THE Supreme Court has, in a short order, held the original agreement in the Reko Diq case along with all the subsequent agreements stemming from it, aimed at exploring and later mining the copper and gold reserves in the area, null and void.

The order raises several questions, the most important being what effect it will have on the arbitration proceedings initiated by the aggrieved party at the International Centre for Settlement of Investment Disputes (ICSID) and International Chamber of Commerce and which are nearly complete. There are ample indications that the SC order whose weight is on the side of the federal and provincial governments will have no effect on the ICSID verdict which is expected any day. Under the present international investment arbitration regime, an act of judiciary of a particular state, such as this particular order, is seen as an act of that state.

Another issue is the long-term fallout of the SC judgment on foreign investment in Pakistan which is already in decline.

The original agreement, namely, Chaghai Hills Exploration Joint Venture Agreement (CHEJVA) was signed between Balochistan government and Australian mining group Broken Hill Propriety (BHP) on July 23, 1993 when a caretaker government headed by Moeen Qureshi was in office.

The execution of the CHEJVA has been declared contrary to the provisions of the Mineral Development Act, 1948, the Mining Concession Rules 1970 framed under it, the Contract Act 1872 and the Transfer of Property Act 1882 by a three-member bench of the court headed by Chief Justice Iftikhar Muhammad Chaudhry. It also declared illegal an addendum to the exploration agreement of March 2000, an option agreement of April 2000 and a novation agreement of April 2006. The company changed a few hands before Tethyan Copper Company (TCC) — a joint venture between Chile's Antofagasta and Canadian-based Barrick Gold, the two of the largest mining companies of the world — emerged as its present owner.

Reko Diq, which means "Sandy Mountain" in Balochi language, contains huge deposits of copper and gold ore in a belt stretching from Romania through Turkey, Iran, Pakistan and Afghanistan all the way to Papua New Guinea.

It is interesting to note that on February 7, 2012, the Chief Justice had, in an order, asked the federal and Balochistan governments to approach the ICC and ICSID with a request for slowing down their process to enable the Supreme Court of Pakistan to remove illegalities in the agreement. But the counsel for the TCC asked the SC to refrain from passing such orders, as they “have no compulsion on the international front” and that such an order may further increase legal complications at the domestic and international level.

Now that the TCC is no longer in the picture, the question arises who will run the Reko Diq project. It is obvious that the federal and Balochistan governments cannot develop the project on their own for it requires injection of huge money and specialised skill to explore and mine deposits of copper and gold. At the moment, the only specialist they have is Dr Samar Mubarakmand, a nuclear scientist, who has been allocated a deposit area.

He has, in the recent past, been offering his services for various projects other than nuclear-related. These include Thar coal project where his underground gasification project has not been a success so far. He is now more than willing to lend his expertise to the Reko Diq project. But the fact remains that this project cannot go ahead successfully unless the provincial government invites another group of foreign firms known for their skill to do the job. What the Balochistan government needs to ensure is transparency of the agreement it signs this time with the mining companies.

The TCC says it had spent $220 million during the past five years on exploring the deposits in the ochre sand desert, and was planning to invest a total of $3.3 billion when the provincial government abruptly refused to grant it a mining licence. The Company says it never got an explanation for the refusal, nor could understand what ‘their actual issues’ were. According to documents filed with the Supreme Court, TCC projected the mine would produce at least $60 billion worth of ore over its lifespan based on long-term copper and gold prices respectively.

Since higher spot prices would increase that sum significantly, the mine would ultimately be worth almost $120 billion, with Balochistan getting a quarter of that after operating costs. It is this difference in long-term and spot prices that has led to angry allegations in the media and from Baloch nationalists that outsiders were exploiting their natural wealth.

In June last year, British High Commissioner to Pakistan Adam Thomson said that the verdict in international arbitration on the Reko Diq saga may have ‘chilling affects’ on foreign investors. Supreme Court of Pakistan's verdict in certain cases whether it relates to Reko Diq or others is a sign of discouragement for foreign investors, he had said.

Chairman, Board of Investment, Salim Mandviwalla had in an interview in June last year taken exception to “the manner in which the Tethyan Copper Company was treated.” The consortium has spent a huge amount of money in exploring a block of land allotted to them in Reko Diq area. “But now that they have finally found copper, the Balochistan government wants to kick them out, preventing them from capitalising on their investment.”

He said, “at every mining investment conference I go to abroad, people ask me about Reko Diq. It affects sentiments among mining companies looking to invest in Pakistan.”

Meanwhile, the superior judiciary in Pakistan is causing anxiety in the business community for taking up sou motu cases or petitions relating to complex economic matters on the pretext of protecting human rights and consumers’ interests or for violating the law. This trend began with the cancellation of Pakistan Steel Mills privatisation by the Supreme Court in 2006.

Recent judicial activism in cases such as LNG import, RPPs, Reko Diq, CNG and sugar prices has created an atmosphere of uncertainty for the investors.