Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan

At a glance

Parties

Tethyan Copper Company Pty Limited (Australia; owned equally, through Atacama Copper Pty Limited, by Antofagasta plc and Barrick Gold Corporation) v. Islamic Republic of Pakistan

Case no.

ICSID Case No. ARB/12/1

Forum and rules

ICSID Convention arbitration; ICSID Arbitration Rules 2006

Treaty

Australia–Pakistan BIT (signed 7 February 1998, in force 14 October 1998)

Tribunal

Prof. Dr. Klaus Sachs (President), Lord Leonard Hoffmann, Dr. Stanimir A. Alexandrov (replaced John Beechey, who resigned in September 2012)

Sector

Copper and gold mining (Reko Diq, Balochistan)

Outcome

Liability found for breaches of Articles 3(2), 3(3) and 7(1) (10 November 2017). Pakistan's corruption-based application to dismiss was rejected, and damages were awarded (12 July 2019). A US district court refused to stay or dismiss the enforcement petition (10 March 2022).

Amount

Awarded: USD 4,087 million in compensation, plus interest at the US Prime Rate + 1%, compounded annually, from 15 November 2011. Pakistan also bears the costs of the arbitration (USD 3,763,194.02; reimbursement of USD 2,533,277.08) and pays USD 59,447,596.60 of the claimant's costs. The US court put the total at about USD 6 billion.

The dispute

Tethyan Copper Company Pty Limited (TCCA) became a party to the 1993 Chagai Hills Exploration Joint Venture Agreement (CHEJVA) with the Government of Balochistan in April 2006. It held a 75% interest in the joint venture and in Exploration License EL-5 over the Reko Diq copper-gold area. It spent about USD 240 million on exploration and submitted a Feasibility Study on 26 August 2010. On 15 February 2011 its Pakistani subsidiary, TCCP, applied for a mining lease. The Balochistan Licensing Authority rejected the application on 15 November 2011, and the administrative appeal was denied on 3 March 2012. TCCA claimed that Pakistan had denied the lease so that Balochistan could take over the project itself. It argued that this breached fair and equitable treatment (Article 3(2)), the bar on impairment (Article 3(3)) and the expropriation provision (Article 7(1)) of the BIT. Pakistan objected to jurisdiction and admissibility, denied that Balochistan's conduct was attributable to it, and argued that the lease was lawfully refused under the 2002 Balochistan Mineral Rules. It also brought counterclaims. In 2015 it applied to dismiss the claims on the ground of corruption.

Key holdings

1. Jurisdiction upheld and the claims are admissible. By denying TCCP's Mining Lease Application so that the Government of Balochistan could carry out its own project, Pakistan breached fair and equitable treatment (Article 3(2)). The denial was also a measure equivalent to expropriation that did not meet the conditions for a lawful expropriation (Article 7(1)), and it impaired the use of the investment (Article 3(3)). The stated grounds for the denial were a pretext. Decision on Jurisdiction and Liability ¶¶ 1373, 1449
2. The words "subject to its laws" in Article 3(3) qualify only the protection-and-security obligation, not the non-impairment obligation. In any event the denial was arbitrary, unreasonable and discriminatory. Decision on Jurisdiction and Liability ¶¶ 1360–1372
3. The counterclaims failed. Pakistan has no standing to bring counterclaims under the CHEJVA or the 2002 BM Rules, because those claims belong to Balochistan, which was pursuing them in the parallel ICC case. The counterclaim under Article 1(1)(a) of the BIT is within jurisdiction but is dismissed: a treaty definition cannot create liability for the investor, and the investment was admitted lawfully in 2006. Decision on Jurisdiction and Liability ¶¶ 1423, 1446
4. Pakistan's Application to Dismiss the Claims was rejected in full. Pakistan proved none of its corruption allegations attributable to TCCA. The Tribunal recorded concern about the timing and context in which the witness evidence was produced through the NAB inquiry. Decision on Application to Dismiss ¶¶ 1490–1493, 1499
5. Damages were assessed using the claimant expert's modern DCF valuation, with adjustments for security risk, for the risk that the mining lease would not be renewed, and for systematic risk. Pakistan must pay USD 4,087 million. Award ¶¶ 1844, 1858
6. Interest is governed by international law, not Pakistani law. It runs at the US Prime Rate plus 1 percentage point, as a proxy for the borrowing costs of Antofagasta and Barrick, compounded annually from 15 November 2011 until payment. Award ¶¶ 1799–1809
7. Pakistan bears all the costs of the arbitration (USD 3,763,194.02) and USD 59,447,596.60 of the claimant's legal and other costs. The Tribunal relied on the claimant's success and on Pakistan's largely meritless defences, which caused delay and cost. Award ¶¶ 1847–1855
8. US District Court for the District of Columbia: a stay pending the ICSID annulment and revision proceedings was denied. The FSIA arbitration exception applies, and the court must defer to the Tribunal's ruling that it had jurisdiction. The award receives full faith and credit; the due process objection failed because the damages are compensatory. Memorandum Opinion, pp. 11, 17–20

Procedural history

1. 28 November 2011Request for Arbitration filed. ICSID registers it on 12 January 2012.
2. 12 July 2012Tribunal constituted. After Pakistan's challenge, John Beechey resigns on 6 September 2012, and the Tribunal is reconstituted with Stanimir Alexandrov on 10 September 2012.
3. 13 December 2012Decision on Provisional Measures: the Tribunal recommends no measures, but orders Pakistan to give notice and regular information about its plans for deposit H4.
4. 6–17 October 2014Hearing on jurisdiction and liability in Paris.
5. 2 September 2015Pakistan files its Application to Dismiss the Claims on corruption grounds. The application is dismissed on 20 March 2017, with reasons to follow.
6. 10 November 2017Decision on Jurisdiction and Liability, and reasoned Decision on Respondent's Application to Dismiss the Claims.
7. 2017–2018The challenge to Alexandrov is rejected (5 September 2017). The proposal to disqualify the whole Tribunal is declined by the Chairman of the Administrative Council (5 February 2018). The request for reconsideration is rejected (28 February 2018).
8. 12 July 2019Award: USD 4,087 million plus interest and costs. The quantum hearing had been held in London on 14–24 May 2018.
9. 9 August 2019TCC petitions the US District Court for the District of Columbia to enforce the award. Pakistan applies for annulment (November 2019) and revision, and ICSID partly lifts the stay of enforcement in October 2020.
10. 10 March 2022US District Court denies Pakistan's motion to stay or dismiss the enforcement petition.
11. 9 December 2022Supreme Court of Pakistan advisory opinion: the negotiated settlement agreements and the reconstitution of the Reko Diq project are lawful.

Tribunal, counsel and experts

Decided by

• Klaus Sachs President — appointed by the parties jointly
• Leonard Hoffmann Co-arbitrator — appointed by the respondent
• Stanimir A. Alexandrov Co-arbitrator — appointed by the claimant (replaced John Beechey on 10 September 2012; challenge rejected 5 September 2017)
• John Beechey Co-arbitrator — appointed by the claimant (resigned 6 September 2012 after disqualification proposal)
• Trevor N. McFadden Judge, US District Court for the District of Columbia — appointed by a court
• Umar Ata Bandial Judge, Supreme Court of Pakistan — appointed by a court
• Ijaz ul Ahsan Judge, Supreme Court of Pakistan — appointed by a court
• Munib Akhtar Judge, Supreme Court of Pakistan — appointed by a court
• Yahya Afridi Judge, Supreme Court of Pakistan — appointed by a court
• Jamal Khan Mandokhail Judge, Supreme Court of Pakistan — appointed by a court

For the claimant

Debevoise & Plimpton LLP · HaidermotaBNR / Bhandari Naqvi Riaz (BNR) · Gibson, Dunn & Crutcher LLP · Makhdoom Ali Khan

For the respondent

ABS & Co. · 12 Gray's Inn Square · Matrix Chambers · Office of the Attorney General for Pakistan · GST LLP · Axis Law Chambers · URJ & Co · Allen & Overy LLP

Experts

Graham A. Davis (claimant) · Fiona Cessford-Le Roux (claimant) · Neil Cusworth (claimant) · Leonard Drury (claimant) · Michael Jones (claimant) · Anton Mayer (claimant) · Rex E. Pingle (claimant) · Tony Ridley (claimant) · Mario E. Rossi (claimant) · Robert Radley (claimant) · Vladimir Brailovsky (respondent) · Louis T. Wells (respondent) · James C. Burrows (respondent) · Kadri Dagdelen (respondent) · Terry Owen (respondent) · Barbara Filas (respondent) · Ikramul Haq (respondent) · David Henry (respondent) · Leonidas Howden (respondent) · Rasul Bakhsh Rais (respondent) · Sergey Ripinsky (respondent) · Julian Davies (respondent) · Zaki Rahman (respondent) · Paul A. Holmes (respondent) · Marcella Nanni (respondent) · Stephen M. Schwebel (respondent)

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Keywords

• Reko Diq
• Balochistan
• Australia–Pakistan BIT
• mining lease denial
• copper and gold mining
• fair and equitable treatment
• indirect expropriation
• non-impairment clause
• legitimate expectations
• corruption allegations
• counterclaims
• attribution
• DCF valuation
• compound interest
• Barrick
• Antofagasta
• annulment
• enforcement FSIA

Summary generated with AI from the published documents — refer to the award for the authoritative text.