The British Virgin Islands high court has ruled in favor of Pakistan in the Reko Diq case and ordered to restore all the frozen assets of Pakistan International Airlines (PIA). Prime Minister Imran Khan and others appreciated and praised the efforts of the International Disputes Unit (IDU) and the office of the Attorney General Office that helped in securing a great victory for Pakistan.
What is the Reko Diq case?
The Reko Diq issue was a legal case between the Tethyan Copper Company (TCC) and the Government of Pakistan over breach of the Australia–Pakistan Bilateral Investment Treaty (BIT) and illegal denial of mining rights to TCC at one of the largest copper and gold mines in the world located in the southwest part of Pakistan in Balochistan province.
Background of the case
Australian mining company BHP Billiton and the government of Pakistan have signed a concurrence known as the “Chagai Hills Exploration Joint Venture Agreement (CHEJVA)” for the searching and mining of gold and copper at the Reko Diq Mine in 1993.
According to the agreement, the Australian mining company would hold 75 percent interest in the plan while Pakistan held the remaining 25 percent share on a mutual investment basis with a two percent royalty payment. Later In April 2000, BHP handed over its obligations to a little-known Australian company Mincor Resources, which was acquired by the Tethyan Copper Company (TCC) in 2006.
Later, the validity of the concord was challenged in the Balochistan High Court on the grounds that the Chagai Hills Exploration Joint Venture Agreement (CHEJVA) was executed divergent to the provisions of Pakistani law, the two sides had failed to accurately register CHEJVA, and the government of Balochistan had rudely relaxed local legislation to perform CHEJVA. Although, the challenges were thumped down by the Court, and ruled that CHEJVA was valid and legal.
The Tethyan Copper Company (TCC) submitted a Mining Lease Application with the Balochistan government in February 2011; however, it was discarded in November 2011 by the Balochistan government.
TCC seeks legal recourse
The Tethyan Copper Company (TCC) took the issue to the World Bank Group’s International Centre for Conclusion disputes to seek compensation of $11.43 billion in damages after Pakistani authorities rejected the leasing demand from the company In November 2011.
In its excuse, the company said that it had already spent over Rs35 billion by the time the Balochistan government suddenly refused to grant them the mining lease needed to continue work and claimed $11.43 billion in damages for the unexpected and sudden extinction of the contract.
Later in 2013, the Supreme Court of Pakistan announced the CHEJVA accord as void, as Balochistan had exceeded its powers by signing it, and unacceptable, because it was opposing the public policy. The court said that TCC had no lawful rights to discover and mine in Reko Diq.
The ICSID in July 2017 decided that TCC had a legal expectation of receiving the mining lease because of Pakistan’s pledges in the CHEJVA, its authoritarian framework and direct declarations from its government officials and that there was no wrongdoing in CHEJVA – the ground on which Pakistan’s top court had lapsed the concord and that Pakistan was apt to pay damages. The ICSID awarded $5.976bn (Rs950 billion) in damages to TCC.
On July 12, 2019, The ICSID found that Pakistan had illegally denied the TCC a lease to gold and Mine copper deposits at the Reko Diq mine, breached Fair and equitable treatment standard (FET) and that the state had committed an illegal expropriation under the Australia-Pakistan bilateral investment agreement.
In November 2020, in order to enforce the $6bn award, TCC moved the High Court of Justice in the British Virgin Islands and sought attachment of Pakistani assets belonging to the Pakistan International Airlines Investment Ltd (PIAIL) — a company that is also integrated in the British Virgin Islands.
On a petition from Pakistan, the ICSID stayed the enforcement of the $6 billion granted on the condition that Pakistan gives an “unconditional and irreversible” bank guarantee or a letter of credit (LC) from a highly regarded international bank based outside of Pakistan, for 25 percent of the award, plus ensure interest as of the date of the decision. Pakistan was given 30 days to furnish the said security.
Although Pakistan missed the time limit and was powerless to offer the bank guarantee or LC for 25 percent of the amount, consequently, in December 2020, the British Virgin Islands high court passed an order to attach some of PIAIL’s assets.
These included the company’s interests in two hotels, Scribe Hotel in Central Paris and the Roosevelt Hotel in Manhattan, New York, and 40% interest of PIA in a third entity, Minhal Incorporated.
Later, it was reported that Pakistan was actively negotiating with TCC and was hopeful of reaching an out-of-court settlement of the dispute as of December 2020.
In January 2021, in wake of ICSID’s and British Virgin Islands high court’s orders to attach PIA assets, and the London High Court’s adverse orders in the Broadsheet case, Pakistan’s Ministry of Foreign Affairs advised government entities to keep their foreign accounts and assets at a minimum to protect the country’s foreign assets.
In April 2021, the Secretary Aviation Division reported to a Committee headed by Deputy Chairman Planning Commission that the Roosevelt Hotel in New York, owned by Pakistan International Airlines (PIA) has been indirectly attached by a court in the Reko-Diq case.
Pakistan wins Reko Diq case
The British Virgin Islands high court has ruled in favor of Pakistan in the Reko Diq case and ordered to restore all the frozen assets of Pakistan International Airlines (PIA).
During a hearing on Tuesday, the British Virgin Islands High Court had rejected the Tethyan Copper Company’s petition and ordered it to pay Pakistan’s legal costs in the case. Receivers at Roosevelt Hotel New York and Scribe Hotel Paris have been removed following the court ruling.
A statement issued by the Attorney General said that all the decisions against PIA in the Reko Diq case have been reversed, adding that this decision is our great victory.
The Attorney General said that the verdict in favor of Tethyan Copper Company (TTC) in the Reko Diq case has been quashed. Rose Welt Hotel and Scribe Hotel Paris have also been returned to Pakistan.
Big victory of Pakistan’s stance
At the same time, the country was facing various other disputes at the international level including that of Karkey and the Broadcast sheet. Legal teams were formed to forcefully and effectively present Pakistan’s position in those cases and these timely measures have now started showing results.
In fact, the British Virgin Island Court’s decision in Reko Diq cases a big victory of Pakistan’s stance. This will also give a massive respite to the country on the economic front as the international court has accepted Pakistan’s sovereign immunity stance in the case.
Following the historic lawful victory, Pakistan International Airlines has again obtained possession of its hotels located in France and the US and other properties.
