International tribunal slaps $5 billion penalty on Pakistan

The International tribunal slaps $5 billion penalty on Pakistan in the Reko Diq case, which is one of the biggest in ICSID’s history. The international tribunal, which provides facilities for conciliation and arbitration of international investment disputes, announced its 700-page ruling against Pakistan. The ICSID awarded a $4.08bn penalty and $1.87bn in interest.

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Reko Diq is a dusty town in Chagai district where Pakistan had conducted nuclear tests in 1998. Geological literature reveals that Chagai district is part of a belt called the Tethyan Magmatic Arc, which stretches from Turkey and Iran into Pakistan. The arc is a known reservoir for rare metals, and Pakistan’s share lies underneath the region between Chagai and North Waziristan. Reko Diq, according to the Geological Survey of Pakistan, holds about 5.9 billion tonnes of ore, making it the world’s fifth largest deposit of gold and copper.
Reko Diq mines have been the centre of much controversy since their discovery by BHP, an Anglo-Australian multinational mining, metals and petroleum dual-listed public company. In 1993, then caretaker chief minister of volatile Balochistan province Naseer Mengal had granted exploration rights to BHP for the entire Chagai area under the Chagai Hills Joint Venture Agreement (CHEJVA).
BHP later sold its stakes to Tethyan Copper Company (TCC). In August 2010, TCC completed the feasibility study of the project and submitted it to the provincial government of Balochistan. In November 2011, the Balochistan government rejected TCC’s application for mining lease, while in 2013, former chief justice of Pakistan Iftikhar Chaudhry terminated the Reko Diq deal.
To protect its legal rights, TCC, claiming $11.43 billion in damages, commenced international arbitration proceedings at two forums: one against the Pakistan government with ICSID, asserting breaches of the bilateral investment treaty between Australia and Pakistan, and another against the Balochistan government with the International Chamber of Commerce, asserting breaches of CHEJVA.
TCC said it had invested more than $220 million by the time Pakistan’s government, in 2011, unexpectedly refused to grant it the mining lease needed to continue its operation.
Pakistan had lost its first jurisdictional challenge in 2017, when the international tribunal said that it has the jurisdiction to adjudicate the Reko Diq matter. After that, the tribunal declared that there was no wrongdoing in the agreement — the grounds on which the Pakistan top court had in 2013 terminated the deal. Eventually, the tribunal held that Pakistan was liable to pay damages.
The only remaining issue in the case was the final penalty on Pakistan, which has now been announced.
Expressing his disappointment with the decision, PM Imran Khan has directed that a commission be constituted to “investigate reasons as to how Pakistan ended up in this predicament and who was responsible for making the country suffer such a loss”.
The attorney general (AG) of Pakistan said in a statement that the government would conduct an internal review of ICSID’s “long-standing arbitration” between the state and TCC.
“For now, 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,” the statement read.
Tethyan board chair William Hayes, however, said in a statement that the company was still “willing to strike a deal with Pakistan”, but added that “it would continue protecting its commercial and legal interests until the dispute was over”.
In its statement, the AG’s office welcomed Hayes’s approach to work towards a “mutually beneficial solution that works for both sides”.

Waziristan. Reko Diq, according to the Geological Survey of Pakistan, holds about 5.9 billion tonnes of ore, making it the world’s fifth largest deposit of gold and copper.
Reko Diq mines have been the centre of much controversy since their discovery by BHP, an Anglo-Australian multinational mining, metals and petroleum dual-listed public company. In 1993, then caretaker chief minister of volatile Balochistan province Naseer Mengal had granted exploration rights to BHP for the entire Chagai area under the Chagai Hills Joint Venture Agreement (CHEJVA).
BHP later sold its stakes to Tethyan Copper Company (TCC). In August 2010, TCC completed the feasibility study of the project and submitted it to the provincial government of Balochistan. In November 2011, the Balochistan government rejected TCC’s application for mining lease, while in 2013, former chief justice of Pakistan Iftikhar Chaudhry terminated the Reko Diq deal.
To protect its legal rights, TCC, claiming $11.43 billion in damages, commenced international arbitration proceedings at two forums: one against the Pakistan government with ICSID, asserting breaches of the bilateral investment treaty between Australia and Pakistan, and another against the Balochistan government with the International Chamber of Commerce, asserting breaches of CHEJVA.
TCC said it had invested more than $220 million by the time Pakistan’s government, in 2011, unexpectedly refused to grant it the mining lease needed to continue its operation.
Pakistan had lost its first jurisdictional challenge in 2017, when the international tribunal said that it has the jurisdiction to adjudicate the Reko Diq matter. After that, the tribunal declared that there was no wrongdoing in the agreement — the grounds on which the Pakistan top court had in 2013 terminated the deal. Eventually, the tribunal held that Pakistan was liable to pay damages.
The only remaining issue in the case was the final penalty on Pakistan, which has now been announced.
Expressing his disappointment with the decision, PM Imran Khan has directed that a commission be constituted to “investigate reasons as to how Pakistan ended up in this predicament and who was responsible for making the country suffer such a loss”.
The attorney general (AG) of Pakistan said in a statement that the government would conduct an internal review of ICSID’s “long-standing arbitration” between the state and TCC.
“For now, 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,” the statement read.
Tethyan board chair William Hayes, however, said in a statement that the company was still “willing to strike a deal with Pakistan”, but added that “it would continue protecting its commercial and legal interests until the dispute was over”.
In its statement, the AG’s office welcomed Hayes’s approach to work towards a “mutually beneficial solution that works for both sides”.