TCC moves US court for enforcement of $6bn award in Reko Diq case

ICSID’s 622-page final verdict and earlier decisions made public

ISLAMABAD: Tethyan Copper Company (TCC) has approached a court in the United States for enforcement of US$6 billion penalty imposed on Pakistan by the International Centre for Settlement of Investment Disputes (ICSID) in Reko Diq goldmines case.

According to the Global Arbitration Review (GAR), the TCC – a joint venture of Chile’s Antofagasta and Canada’s Barrick Gold – on August 9 filed a petition at a court for district Columbia after it won the award against Pakistan last month.

An ICSID tribunal – chaired by Germany’s Klaus Sachs and including Bulgarian arbitrator Stanimir Alexandrov and the UK’s Lord Hoffmann – on July 12 ordered Pakistan to pay just over US$4 billion in damages to the TCC, plus US$1.7 billion in pre-award interest.

The tribunal found that Pakistan unlawfully denied the TCC a lease to mine copper and gold deposits at the Reko Diq mine, located in Chagai district of Balochistan.  It held the state had committed an unlawful expropriation under the Australia-Pakistan bilateral investment treaty.

The ICSID also declared that the Supreme Court of Pakistan’s 2012 judgment in the rental power projects (RPPs) case was ‘arbitrary’. According to the GAR report, the 622-page final award and earlier decisions in the case are now made public after being filed as exhibits in the US court.

PM orders inquiry into Reko Diq 'fiasco'

The TCC entered into an agreement with Balochistan in 2006 to develop Reko Diq, on the basis of what it said were assurances from the federal and provincial governments, only to be later ousted from the project in 2012 after the Supreme Court of Pakistan declared the agreement void.

Later, the TCC approached the ICSID case which held a combined 32 hearings of the case in London, Hong Kong and Paris in the subsequent seven years. Pakistan made repeated efforts to have the TCC’s claims thrown out on the grounds that the investment was tainted by corruption.

The state alleged that Tethyan and its predecessor BHP had paid numerous bribes in relation to the project. It also offered an expert opinion by US arbitrator and former president of the International Court of Justice Stephen M Schwebel in relation to its arguments on the TCC’s ‘unclean hands’.

Among its allegations, Pakistan said public officials had been provided with all-expenses-paid trips to Canada and Chile with unnecessary stopovers in Rio de Janeiro, New York, London and Nice.  It said the TCC had considered bribing an official with the offer of a house in Islamabad and a BMW car.

The GAR report stated that the TCC denied the corruption allegations, which, it said, were a cynical attempt by the government of Pakistan to rescue its hopeless position in the arbitration.

Reko Diq case handled poorly: Bhootani

In a 2017 decision, the tribunal concluded that Pakistan had not established any of its individual allegations of corruption that would be attributable to the TCC and that could have become relevant as potential contributory fault with regard to quantum.

The GAR report further said the TCC is using Gibson Dunn & Crutcher for the enforcement action, having used Debevoise & Plimpton in the arbitration. Miami and DC-based disputes boutique, the GST will defend Pakistan in the enforcement action. The firm also acted in the later stages of the ICSID case, the state having originally retained Omnia Strategy and Allen & Overy.

In its enforcement application, the TCC says the award shows Pakistan’s denial of the Reko Diq lease was based on “pre-textual grounds with the motive of implementing its own mining project” and taking the value of Tethyan’s investment for itself.

The TCC’s proposed order seeks entry of judgment for US$4.09 billion, plus interest understood to be at least US$1.7 billion and US$62 million in costs. The TCC award is thought to be the second largest in ICSID’s history, beaten only by the US$8.7 billion awarded to US oil company ConocoPhillips in its claim against Venezuela over the expropriation of assets in the Orinoco Belt.

A senior official confirmed that TCC has filed for enforcement.

Pakistan slapped with $6 billion penalty in Reko Diq case

However, he told The Express Tribune that filing for enforcement does not mean anything as it will take several months before Pakistan even receive service of process. "The case will not start till we have been served a notice of process. Generally, it takes about 10 to 12 months," he added.

An official in the law ministry also revealed that Pakistan is also approaching the international tribunal for annulment of the award. According to international law expert Taimur Malik, Reko Diq award amount is unusual and disproportionate considering the actual investment made by the claimants.

However, the legal battle is not over as yet because Pakistan can still seek annulment of the award and, regardless of the outcome, the annulment hearings can take more than a year.

“Moreover, the claimants will find it very difficult to enforce the award as Pakistan has limited assets abroad and enforcement through Pakistani courts will be time consuming. Therefore, a negotiated settlement is still probably the most likely scenario in this case,” he added.