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A Legitimate Deal
The Supreme Court of Pakistan

A Legitimate Deal

SC’s seal of approval on the recent Reko Deal agreement to pave way for revival of a stalled project

ISLAMABAD: The Supreme Court of Pakistan has declared that the agreement signed in April this year between the Pakistan government and two international firms – Antofagasta PLC and Barrick Gold Corporation – for exploration of the Reko Diq mine is “legal” and “environment friendly”.

A five-judge bench led by Chief Justice of Pakistan Umar Ata Bandial gave this verdict on December 9 while hearing a presidential reference that asked the apex court if its 2013 judgment on Reko Diq prevented the federal and provincial governments from entering into a new agreement.

In January 2013, an apex court bench, headed by then chief justice Iftikhar Muhammad Chaudhry had declared an amendment between the Balochistan government and the mining firms which operated as a consortium, the Tethyan Copper Company (TCC), for exploration at the Reko Diq as illegal.

“The Chagai Hills Exploration Joint Venture Agreement (Chejva) of July 23, 1993, is held to have been executed contrary to the provisions of the Mineral Development Act 1948, the Mining Concession Rules 1970 framed under it, the Contract Act 1872 and the Transfer of Property Act 1882. Even otherwise it is not valid,” the 2013 verdict said.

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However, in its recent 13-page short order, the top court said: “The process for the reconstitution of the Reko Diq project has been undertaken transparently and with due diligence. The agreements are being signed by authorities duly authorised and competent to do so under the law.”

The order added that expert advice on financial, technical and legal issues was sought from local and independent international consultants to ensure transparency and fairness in the project.

“The agreements under which the terms for consultancy were settled were also constituted after “due deliberation and have not been found by us to be unconstitutional or illegal,” it said.

The SC said the proposed Foreign Investment (Protection and Promotion) Bill, 2022 and any amendments to it would not violate the Constitution, provided that the relevant resolutions are passed by the Sindh and Balochistan assemblies as well as the National Assembly after following due process.

It said the Reko Diq project will also facilitate and encourage direct foreign investment in similar mining projects and other high capital intensive industries in which direct foreign investment is required to be encouraged through guarantees assured by laws and regulatory measures.

“The Reko Diq project is the first to be identified as a ‘qualified investment’ under its terms.”

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To the questions raised by President Dr Arif Alvi, the SC said while it was a settled law that disposal of public assets through a competitive process was the ordinary rule, “it is not an invariable rule”.

It said the Constitution did not forbid the disposal of public assets other than through a competitive process as long as the alternative process had legal support and was rationally justified, pointing out that these conditions were met in the Reko Diq project.

“The provincial assemblies alone had the exclusive legal competence to deal with mines and mineral development. Therefore, they were ‘competent to alter, amend or repeal any existing law’ regarding these areas.”

The court said it had been assured that the agreements contained no exemptions from environmental laws and required Barrick Gold Corporation to act in accordance with both international environmental standards and domestic laws.

“The learned counsel for Barrick [Gold Corporation] has categorically assured us that the applicable minimum wage laws will be fully observed and the agreements expressly provide that all operations will be carried out in accordance with international mining standards.”

The court said it was assured that Barrick Gold Corporation would contribute towards corporate social responsibility by dedicating a portion of its returns towards the provision of fresh drinking water, health facilities, schools and local infrastructure to native residents.

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“In addition, most of the labour force will be employed from amongst the local population of the province. Programmes for the development of skills will also be put in place”.

The mine

Located in Chagai District of Balochistan, Reko Diq is a large copper and gold deposit containing 12.3 million tons of copper and 20.9 million ounces of gold in inferred and indicated resources.

A further 14 mineralized porphyry bodies are known to exist there, with the potential to place Reko Diq as one of the world’s largest undeveloped copper projects.

The first agreement

The original agreement for the Reko Diq mining project was signed in 2006, and it set aside a share of 37.5% to Canada’s Barrick Gold and Chile’s Antofagasta each while the Balochistan government received a 25% stake.

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The two international firms which formed a consortium–the TCC –had found vast gold and copper deposits at the mine. However, the hugely lucrative open-pit mine project came to a standstill in 2011 after the provincial government refused to renew the TCC.

In 2013, the Supreme Court declared the agreement void. In 2019, the World Bank’s arbitration tribunal committee imposed a penalty on Pakistan for unlawful denial of mining. However, in March, the federal and Balochistan governments reached an agreement with Antofagasta PLC and Barrick Gold Corporation on a framework to reconstitute the Reko Diq project that allowed Antofagasta to make an exit.  The reconstituted project, which will excavate gold and copper reserves in Balochistan, saved Pakistan from an $11 billion penalty.

New Reko Diq agreement

Under the new agreement, Barrick Gold Corporation decided to become a 50% partner with the governments of Pakistan and Balochistan and three state-owned entities in the project. The Chilean firm exited the contract in exchange for a payment of $900 million by Pakistani shareholders.

Balochistan government holds a 25% stake in the project under the new pact and the rest of the 25% shareholding is controlled equally (8.33%) by three state-owned enterprises.

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