Reko Diq settlement hangs by thread
The government, on Saturday, urged all stakeholders to complete pending actions hampering the conclusion of the $900 million settlement deal in the Reko Diq case by December 15th, as it eyes the Supreme Court (SC) for an early decision.
The December 15th deadline is sacrosanct to avoid a $5.9 billion penalty in return for a settlement deal with Antofagasta and the Barrick Gold in the infamous Reko Diq mining case.
“The finance minister highlighted the importance of the early completion of the remaining steps under the agreed arrangement. He also stressed upon all concerned to ensure that the deadline of December 15 is successfully met and the project is revived the earliest after the settlement,” according to a press statement issued by the Ministry of Finance.
The press statement was issued a day after a meeting of the Apex Committee on the Reko Diq Project to review progress on the implementation of the agreed steps for the completion of the Reko Diq arrangement. Finance Minister Ishaq Dar chaired the meeting, also attended by the Director General of Military Intelligence Major General Iftikhar Hussain Chaudhry and Additional Attorney General Ahmed Irfan.
A meeting participant told The Express Tribune that time was running out and the government has to have a decision from the SC early next week to get clarity on whether it can implement the next steps of the deal or not.
On the advice of the prime minister, the president of Pakistan filed a reference in the SC under Article 186 of the Constitution, requesting the apex court to evaluate two key questions.
The president has requested the apex court to decide “whether the earlier judgment of the SC reported as Maulvi Abdul Haque Baloch v. Federation of Pakistan, laws or public policy prevent the government of Pakistan and the government of Balochistan from entering into the Reko Diq Agreements or affect their validity.” The second question posed by president is that “if enacted, would the proposed Foreign Investment (Protection and Promotion) Bill 2022 be valid and constitutional or not.”
A five-member bench, headed by Chief Justice Umar Ata Bandial comprising Justice Ijazul Ahsan, Justice Muneeb Akhtar, Justice Yahya Afridi and Justice Mazahar Ali Akbar Naqvi, is hearing the presidential reference.
In July 2019, the International Centre for Settlement of Investment Disputes (ICSID) Tribunal ruled in favour of the Australian company Tethyan Copper Company (TCC), ordering Pakistan to pay a hefty fine of $5.9 billion.
“The meeting was informed that after the advice of the SC on a reference already filed is received, necessary legislative steps will be taken for which the relevant provinces concerned are fully on board,” said the finance ministry. The provincial governments have also assured completion of all the codal formalities within the due date.
Depending on the SC judgment, the government will get the Investment Protection Bill passed by parliament. The State Bank of Pakistan (SBP) will issue a no-objection certificate (NoC) to set up an offshore holding company. The Securities and Exchange Commission of Pakistan (SECP) on Friday incorporated the Special Purpose Vehicle to give effect to the settlement deal with Barrick Gold.
The sources said that the Mining Act will also have to be amended which does not allow the execution of the Reconstitution Project. The existing mining law only supports competitive bidding-based contracts.
“The revival of the Reko Diq project will provide a fillip to the economy by boosting investment sentiments and will increase employment opportunities in the country,” it added. In July 2019, the ICSID Tribunal ordered Pakistan to pay $4.1 billion in damages and $1.8 billion in pre-award interest, and to reimburse TCC with $62 million in costs incurred.
The tribunal also ordered post-award interest at the rate of US Prime plus 1%, which amounts to $740,000 a day. The current liability has already increased to $22 million.
Subsequently, Pakistan entered into a settlement deal with Barrick Gold and Antofagasta. Under the deal, 50% shareholding will be with Barrick Gold and the remaining with Pakistani entities. The government of Balochistan will hold a 10% free-carried interest and fully participating interest of 15% through the Balochistan Mineral and Mining Company. The remaining 25% shareholding will belong to the federal government. OGDCL, PPL and the Government Holdings Private Limited will hold 25% of the government shares.
According to the presidential reference, these three companies will pay $500 million to acquire 25% shares in the Reko Diq Project while the balance of $900 million due to Antofagasta will be paid by the government of Pakistan.
According to the settlement, following the reconstitution of the Reko Diq project, Antofagasta will be paid $900 million, plus about $22 million accrued interest, and in return it will transfer its shares to Barrick Gold and exit the project. Pakistan has already deposited the requisite $900 million with HSBC to make its payment due to Antofagasta by December 15, 2022, subject to the culmination of the settlement deal.
Published in The Express Tribune, November 27th, 2022.
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