Reko Diq stay order

We learnt this week that Pakistan has been granted a stay on the enforcement of the $6 billion penalty due in the Reko Diq project case. The World Bank’s International Centre for Settlement of Investment Disputes (ICSID), which also awarded the penalty, granted a stay while Pakistan pursues an appeal to try to get the award reduced or rescinded. The attorney general called the stay a success for the country and its legal team. Unfortunately, he may be exaggerating. After all, the award still stands, for now. The only impact of the stay is a deferral of payment. It is the equivalent of celebrating a third-umpire review while the umpire is still looking at replays. Depending on the terms of the stay and the eventual judgment on the appeal, the amount payable may also accrue interest. The principal amount was already crippling. Imagine what will happen if it ends up increasing.

At the end of the day, Pakistan’s case relies on sympathy more than legal strength. The known facts show that corrupt local officials signed a terribly exploitative deal with foreign investors. After much wrangling, the Supreme Court eventually overturned the deal. Unfortunately, this came about 20 years after the original deal had been signed, and about seven years after the successor deal. It is beyond us why it took that long for those in the know to realise how bad the deal was. Even then, the case only made it to the Supreme Court because ex-CJP Iftikhar Chaudhry had taken it upon himself to oppose all things done by Musharraf. In this case, it appears that his haste cost the country billions. The best judges try to ensure that they write bulletproof judgments that can withstand rigorous appeal processes.

That was not the case here, as the ICSID judgment shows. The SC ruling was considered to be a decision of the Pakistani state, and thus a breach of contract. Similar situations arose with the Karkey deal and others. These should serve as a constant reminder that populist judicial activism can deliver fatal blows.

Published in The Express Tribune, September 19^th, 2020.

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