lure more foreign investors.

According to details available on Tethyan’s website, the Reko Diq Mining Project was to build and operate a world class copper-gold open-pit mine at a cost of about $3.3 billion. The project could be “a beacon for further investment into exploration and mining sectors in Baluchistan and Pakistan in general,” the company said.
Tethyan says its 1998 agreement with the local Baluchistan government entitled it to the mining lease, subject only to “routine” government requirements.

After an extensive and detailed feasibility study, the company’s local subsidiary submitted a mining lease application in 2011. The project stalled in November 2011 when the Baluchistan provincial government rejected the application.

Pakistani officials in both Islamabad, the capital, and Baluchistan say the mining lease was terminated by the Baluchistan government because it was secured in a non-transparent manner and granted too many concessions to the company, violating government rules and regulations and ignoring national interests.

By then, Tethyan had invested $220 million in Reko Diq. The Australian mining company sought help from the World Bank arbitration tribunal in 2012, and it ruled against Pakistan in 2017, rejecting an earlier decision against Tethyan by the Pakistan Supreme Court.

The miner originally sought $8.5 billion. The tribunal opted to use a formula for calculating damages for the cancelled lease based on the assumed profits Tethyan might have earned from the mine over 56 years, said an official at the Justice Ministry who spoke on condition he not be named because he was not authorized to speak to media about the case.

The resulting fine, of nearly $6 billion including the damages award and interest, is equal to about 2% of Pakistan’s GDP and is on a par with a recently agreed upon bailout package for Pakistan from the International Monetary Fund.

Economist Jeffrey Sachs described it as a “mugging” of Pakistan. Other experts also have questioned the reasoning behind huge award, which is more than double the size of the largest similar arbitration award, in the case between Dow Chemical and Kuwait Petrochemical Corp.

Documents explaining the award suggest one intention was to penalize Pakistan for having violated its investment treaty with Australia.

Regardless, paying compensation equivalent to 40% of the country’s foreign exchange reserves would be a challenge as the impoverished Islamic nation struggles to revive its economy. The pandemic has infected nearly 300,000 of Pakistan’s 212 million people and killed more than 6,300, while the economy contracted for the first time in decades in the fiscal year that ended in June.

Reko Diq’s proximity to the Saindak copper mine operated by Minmetals Corp. of China has raised speculation that Pakistan might tap help from Beijing in resolving the problem if its latest effort to get the award revoked fails.

Baluchistan’s Gwardar port is an anchor in the China Pakistan Economic Corridor, part of Beijing’s vast Belt and Road infrastructure initiative.

Minmetals’ chairman, Guo Wenqing, met with Khan, the prime minister, in Beijing last year. But both Pakistani officials involved in the Reko Diq project and Minmentals said there is no discussion of a bailout by China.

Mahfooz Ali Khan, who retired as finance secretary in Baluchistan province, told The AP the regional government initially agreed to the project hoping to see the mine developed but cancelled after it found rules had been violated.

“I personally feel that both sides should consider an out of court settlement as both sides have solid legal points to continue a legal battle, but it would be better if they renegotiate and resume work on the project,” he said.

Link to Story
Dear @Arsalan any one can gather photos, reviews on firearms, fighter planes, sports or politics from the web and become an expert on boards like this one. This portion of the board has become as disgusting as another portion of the board dedicated to a country, may be linked to us till 71.

Anyone can go to news papers websites and start copy/pasting every article appearing which has any link to economy much like a bot at work just copy/paste no capability of analyzing, and if you see this section of the board you ll understand; my point that is why people like me stay away from contributing because it is extremely difficult to look at all the junk and trying to filter it. That is where the "Think Tank machine" and the staff should look at, countless new threads copy/paste job with no analysis.

If quality of discussion is required then quality of thread should also be ensured, normally I see the philosophy at work "quantity has a quality of its own"

Anyways, coming to the main topic when we talk about reko diq what I have are the figures available with GoP submitted by various foreign firm and the estimates are 220 billion dollars worth gold and copper (only) which is 41.5 million ounces of Gold and about 24 million tons of copper. I have another set of figures which I got directly from Barrick when I was working in a firm where getting such data was piece of cake. The actual estimates are 4 to 5 times the figures available with GoP, so you get the idea we are talking about 800 billion dollars to a trillion dollars worth of gold and copper (only).

Now there are very serious question marks as to how the agreement was made, nothing in the agreement favored Pakistan or Baluchistan. Whenever there are such agreements (Pakistani more so) and internationally there is always money involved all a govt has to do is follow the people involved in the agreement and follow the money, much like Karkey case.

Now there is other point be it international Courts of settlements, arbitration or any other means the judges there are influenced by these corporates, and so does the bureaucrats/politicians/lawyers/generals of our country (some people call it bribes but I will call it at face value) which at one end (Pakistan's end) present a weak defense and on the other a decision not entirely based upon merits.

We already know about our end today we are in a mess is that our politicians/bureaucrats and generals were influenced in case of Kalbhushan we accepted "jurisdiction" of ICJ and the fudges there are no different than our own.

In Reko Diq case we did not present our case in a strong manner, the judges were influenced we did not investigate, still not investigating like Karkey thats why we lost the case.

There was another thing the panel which gave its verdict against Pakistan, once of the judge on the panel had to resign (thats what I remember) on the basis of misconduct, had people in Pakistan been awake an appeal should have been filed in the same court for annulment of the decision as one of the members had to resign or charges of misconduct were brought against him

This time again the case in being presented on extremely weak grounds COVID-19 B.S.
 
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cloud4000

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The maximum the company should get is $220 million, the amount it spent on the project. The rest is compensatory and punitive, set by the arbitration board.

The article said the contract was cancelled due to irregularities. Regardless, the judgement was unfair
 

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