On July 14, 2019, International Center for Settlement of Investment Disputes (ICSID), which is one of the five organisations of the World Bank, slapped Pakistan with a $5.9 billion award in the Reko Dig mining case in the favour of Tethyan Copper Company (TCC) — a Canadian and Chilean consortium of Barrick Gold and Antofagasta Minerals. This case was related to gold and copper mines in Reko Diq in Balochistan’s Chagai district. Reko Diq sits over the popular copper belt and is known to have the fifth largest deposits of gold and copper in the world.
Progress on the project came to a standstill in November 2011, when the government of Balochistan summarily rejected the application by the TCC’s local operating subsidiary for a mining lease in respect of Reko Dig and later on the contract was terminated by the Supreme Court of Pakistan because Reko Diq agreement was in conflict with the country’s laws.
After the fine slapped on Pakistan by ICSID, the media in Pakistan starting searching for a scapegoat. In the subsequent media campaign discussion revolved around how judicial activism was at fault for trapping Pakistan in such a predicament when it could have used those gold and copper reserves to boost its foreign reserves, but instead Pakistan was forced to pay a hefty amount or enter in a settlement with the TCC on non favourable terms.
Prominent American Economist Jeffery Sachs, in an article published on his website, laid the blame on “World Bank’s flawed and corrupt investment arbitration process” because of which “Multinational companies are feasting on unapproved, non-existent projects at the expense of poor countries”.
He pointed out that most of the terms of agreement (i.e royalties, corporate taxes, environmental standards, land area, and other basic provisions) on the basis of which the arbitrator calculated the award was not even signed between the state and the mining company. Jeffery Sachs joined many other economists, who criticized the way the arbitration body calculated the awards in investment disputes.
He also pointed out the alleged conflict of interest in the TCC case:
“The ICSID is not an honest broker. One of the tribunal members in the TCC case is using the same expert put forward by TCC for another case in which the arbitrator is acting as counsel! When challenged about this obvious conflict of interest, the arbitrator refused to step down and the ICSID proceeded as if all were normal.”
He also called for fixing this broken arbitration system so that the rich multinational companies can stop feasting on developing countries through unapproved, non existing projects.
So it is indispensable for the incumbent government (besides fixing the loopholes in the domestic laws) to rally this point of view in the international organizations along with the other developing countries who’ve been a victim of these faux judgments by the arbitrators so this system of arbitration can be made more flawless.
Read more Click here