How impartial is international arbitration in investment disputes? Reko Diq case study

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How impartial is international arbitration in investment disputes? Reko Diq case study
How impartial is international arbitration in investment disputes? Reko Diq case study

Pakistan lost its multi-billion dollar dispute against Tethyan Copper Corporation Pty Limited (TCC), an Australian company, in 2019 at the International Centre for the Settlement of Investment Disputes (ICSID). Based on the 1998 Pakistan-Australia Bilateral Investment Treaty, TCC filed a lawsuit against Pakistan in ICSID (BIT).

Numerous nations have been victimized by bilateral investment treaties (BIT). International arbitration institutions are utilized by multinational corporations to obtain out-of-the-way benefits and to challenge the basic foundations of the sovereignty of institutionally weak governments.

Out of 53 BITs, Pakistan has approved 23 of them. Pleased-ing TCCP would set a new standard for other foreign investors in Pakistan.

Emmanuel Gaillard, a professor of law and an authority on international arbitration, accurately observed that “over the past decades, parties to arbitrations and their lawyers have developed an unprecedented array of procedural tactics designed to undermine and prejudice their opponents and to increase the likelihood that their claims prevail.” Prudent nations are well aware of this truth, and many nations withdrew from these institutions after going through a turbulent experience.

There hasn’t always been good chemistry between developing nations and the International Centre for Settlement of Investment Disputes (ICSID). Several developing nations have withdrawn from the ICSID Convention, including Bolivia, Venezuela, and Ecuador.

India is one of the well-known developing nations that have resisted adopting the ICSID Convention from the beginning. Additionally, India has shown a general lack of confidence in the ISDS and, as a result, has unilaterally canceled 58 of its existing Bilateral Investment Treaties (BITs) and successfully negotiated six BITs after the adoption of its Model BIT. 

The Indian Council for Arbitration advised the Indian Ministry of Finance in 2000 against India joining the ICSID Convention because (1) the convention’s arbitration rules favored developed nations and (2) there was no way for an Indian court to review the award even if it went against India’s public policy.

When Hugo Chavez pledged to renegotiate all flawed investment agreements with transnational corporations and declared significant reforms, the Bolivarian Republic of Venezuela was also quickly caught in the venom of international arbitration. More than 20 international corporations petitioned the ICSID under the Chavez administration with claims for contract breaches and investment losses.

Given the Reko Diq ruling by the ICSID, which hit Pakistan hard with a $5.976 billion fine, it is important for Pakistan to respond to the Reko Diq case sensibly. So far, it appears that the uneasy and unprepared Pakistani team handling the Reko Diq case has capitulated to the ICSID ruling and succumbed to the TCCP tactic.

Despite losing its original two claims against the government of Balochistan, TCC steadfastly pursued its legally weak claims in the ICSID for the past ten years. TCC also filed a claim against the government of Pakistan based on BIT.

After receiving preliminary assistance from the ICSID in 2012, the government of Balochistan hurriedly began construction on the copper-gold project without conducting a comprehensive feasibility study, wasting billions of the country’s tax dollars on the procurement of machinery and equipment.

The Reko Diq issue was handled with the utmost casualness from 2014 until the ICSID handed down a severe sentence and fine in 2019. Millions are wasted on extravagant tours of the capitals of the world rather than focusing on the legal and technical aspects of the case.

In its ruling in 2013, the Supreme Court noted that TCC had attempted to profit from the period’s political unrest unfairly. Through the CHEJVA, Addendum No1, and other agreements, the foreign businesses took advantage of the enormous knowledge gaps in large-scale mineral extraction on the side of the Balochistan government and were in a unique position to influence and dominate. Once more, identical ruses are employed to deprive Balochistan of ownership rights and entitlements to benefits from one of the greatest copper-gold reserves on earth.

In its 2013 ruling, the Supreme Court reprimanded the Balochistan government for its “inefficiency” and “haste” in abandoning a multibillion-dollar project without first exploring the best deals that could be had in the interest of the general population.

Despite the fact that dishonesty on the part of the TCC and its affiliated partners, a less useful partnership agreement with the TCC is being discussed. Balochistan is blamed despite having obvious constitutional rights to its mineral wealth.

In 1998, when it signed and facilitated the TCC, the Balochistan government undoubtedly had a limited understanding of the nature of the large-scale gold and copper mining in Reko Diq, the international business standards for such mining, and the terms of the agreement between national governments and foreign corporations. But now that things have changed and people are more knowledgeable about their rights and available resources, any manipulation would only fuel conflict in the province.

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