July 14, 2019 / 10:42 AM / 3 months ago

UPDATE 2-Pakistan welcomes venture's willingness for negotiated settlement after Reko Diq mine ruling

(Adds details, background)

By James Mackenzie

ISLAMABAD, July 14 (Reuters) - Pakistan said on Sunday it welcomed a statement by Tethyan Copper expressing willingness for a negotiated settlement after a World Bank tribunal ordered the government to pay $5.8 billion in damages in a dispute over the Reko Diq copper mine.

The statement from the attorney general’s office came after a World Bank arbitration court ruled in favour of Tethyan Copper, a joint venture between Chile’s Antofagasta Plc and Canada’s Barrick Gold, in a dispute over a lease to the mine, located in a remote area of southwestern Pakistan.

The government said it was disappointed by the ruling but had taken note of a statement from Tethyan Copper’s chairman expressing willingness to seek a negotiated settlement.

“The Government of Pakistan welcomes this approach to work towards a mutually beneficial solution that works for both sides,” it said.

However, it said that together with the provincial government of Balochistan, it was still studying the decision by the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The ICSID ruled against Pakistan in 2017, but had not determined damages owed to Tethyan until now.

The ruling comes at a sensitive time for the government of Prime Minister Imran Khan, which is facing increasing economic headwinds and which earlier this month signed a $6 billion bailout agreement with the International Monetary Fund to stave off a looming balance of payments crisis.

Pakistan has partnered with China in the $60 billion China Pakistan Economic Corridor infrastructure project, part of China’s vast Belt and Road initiative but it remains in desperate need of foreign investment.

Tethyan Copper discovered vast mineral wealth more than a decade ago in Reko Diq, at the foot of an extinct volcano near Pakistan’s frontier with Iran and Afghanistan.

The deposit was set to rank among the world’s biggest untapped copper and gold mines, but the dispute has turned the spotlight on the business climate in Pakistan and become a test case of its ability to attract significant foreign investment.

The company said it had invested more than $220 million by the time Pakistan’s government, in 2011, unexpectedly refused to grant a mining lease needed to keep operating.

The attorney general’s office said Pakistan reserved the right to pursue any legal remedies but sought to assure foreign investors that their rights would be protected.

“Pakistan is a responsible state and the Government of Pakistan takes its international legal obligations most seriously,” the statement said.

“Pakistan welcomes all foreign investors and assures them that their lawful rights, interests and assets shall always be protected by Pakistan,” it said.

Among the reasons for the original decision to deny the licence were difficulties with security in a poor region with a sometimes violent separatist movement and the strength of public opinion against it in the perceived absence of economic benefits to the people of Balochistan.

The attorney general’s office said the mineral resources in Reko Diq were the “collective resource of the people of Balochistan and Pakistan” and it was keen to develop them to ensure development needs of some of the world’s poorest people.

“International Tribunals are also urged to consider the implications of their decisions and the impact on development and poverty alleviation,” it said. (Reporting by James Mackenzie; Editing by Mark Potter)

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