Gold diggers in Balochistan
The caretakers were expected to take care and the governors were supposed to govern. However, in Reko Diq’s case, governance failed and the care was never provided.
In a recent judgement, the Supreme Court of Pakistan has declared illegal the July 1993 agreement between the Balochistan Development Authority (BDA) and Australia’s BHP. Since the original agreement stands null and void, all subsequent sales and transfers of the exploration rights by BHP to Tethyan Copper Co. (TCC), which is jointly owned by Canada’s Barrick Gold Corporation and Chile’s Antofagasta, have been deemed illegal and void.
An interesting debate has ensued in Pakistan since the Supreme Court’s verdict was released earlier in January. Some commentators are critical of the court accusing it of killing another golden goose. They have argued that foreign investors had sunk over $400 million into the project and thus, they were acting in good faith. Others have accused the Balochistan government of mishandling the project, which has further delayed the development of a goldmine in Pakistan.
I believe that the ongoing debate fails to acknowledge the role of key players who were instrumental in a series of dubious deals, which have finally been declared illegal and void by the Supreme Court. I am of the view that the foreign investors were fully aware of the risks when they signed agreements with government departments that were not authorised to bind the government, especially when caretaker governments were in place in Islamabad and Quetta. Concomitantly, the caretaker government and the provincial governor should not have exceeded their authority to sign agreements that are the purview of the elected governments. I further contend that the claims of $400 million investment by TCC during 2006 and 2011 appear grossly exaggerated.
Let me take you back to 29 July 1993 when Reuters News reported the agreement between Balochistan Development Authority and Australia’s Broken Hill Holdings Ltd. to explore for gold and copper in Chagai District. According to Reuters, the “accord covers preliminary investigation and feasibility studies by BHP with support from the provincial government… Baluchistan will have a 25 per cent share in the project, expected to cost some $100 million.”
Here lies the problem. Pakistan in July 1993 was experiencing a political crisis. President Ghulam Ishaq Khan had sacked Mian Nawaz Sharif’s government and Moeen Qureshi was appointed the caretaker prime minister on July 19, 1993. The provincial government in Balochistan was also dissolved and in its place, retired Brig Raheem Durrani was appointed governor and Naseerullah Mengal the acting chief minister.
In the chaos that ensued in Pakistan in July 1993 where the critical institutions of the state, i.e., the army, the legislature, the civil establishment, and the superior courts were at loggerheads, the Australian Company willingly entered into an agreement with the agency of the provincial government, the Balochistan Development Authority, which probably had no authority to act on behalf of the people of Balochistan, especially when the provincial assembly had been dissolved. Such agreements are negotiated and ratified by the elected legislature and not by a minor authority (the BDA) whose credentials and expertise remained dubious at best.
The BDA has a sordid past and a deceitful present. It never had the expertise or the capacity to act as an interlocutor for the government of Balochistan in matters involving investments of millions of dollars. Perhaps it is the only public agency in the world whose chairman had the gall to extend his own tenure by three years in violation of all rules and regulations. In November 2011, Saddat Anwar Qumbrani, Chairman of BDA, extended his tenure by three years by issuing a notification to the effect. What is even more bizarre is that Mr. Qumbarani continued in the Chairman’s role while the provincial authorities had been aware of the gross misconduct. In fact, he is still listed as the Chairman of BDA on the Balochistan government’s website.
The Supreme Court’s verdict exposes other missteps in Reko Diq’s case where foreign investors obtained concessions from the BDA in violation of the laws of the land. In particular, the verdict refers to an addendum to the 1993 joint venture agreement that was crucial in changing the very complexion of the original agreement. Again, a caretaker governor, Justice (retired) Amir-ul-Mulk Mengal, signed off on the addendum on December 24, 1999. The Court noted that earlier Governor Syed Fazl Agha had refused to sign the same addendum because the Balochistan government had constituted a two member commission on October 12, 1999 to review the addendum.
October 12, 1999 is when General Musharraf staged a coup d’état and replaced all civilian governments with his appointees. Again, while the democratically elected governments in Pakistan were deposed by the military establishment, BHP willingly and knowingly made deals with authorities who drew legitimacy not by the rule of law but by ‘martial law’. Now that the superior courts in Pakistan are free to render judgements, such deals, irrespective of their longevity, are coming up for scrutiny.
Some interesting arguments have been made in defence of foreign investors in Reko Diq. Writing in a national daily in Pakistan, a leading lawyer argued that the Supreme Court “should have applied the ‘bona fide purchaser’ rule in the Transfer of Property Act of 1882”, which implies that if “I buy property in good faith from someone who looks like they actually have the title to the land in question, then the law will deem me to be the proper owner even if it turns out that the seller was a complete fraud.” Thus, even if BHP may not have “legally” secured exploration rights, the subsequent purchase of the same by Barrick Gold and Antofagasta should be deemed legal because the two acted in good faith.
First, what happened to caveat emptor (buyer beware). Second, if I were to fraudulently sell Barrick Gold’s head office, which is located a few blocks south of my office in downtown Toronto, to a naïve property investor in Karachi, would that give the Pakistani investor control over Toronto property, given that the Pakistani investor acted in good faith!
More than once, the foreign investors jumped hastily and willingly into the bed with caretaker governments and non-democratic governors. The deals they reached with ad hoc, and at times unconstitutional, regimes have tainted their legitimacy. If it were not for the Supreme Court, such dealings would have remained under the cloak of secrecy.
Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at email@example.com
The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.