Pakistan moves US court to halt enforcement of Reko Diq verdict

This undated file photo shows the construction site of Tethyan Copper Company, a joint venture between Barrick Gold of Canada and Antofagasta Minerals of Chile, in Reko Diq, Pakistan. (Photo courtesy: astralconstructors.com)

• Says implementation of $6 billion penalty will have devastating consequences for its economy
• The amount of the arbitral award comes to two percent of the country’s GDP and 40 percent of its foreign reserves

KARACHI: Pakistan has approached a federal court in the United States to get a stay order against an Australian copper company that is seeking the enforcement of $6 billion arbitral award against the country in the Reko Diq case, a New York-based publication, Law360, reports.
In a brief submitted in the court on Friday, Pakistan argued that Tethyan Copper Company, a joint venture between Barrick Gold of Canada and Antofagasta Minerals of Chile, should not be allowed to proceed with the litigation since the country was trying to reverse the penalty imposed on it by highlighting “numerous” substantive and procedural errors in the judgment against it.
The South Asian nation, which is facing major economic challenges, argued in the US District Court of Columbia that the enforcement would have “devastating” consequences for its political and economic stability.
The International Center for Settlement of Investment Disputes (ICSID) in July last year announced a huge award of $5.8 billion against Pakistan in the Reko Diq case, filed in 2012 by the company in the World Bank arbitration court.
The award, the second largest ever to be issued by the ICSID, equals two percent of Pakistan’s annual gross domestic product and 40 percent of its total liquid foreign reserves, according to the brief.
“Pakistan said that its economy is currently facing ‘significant challenges and weaknesses’ and that enforcing the award would effectively negate a $6 billion loan it received from the International Monetary Fund last year to stabilize its government and economy,” the publication reported.
The country noted in its brief that the ICSID secretary general provisionally stayed the enforcement of the award after registering the annulment bid in November, adding that the benefits of pausing the litigation were “overwhelming.”
Pakistan claims that the tribunal disregarded international law that limits the amount of damages available for lost profits and that its panel relied on a novel method to calculate damages “without authorization or explanation” that resulted in a number that ran into billions of dollars, said the report.
In its annulment bid, Pakistan argues that this method — the “modern discounted cash flow approach” — failed to properly account for certain risks and uncertainties in the project. Moreover, the calculated damages were based on a projected 56-year operating period for the mine, though the country had not issued any lease or permit for such a long period.
The country also argued that the proposed project was based on agreements that were invalid under Pakistani law and that Tethyan Copper could therefore not seek any damages.