Reko Diq case: US$5 billion penalty imposed on PakistanDate: 15 July 2019 Tags: International Organizations, International Events
World Bank's International Centre for Settlement of Investment Disputes (ICSID) has imposed US $5.976 billion penalty on cash strapped Pakistan for unlawful denial of mining lease to company for Reko Diq project in 2011. It is one of biggest penalty imposed on Pakistan in its history. In this case, ICSID awarded US $4.08 billion penalty and US $1.87 billion in interests.
Reko Diq mine
Reko Diq, which means sandy peak in Balochi language is a small town in Chagai district in Balochistan, close to border with Iran and Afghanistan. Reko Diq mine is famous for its vast gold and copper reserves and is believed to have the world's fifth largest gold deposit.
What is the issue?
Tethyan Copper Company (TCC) - a joint venture (JV) between Chilean mining company Antofagasta and Canada's Barrick Gold Corporation had completed extensive and detailed bankable feasibility study establishing basis for mine development at Reko Diq during August 2010 and submitted mining lease application in February 2011, along with environmental and social impact assessment report. Its mining project was stopped in November 2011, when Balochistan government summarily rejected application by TCC's local operating subsidiary for a mining lease in respect of Reko Diq. Besides, Pakistan’s Supreme Court also had in January 2013 declared Reko Diq agreement void and in conflict with the country's laws.TCC had filed claims for international arbitration before World Bank's ICSID in 2012 after Balochistan government rejected a leasing request from the company. It had claimed US $11.43 billion in damages. The case between Pakistan government and company continued for seven years.
International Centre for Settlement of Investment Disputes (ICSID)
It is autonomous, multilateral specialized institution to encourage international flow of investment and mitigate non-commercial risks by treaty drafted by International Bank for Reconstruction and Development's (IBRD) executive directors and signed by member countries. It also serves as international arbitration institution for resolving legal dispute resolution and conciliation between international investors. It also performs advisory activities and maintains several publications.
It is part of and funded by World Bank Group. It is headquartered in Washington, DC, in the United States. It was established in 1966 by Convention on Settlement of Investment Disputes between States and Nationals of Other States (also known as ICSID Convention). 153 contracting member states agreed to enforce and uphold arbitral awards in accordance with ICSID Convention