ISLAMABAD (AP) — An international tribunal has granted a stay pending a final decision on a $5.8 billion penalty imposed on Pakistan for denying a mining lease to an Australian company, the adviser to Pakistan's prime minister said Friday.
Pakistan had appealed the penalty imposed by the World Bank’s International Center for Settlement of Investment Disputes, and has said it would hinder the country's handling of the coronavirus pandemic. The case is testing Prime Minister Imran Khan’s ability to use back channel diplomacy to settle disputes and keep alive efforts to lure more foreign investors to his impoverished country.
The fine, nearly $6 billion including the damages award and interest, is equal to about 2% of Pakistan’s GDP and is on a par with a $6 billion bailout package the country secured from the International Monetary Fund last year. Experts have questioned the reasoning behind the huge award, which is more than double the size of the largest similar arbitration award in a case between Dow Chemical and Kuwait Petrochemical Corp.
Saleem Bajwa, an adviser to Khan, tweeted Friday that the tribunal's decision was a “great relief” for Pakistan. The decision was also hailed as a “success” in a brief statement from the attorney general’s office late Thursday. Both Islamabad and the mining company say they're willing to consider a settlement pending a final decision on the award, which might not come until next year.
The penalty centered around Pakistan's cancelling of the Reko Diq mining lease for Australia's Tethyan Copper Corp., a 50-50 joint venture of Barrick Gold Corp. of Australia and Antofagasto PLC of Chile, to build and operate a copper-gold open-pit mine.
The Reko Diq district in southwestern Pakistan’s Baluchistan province is famed for its mineral wealth, including gold and copper. Khan’s government considers it a strategic national asset, especially as prices for commodities surge, with gold recently at more than $2,000 an ounce. The Baluchistan government has since set up its own company to develop the mine.
Tethyan had invested $220 million in Reko Diq by 2011, when Pakistan terminated its mining lease. The company sought help from the tribunal the following year, and it ruled against Pakistan in 2017.
The tribunal declined to comment in response to a request by The Associated Press on Friday.
Paying compensation equivalent to 40% of the country’s foreign exchange reserves would have been a challenge as Pakistan struggles to revive its economy. The coronavirus pandemic has infected more than 300,000 of Pakistan’s 212 million people and killed more than 6,400, while the economy contracted for the first time in decades in the fiscal year that ended in June.