ICSID CASE NO. ARB/12/1 TETHYAN COPPER COMPANY PTY …

ICSID CASE NO. ARB/12/1

TETHYAN COPPER COMPANY PTY LIMITED

Claimant

-v-

THE ISLAMIC REPUBLIC OF PAKISTAN

Respondent

RESPONDENT’S OBJECTIONS TO JURISDICTION AND ADMISSIBILITY,

COUNTER-MEMORIAL ON THE MERITS AND COUNTER-CLAIM

Before:

Dr Klaus M. Sachs, President

Dr Stanimir Alexandrov

Rt Hon. Lord Hoffman

30 September 2013Factual Exhibits and Legal Authorities amended as at 07 October 2013

Case 1:19-cv-02424-TNM Document 36-2 Filed 12/21/20 Page 2 of 255

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Table of Contents

I ....................................................................................................................................................... 6INTRODUCTION......................................................................................................................... 6II. .................................................................................................................................................... 7PRELIMINARY STATEMENT ................................................................................................. 7

II.1 RELEVANT ENTITIES............................................................................................................. 7II.2 KEY CONTRACTUAL INSTRUMENTS ............................................................................... 8II.3 KEY LEGISLATION............................................................................................................... 10II.4 RELEVANT PAKISTANI COURT JUDGEMENTS ........................................................... 10II.5 KEY LICENSES AND INSTRUMENTS ............................................................................... 11II.6 KEY TREATY PROVISIONS ................................................................................................ 12II.7 SUMMARY ............................................................................................................................... 13

III.................................................................................................................................................. 22STATEMENT OF FACTS......................................................................................................... 22

III.1 THE REKO-DIQ AREA ...................................................................................................... 22III.2 THE CLAIMANT MADE ITS ALLEGED INVESTMENT IN A UNIQUE POLITICAL,GOVERNMENTAL, LEGAL AND SOCIAL CONTEXT............................................................... 23III.3 THE CHEJVA AGREEMENTS ARE ILLEGAL, VOID AND NON EST......................... 30A) THE CIRCUMSTANCES IN WHICH THE CHEJVA WAS CONCLUDED ................... 30B) THE CIRCUMSTANCES IN WHICH THE RELAXATIONS OF THE 1970 BM RULESWERE OBTAINED BY BHP .............................................................................................................. 40C) THE CIRCUMSTANCES IN WHICH THE 2000 ADDENDUM WAS SIGNED ............ 45D) THE CIRCUMSTANCES IN WHICH THE 2006 NOVATION AGREEMENT WASSIGNED ................................................................................................................................................. 48E) THE SUPREME COURT OF PAKISTAN PROPERLY HELD THAT THE CHEJVAAGREEMENTS WERE ILLEGAL, VOID AND NON EST ........................................................... 49i) THE SUPREME COURT PROCEEDINGS.............................................................................. 50ii) THE FINDINGS OF THE SUPREME COURT........................................................................ 52iii) THE SUPREME COURT’S RULING IS UNDOUBTEDLY CORRECT ANDESTABLISHES PAKISTANI LAW AS A MATTER OF FACT .................................................... 59III.4 THE CLAIMANT NEVER HAD A RIGHT TO MINE THE REKO DIQ AREA ............ 61A) THE CHEJVA DOES NOT CONFER A RIGHT TO ANY MINERAL TITLE ............... 61B) NO SUBSEQUENT AGREEMENT CONFERRED A RIGHT TO A MINERAL TITLE75III.5 THE CLAIMANT TRANSFERRED ITS (LIMITED) RIGHTS UNDER THE CHEJVATO TCCP IN 2008 ................................................................................................................................ 80III.6 THE 2002 BM RULES GOVERNED THE GRANTING OF MINERAL TITLES ANDGAVE THE LICENSING AUTHORITY A BROAD DISCRETION AS TO WHETHER TOGRANT OR REFUSE SUCH MINERAL TITLES........................................................................... 83III.7 TCCP’S MINING LEASE APPLICATION WAS FATALLY FLAWED ANDDEFICIENT UNDER THE 2002 BM RULES................................................................................... 89A) BHP’S FAILURE TO CONDUCT MEANINGFUL EXPLORATION ACTIVITIESAFTER SIGNING THE CHEJVA...................................................................................................... 89B) THE CLAIMANT, UPON JOINING THE PROJECT, SOUGHT DRAMATICALLY TOINCREASE ITS SCOPE ...................................................................................................................... 91


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C) THE CLAIMANT SOUGHT, BUT FAILED, TO NEGOTIATE A MINERALAGREEMENT ...................................................................................................................................... 94D) TCCP’S FLAWED APPLICATION FOR A MINING LEASE........................................... 99III.8 THE LICENSING AUTHORITY, WHICH IS NOT A PARTY TO THE CHEJVA ANDEXERCISES ITS REGULATORY POWERS INDEPENDENTLY OF THE CHEJVA,PROPERLY REJECTED THE CLAIMANT’S APPLICATION FOR A MINING LEASE ..... 108A) THE LICENSING AUTHORITY IS NOT A PARTY TO THE CHEJVA ANDEXERCISES ITS REGULATORY POWERS INDEPENDENTLY OF THE CHEJVA (AND ITSSIGNATORIES) ................................................................................................................................. 108B) THE LICENSING AUTHORITY GAVE A REASONED DECISION PROPERLYREJECTING TCCP’S APPLICATION FOR A MINING LEASE ............................................... 111C) TCCP AVAILED ITSELF OF SEVERAL STAGES OF REVIEW OF THE LICENSINGAUTHORITY’S DECISION............................................................................................................. .121III.9 NEITHER THE RESPONDENT NOR BALOCHISTAN “OUSTED” THE CLAIMANTFROM THE REKO-DIQ PROJECT................................................................................................ 126

IV. ............................................................................................................................................... 132JURISDICTION AND ADMISSIBILITY.............................................................................. 132

IV.1 THE TRIBUNAL DOES NOT HAVE JURISDICTION OVER THE CLAIMANT'SCLAIMS .............................................................................................................................................. 132A) THERE IS NO QUALIFYING INVESTMENT UNDER THE BIT.................................. 134i) THE CLAIMANT’S VAGUE ARTICULATION OF ITS ALLEGED INVESTMENT ..... 134ii) NONE OF THE CLAIMANT’S ALLEGED INVESTMENTS WERE MADE “INACCORDANCE WITH [PAKISTAN’S] LAWS AND INVESTMENT POLICIES” ................. 137iii) EVEN IF LEGAL, THE CLAIMANT’S ALLEGED INVESTMENTS DO NOTCONSTITUTE “INVESTMENTS” FOR THE PURPOSES OF THE BIT .................................. 144B) THE QUESTION OF WHETHER THERE IS A QUALIFYING “INVESTMENT”UNDER THE ICSID CONVENTION DOES NOT EVEN ARISE................................................ 155C) THE CLAIMANT’S CLAIM IS, IN REALITY, BASED ON AN ALLEGED BREACHOF THE CHEJVA, NOT THE BIT .................................................................................................. 156i) THE PRESENT DISPUTE IS A CONTRACTUAL DISPUTE ............................................. 156ii) THE BIT DOES NOT PROVIDE FOR JURISDICTION OVER PURELYCONTRACTUAL CLAIMS .............................................................................................................. 156iii) THE DISPUTES IN THIS CASE ARISE OUT OF AND RELATE TO THE RIGHTSAND OBLIGATIONS UNDER THE CHEJVA AND NOT THE BIT.......................................... 158iv) CLAIMANT’S CLAIMS ARE SUBJECT TO THE EXCLUSIVE JURISDICTIONCLAUSE IN THE CHEJVA REQUIRING SUBMISSION TO THE ICC ARBITRALTRIBUNAL (TO THE EXTENT THAT TRIBUNAL HAS ANY JURISDICTION) .................. 160IV.2. THE CLAIMANT'S CLAIMS ARE INADMISSIBLE................................................... 162A) THE CLAIMANT’S CLAIMS ARE INADMISSIBLE RATIONE MATERIAEBECAUSE ITS RIGHT TO APPLY FOR A MINING LEASE NEVER CRYSTALLISED...... 162B) THE CLAIMANT'S CLAIMS ARE INADMISSIBLE RATIONAE PERSONAE.......... 170i) THE CLAIMANT’S “UNCLEAN HANDS” RENDER ITS CLAIM INADMISSIBLE ..... 170ii) THE CLAIMANT HAS NO STANDING TO ENFORCE ITS PURPORTED RIGHTSUNDER THE BIT............................................................................................................................... 171

V.................................................................................................................................................. 172APPLICABLE LAW ................................................................................................................ 172VI. ............................................................................................................................................... 178


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ATTRIBUTION AND STATE RESPONSIBILITY ............................................................. 178VI.1 INTRODUCTION................................................................................................................... 178VI.2 THE ALLEGED VIOLATIONS OF THE CHEJVA ARE NOT ATTRIBUTABLE TOTHE GOVERNMENT OF PAKISTAN ........................................................................................... 178A) THE BDA IS NOT A STATE ORGAN ................................................................................ 178B) THE ACTS OF THE BDA IN RELATION TO THE CHEJVA ARE NOTATTRIBUTABLE TO PAKISTAN UNDER ARTICLE 5 OF THE ILC ARTICLES................ 180VI.3 THE ALLEGED BREACHES OF THE 2002 BM RULES ARE NOT ATTRIBUTABLETO THE GOVERNMENT OF PAKISTAN..................................................................................... 184

VII............................................................................................................................................... 185LIABILITY ............................................................................................................................... 185

VII.1 SUMMARY OF CLAIMS.................................................................................................. 185VII.2 PAKISTAN DID NOT BREACH ARTICLE 3(2) (“FAIR-AND-EQUITABLE-TREATMENT” OR “FET”) OF THE BIT ...................................................................................... 185

A) PAKISTAN’S SO-CALLED ASSURANCE THAT “TCC” HAD “A RIGHT TORECEIVE A MINING LEASE SUBJECT TO “ROUTINE GOVERNMENTREQUIREMENTS””...................................................................................................................... 186B) THE CLAIMANT’S CLAIM TO AN ASSURANCE IS UNSUPPORTED BYEXPRESS STATEMENTS, CORRESPONDENCE, CONTRACTUAL PROVISIONS, THELAW AND EVEN ITS OWN LETTERS ..................................................................................... 187C) THE CLAIMANT UNDERSTOOD AND UNDERTOOK TO COMPLY WITH THE2002 BM RULES............................................................................................................................. 188D) CLAIMANT’S EXPECTATIONS TO OBTAIN A MINING LEASE OVER REKODIQ WERE NOT LEGITIMATE................................................................................................. 190E) THE NEGOTIATION OF THE DRAFT MINERAL AGREEMENT.............................. 194F) THERE WAS NO PLAN TO OUST THE CLAIMANT ................................................ 206G) THE CHEJVA CONFERS NO ‘RIGHT TO MINE’ ON THE CLAIMANT............... 207H) THE CLAIMANT FAILS TO MEET THE HIGH STANDARD OF ESTABLISHINGA BREACH OF ARTICLE 3(2) OF THE BIT ............................................................................ 208I) A BREACH OF THE FET PROVISION REQUIRES A VIOLATION OF THECUSTOMARY INTERNATIONAL LAW MINIMUM STANDARD OF TREATMENT TOBE DEMONSTRATED .................................................................................................................. 209J) THE CLAIMANT HAS FAILED TO PROVE PARTIALITY, ARBITRARINESS OR ALACK OF DUE PROCESS IN THE LICENSING AUTHORITY’S DECISION-MAKINGPROCESS ........................................................................................................................................ 212

i) THE HOLDER OF THE EXPLORATION LICENCE EL-5 WAS THE JOINT VENTURE,HENCE TCCP WAS NOT ELIGIBLE UNDER BM RULE 48(1) TO OBTAIN A MININGLEASE ................................................................................................................................................. 216ii) THE APPLICANT FOR THE MINING LEASE APPLICATION WAS IN DEFAULT OFTHE TERMS OF THE EL-5 SECOND RENEWAL ...................................................................... 218iii) THE FEASIBILITY STUDY SUBMITTED IN SUPPORT OF THE APPLICATIONFOR 99.453 SQ KM (KNOWN TO HAVE AT LEAST 13 DEPOSITS) ONLY COVERED 4.5 SQKILOMETRES (2 DEPOSITS)......................................................................................................... 219iv) THE APPLICATION FAILED TO PROVIDE VALUE-ADDITION IN THE FORM OFA SMELTER AND REFINERY........................................................................................................ 221VII.3 PAKISTAN DID NOT BREACH ARTICLE 3(3) (“NON-IMPAIRMENT”) OF THEBIT

………………………………………………………………………………………………2222


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VII.4 PAKISTAN DID NOT BREACH ARTICLE 7 (“EXPROPRIATION”) OF THE BIT………………………………………………………………………………………………224

A) THE CLAIMANT NEVER HAD THE “RIGHT TO MINE REKO DIQ” ..................... 225B) THE LICENSING AUTHORITY’S EXERCISE OF REGULATORY POWERS OVERMINERAL RESOURCES DOES NOT AMOUNT TO AN EXPROPRIATION..................... 233C) THE CLAIM THAT THE GOVERNMENT OF PAKISTAN EXPROPRIATEDINFORMATION AND DATA IN RELATION TO THE EXPLORATION OF REKO DIQFAILS AS A MATTER OF LAW AND FACT............................................................................ 235

VIII ............................................................................................................................................. 238COUNTER-CLAIMS ............................................................................................................... 238

VIII.1 SUMMARY OF COUNTER-CLAIMS............................................................................. 238VIII.2 JURISDICTION.................................................................................................................. 239

A) RESPONDENT’S COUNTER-CLAIMS ARISE DIRECTLY OUT OF THESUBJECT-MATTER OF THE DISPUTE ................................................................................... 240B) RESPONDENT’S COUNTER-CLAIMS ARE WITHIN THE SCOPE OF CONSENTOF THE PARTIES ......................................................................................................................... 241C) RESPONDENT’S COUNTER-CLAIMS ARE OTHERWISE WITHIN THEJURISDICTION OF THE CENTRE............................................................................................ 242

VIII.3 BASIS OF COUNTER-CLAIMS ...................................................................................... 244A) THE CLAIMANT’S ALLEGED INVESTMENT WAS ADMITTED IN VIOLATIONOF PAKISTANI LAW AND INVESTMENT POLICIES.......................................................... 244B) THE CLAIMANT BREACHED THE TERMS OF THE CHEJVA.............................. 246C) THE CLAIMANT BREACHED THE 2002 BM RULES ............................................... 248

VIII.4 REQUEST FOR RELIEF ON THE COUNTER-CLAIM.............................................. 251

IX ................................................................................................................................................ 253COSTS, REQUEST FOR RELIEF AND RESERVATION OF RIGHTS .................................... 253


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I.

INTRODUCTION

1) The Respondent Government of the Islamic Republic of Pakistan (“Government of

Pakistan”, the “Government” or the “Respondent”) submits its Objections to

Jurisdiction and Admissibility, Counter-Memorial on the Merits and Counter-Claim

(“Objections, Counter-Memorial and Counter-Claim”) in response to the Memorial

on the Merits filed by Tethyan Copper Company Pty Limited (“TCCA”, or the

“Claimant”) on 1 February 2013 (“Claimant’s Memorial”).

2) The Respondent’s Objections, Counter-Memorial and Counter-Claim is accompanied by

the following documents:

• Respondent’s Exhibits, numbered Ex RE-1 to Ex RE-128

• Respondent’s Legal Authorities, number RLA-1 to RLA-115

• Witness Statement of Mr. Irshad Ali Khokhar dated 29 September 2013(“Khokhar Statement”)

• Witness Statement of Dr. Samar Mubarakmand dated 29 September 2013(“Mubarakmand Statement”)

• Witness Statement of Ex-Advocate General of Balochistan AmanullahKanrani dated 27 September 2013 (“Kanrani Statement”)

• Witness Statement of Mr. Babar Yaqoob Fateh Muhammad dated 28September 2013 (“Chief Secretary’s Statement”)


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II.

PRELIMINARY STATEMENT

II.1 RELEVANT ENTITIES

3) The Claimant has named Pakistan as the Respondent in this arbitration. Pakistan is a

Federal Republic and its territories comprise four provinces and two territories, namely,

Sindh, Punjab, Balochistan, Khyber Pakhtunkhwa (“KP”), the Federal Capital Territory

and the Federally Administered Tribal Areas.1 Pakistan’s provinces are autonomous

units.2 The provinces have a separate and distinct legal personality from the Federation

with the ability to sue and be sued in their own names.3 Each one of them has its own

provincial government. The division of powers between the Federal and Provincial

Governments is found in Part V of the Constitution of Pakistan.4 This confirms that

mineral resources (including gold and copper) are entirely in the provincial domain.5

4) This arbitration concerns the acts of the Province of Balochistan (“Balochistan”), the

Balochistan Development Agency (“BDA” or the “joint venture partner”), and the

Balochistan Mines and Minerals Development Department (“MMDD”). Despite the

heavy focus on Balochistani authorities in the Claimant’s Memorial, and despite having

commenced an ICC arbitration against Balochistan, the Claimant has insisted on

commencing this arbitration against Pakistan.

5) The Claimant in this arbitration is TCCA, a company incorporated under the laws of

Western Australia. Relevant associated entities include: Tethyan Copper Company

Pakistan (Private) Limited (“TCCP”), TCCA’s subsidiary incorporated under the laws of

Pakistan; BHP Minerals International Exploration, Inc. (“BHP”), the original signatory of

1 The Constitution of Pakistan 1973 Ex RE-16, Part I, Article 1.2 Ibid, Preamble.3 Ibid, Part VI, Article 174.4 Ibid, Article 142 of the Constitution of Pakistan 1973 lays down the division of subject-matter of the laws

between the Federation and Provinces.5 President’s Order No. 8 of 1961 Ex RE-17 which devolves power for makings laws and rules for mineral

resource to the Provinces while only retaining powers to make laws for oil and gas.


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the CHEJVA; and Mincor Resources NL (“Mincor”), a company incorporated under the

laws of Western Australia which originally incorporated TCCA (before selling its shares

in TCCA to Atacama Copper Pty Limited, which is now 50% owned by Antofagasta plc

(“Antofagasta”), a United Kingdom company, and 50% owned by Barrick Gold

Corporation (“Barrick”), a Canadian company).

6) The Claimant blurs the separate legal identity of two companies, TCCA and TCCP, by

using the acronym “TCC” in its Memorial. It does so because the Claimant lacks

standing to invoke the Australia-Pakistan bilateral investment treaty (the “BIT”) and the

CHEJVA Agreements. The Claimant transferred all its rights and obligations under the

CHEJVA Agreements and the Exploration Licence EL-5 to TCCP through a statutory

Scheme of Amalgamation in 2008. It was TCCP that made the Mining Lease Application

that was rejected by the Licensing Authority. Hence, the Claimant does not bring its own

claim, but TCCP’s claim before this Tribunal.

II.2 KEY CONTRACTUAL INSTRUMENTS

7) The key contractual instruments relevant to this arbitration are:

a) Chagai Hill Exploration Joint Venture Agreement (the “CHEJVA”) of 29 July

1993, which was signed by BHP and the BDA (on its own behalf) “to enter into a

joint venture for the purpose of conducting exploration”6 pursuant to certain

procedures. Neither the Government of Balochistan nor the Government of

Pakistan signed the CHEJVA or were parties to it. The CHEJVA created an

unincorporated joint venture between BHP and BDA (the “Joint Venture”);7

b) Addendum to the CHEJVA of 4 March 2000 (the “2000 Addendum”), which was

signed by BHP, the BDA (on its own behalf) and the BDA again (purportedly on

behalf of the Government of Balochistan) and professed to clarify the role of the

BDA as an agent of the Government of Balochistan in relation to the CHEJVA.

6 CE-1 The CHEJVA, 29 July 1993, Preamble.7 Ibid.


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The Supreme Court of Pakistan has confirmed that the 2000 Addendum did not

bind the Government of Balochistan to the CHEJVA;8

c) Option Agreement of 28 April 2000 (the “2000 Option Agreement” or the

“Mincor Option”), which was signed by BHP and Mincor and had the general

purpose of “establishing an Exploration Alliance” and of granting Mincor an

exclusive time-limited option to enter into an alliance agreement with BHP.

Introducing the Government of Balochistan as a party to the CHEJVA through the

2000 Addendum was a condition precedent of the 2000 Option Agreement;9

d) Alliance Agreement of 3 April 2002 (the “2002 Alliance Agreement”), which

was signed by BHP and Mincor’s nominee and wholly-owned subsidiary, TCCA

(the Claimant), and had the general purpose of entitling the Claimant to take over

BHP’s rights under the CHEJVA upon fulfilment of certain prerequisites relating

to exploration activities under the CHEJVA;10 and

e) Novation Agreement of 1 April 2006 (the “2006 Novation Agreement”), which

was signed by BHP, the BDA (purportedly on behalf of the Government of

Balochistan) and the Claimant and had the general purpose of replacing BHP in

the CHEJVA with the Claimant.11 The Supreme Court of Pakistan, which has

jurisdiction under Clause 11 of the Novation Agreement, has confirmed that the

Novation Agreement is illegal, void and non est and did not bind the Government

of Balochistan.12

8 CE-2 Addendum Agreement dated 4 March 2000.9 CE-12 Option Agreement, 28 April 2000, between BHP Minerals International Exploration Inc and Mincor

Resources NL.10 CE-198. The Alliance Agreement, 3 April 2002 between BHP Minerals International Exploration Inc. and

Tethyan Copper Company Limited.11 CE-3 2006 Novation Agreement, 1 April 2006.12 The Supreme Court Judgment Ex RE-18 released on 10 May 2013 ¶ 36.


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II.3 KEY LEGISLATION

8) Key legislation relevant to this arbitration are the:

a) Balochistan Mining Concession Rules 1970 (together with amendments) (the

“1970 BM Rules”);13

b) Balochistan Mineral Rules 2002 (together with amendments to date) (the “2002

BM Rules”);14

c) Regulation of Mines & Oil-Fields and Mineral Development (Government

Control) Act, 1948 (the “1948 Act”);15

d) Government of Balochistan Rules of Business, 1976 (the “1976 Rules”);16 and

e) The Contract Act (IX of 1872).17

II.4 RELEVANT PAKISTANI COURT JUDGEMENTS

9) Relevant Pakistani Court judgments in this case are the:

a) Judgment of the Islamabad High Court in the matter of Tethyan Copper Company

(Pakistan) Pvt. Limited, dated 11 April 2008,18 sanctioning and approving the

Scheme of Arrangement whereby “all contracts, grants and instruments of

transfer” held by the Claimant were “transferred to and vested in” TCCP (the

“Islamabad Court Judgment”);

b) Judgment of the Supreme Court of Pakistan in CPLA 796 of 2007 combined with

Constitutional Petitions No. 68 of 2010, 69 of 2010, 1 of 2011 and 4 of 2011 dated

13 Balochistan Mining Concession Rules 1970 (together with amendments) Ex RE-2.14 Balochistan Mineral Rules 2002 (together with amendments to date) Ex RE-1.15 RE-19.16 Ex RE-20.17 Ex RE-21.18 Order of the Islamabad High Court, 11 April 2008, Ex RE-61.


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7 January 2013, in respect of which the detailed Judgment was released by the

Supreme Court of Pakistan on 10 May 2013;19 and

c) Judgment of the Balochistan High Court dated 26 June 2007 in relation to the

Constitutional Petition No. 892 of 2006, which has since been overturned in

appeal by the Supreme Court in CPLA 796 of 2007.20

II.5 KEY LICENSES AND INSTRUMENTS

10) The key licences and instruments issued under the 2002 BM Rules were:

a) Exploration Licence designated as “EL-5” and granted to the Joint Venture on 18

May 2002 (but with retroactive effect from 21 February 2002) for a period of

three years;21

b) First renewal of EL-5 to the Joint Venture on 9 April 2005 for a period of three

years;22

c) Assignment of BHP’s share in the Joint Venture’s EL-5 to the Claimant on 8

April 2006 (conditional upon an undertaking by the Claimant that it would abide

by the terms of EL-5, the conditions of the assignment and relevant laws) (the

“Assignment”);23

19 Ex RE-18, Constitutional Petition No. 68/2010 by M. Tariq Asad, 6 November 2010, CE-172;Constitutional Petition by the Watan Party, 8 November 2010, CE-173. Additional petitions were laterfiled: Constitutional Petition by Qazi Siraj Sanjrani and another, 4 January 2011, CE-268; ConstitutionalPetition by Senator Swati and others, 24 January 2011, CE-270.

20 CE-61, Appellants: (i) Maulana Abdul Haq Baloch, (ii) Yusuf Masti Khan and (iii) Ehsan Ullah Waqasagainst Respondents:(i) The Government of Balochistan through Secretary Industries and MineralsDepartment, (ii) Balochistan Development Authority, (iii) Federation of Pakistan through SecretaryMinistry of Petroleum and Natural Resources, (iv) Tethyan Copper Company, (v) Antofagasta Plc, (vi)Muslim Lakhani, Director Tethyan Copper Company, (vii) Barrick Gold Corporation and (viii) BHP(Pakistan) Pvt Limited).

21 See Letter of Director General to Chagai Hill Joint Venture, 18 May 2002, CE-16.22 See Letter of Director General to Chagai Hill Joint Venture, 9 April 2005, CE-17.23 See Letter of Director General to Chagai Hill Joint Venture, 8 April 2006, Ex RE-25.


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d) Undertaking by the Claimant that it would abide by the terms of EL-5, the

conditions of the Assignment and relevant laws (the “Undertaking”);24

e) Second renewal of EL-5 to the Joint Venture on 1 December 2007 for a period of

three years until 19 February 2011;25

f) Application by TCCP for a mining lease dated 8 February 2011 (the “Mining

Lease Application”) filed with the Balochistan Licencing Authority (the

“Licencing Authority”) and attaching a feasibility study for initial mine

development (the “Feasibility Study”);26

g) Notice of Intent to Reject the Mining Lease Application by the Licensing

Authority of 21 September 2011 (the “Notice”);27

h) TCCP’s Interim Response to Licensing Authority’s Notice of Intent to Reject the

Mining Lease Application of 19 October 2011;28 and

i) The Licensing Authority’s rejection of Mining Lease Application on 15

November 2011.29

II.6 KEY TREATY PROVISIONS

11) The key provisions in the BIT are:

a) Article 1(1)(a) of the BIT, requiring inter alia that investments must be made

subject to the laws and investment policies of the host State;

b) Article 3(1) of the BIT, requiring that the host State shall encourage and promote

investments in accordance with its national law;

24 See Letter from the Claimant to Director General, 10 April 2006, CE-206.25 See Letter of Director General to Chagai Hill Joint Venture, 1 December 2007, CE-20.26 See Letter from the Claimant to Director General, dated 8 February 2011, CE-6.27 See Notice of Intended Reasons for Refusal of Mining Lease Application, 21 September 2011, p.1, CE-7.28 See TCCP’s Interim Response to Licensing Authority Notice, 19 October 2011, CE-8.29 See Letter from Director-General of the MMDD to TCCP, 15 November 2011, CE-11.


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c) Article 3(2) of the BIT, requiring the host state to ensure fair and equitable

treatment to investments in its territory;

d) Article 3(3) of the BIT, requiring that, subject to its national law, the host State

shall not impair investments;;

e) Article 7 of the BIT, requiring, inter alia, that the host state should provide

compensation in the event of a nationalisation or expropriation;

f) Article 13 of the BIT, providing in the event of a dispute between an investor and

the host state, either party to a dispute may refer to ICSID arbitration;

g) Annex B(7) of the BIT, requiring that the Arbitrators shall take account of the

terms of the agreement, any agreement between the parties to the dispute and the

domestic law of the host State when reaching its award; and

h) Article 25(1) of the ICSID Convention relating to the jurisdiction of the Centre.

II.7 SUMMARY

12) The Claimant’s case is that the Balochistan Licensing Authority’s refusal of TCCP’s

Mining Lease Application violated Articles 3(2), 3(3) and 7 of the BIT because it had an

entitlement to “mine Reko Diq” pursuant to Article 11.8.2 of the CHEJVA “subject only

to compliance with routine Government requirements.” TCCP’s Mining Lease

Application was for a 30-year lease over 99.473 square kilometres (previously part of

Exploration Licence EL-5 granted to the Joint Venture).

13) As will be demonstrated herein, the Claimant’s case must overcome at least four

insurmountable and fatal threshold hurdles.

14) First, the indisputable fact that the Claimant’s purported investment is illegal under

Pakistani law and investment policy and hence outside the scope of the BIT.30 The

30 CE-04, Agreement between Australia and the Islamic Republic of Pakistan on the Promotion andProtection of Investments (Entry into force: 14 October 1998) (the “BIT”), Article 1(1)(a): “investment”means every kind of asset, owned or controlled by investors one Party and admitted by the other Partysubject to its law and investment policies applicable from time to time and includes: …”.


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Supreme Court of Pakistan’s judgment dated 7 January 201331 settles Pakistani law on

this issue. The Supreme Court of Pakistan is the final arbiter of legality under Pakistani

law.32 The Claimant cannot discharge its burden of proof that its purported investments,

all of which were allegedly made pursuant to the CHEJVA, the 2000 Addendum, and the

2006 Novation Agreement (the “CHEJVA Agreements”), are legal under Pakistani law.

Even if the ICC Tribunal were to find the CHEJVA Agreements valid, it would not

change the fact that these agreements are illegal under Pakistani law and investment

policy. The treaty parties’ mandate in Article 1(1)(a) of the BIT that only those

investments which are legal under the host state’s domestic law and investment policy

qualify for treaty protection requires this Tribunal to decline jurisdiction.

15) Second, the Claimant transferred all its rights and obligations pursuant to the CHEJVA

and the Exploration Licence EL-5 to another company, TCCP, through a Scheme of

Arrangement sanctioned and approved by the Islamabad High Court in 2008.33 Hence, the

purported investments are not held by an Australian company but by a Pakistani

company. The Claimant therefore lacks standing to pursue this claim.

16) Third, irrespective of points (1) and (2) above, the CHEJVA did not confer on the

Claimant a right to a mining lease, but only a right to apply for a mining lease.34 This

(limited) right was itself conditional upon the fulfilment of certain conditions precedent,35

which were never in fact fulfilled prior to the expiry of the Exploration Licence EL-5.

Therefore, on the facts, this right to apply for a mining lease never arose and the Claimant

31 Ex RE-22 Short Order of the Supreme Court of Pakistan dated 7 January 2013; and Ex RE-18 DetailedJudgment of the Supreme Court of Pakistan dated 10 May 2013.

32 The contract pursuant to which the Claimant alleges that it had an entitlement to a mining lease (theCHEJVA) was deemed by the Pakistani Supreme Court on 7 January 2013 – in a decision of Pakistani law,which for this Tribunal must be regarded as a matter of fact – to be illegal, void and non-est. The Claimantbecame a party to the CHEJVA by virtue of the 2006 Novation Agreement which was also held to beillegal, void and non est. Article 11 of the Novation Agreement provides that Pakistani law is the governinglaw of the contract and the Courts of Pakistan have non-exclusive jurisdiction.

33 Order of the Islamabad High Court, 11 April 2008, Ex RE-61.34 The Claimant argues that TCCP had a right to be granted a mining lease “subject to compliance with

routine Government requirements” pursuant to Article 11.8.2 of the CHEJVA, CE-1.35 The Claimant did not fulfil the conditions precedent set out in Articles 11.1, 11.2, 11.3, 11.4, 11.5 and 11.6

of the CHEJVA, CE-1.


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cannot prove that this non-existent right fulfils the criteria for an “investment” under the

BIT.

17) Fourth, the ICC Tribunal is considering preliminary objections that the CHEJVA

Agreements are illegal, void and non est under their applicable law, whether these

agreements bind the Government of Balochistan, and whether the Claimant has the

standing to bring its claim. The ICC Tribunal has exclusive jurisdiction to consider the

existence and scope of the Claimant’s alleged right to a mining lease under Article 11.8.2

of the CHEJVA, and whether Respondent breached this alleged right.36 Hence, the ICC

Tribunal must first determine what rights exist under the CHEJVA Agreements (if valid)

and whether such rights have been violated. The Claimant has asserted that its rights

under the CHEJVA Agreements are a purported investment under the BIT. Hence, the

present Tribunal must wait for the ICC Tribunal to decide the existence of these alleged

rights before it can decide whether these fulfil the requirements of an investment under

the BIT. Moreover, since the Claimant’s treaty claims are premised on the alleged breach

of Article 11.8.2 of the CHEJVA, this Tribunal must logically await the findings of the

ICC Tribunal on these contractual issues before determining whether they are capable of

giving rise to a breach of the BIT. The Claimant’s treaty claims are therefore not ripe for

determination by this Tribunal.

18) The Claimant’s case on the merits is similarly flawed. The Claimant fails to prove that

the Respondent has breached the guarantees in the BIT relating to fair and equitable

treatment (Article 3(2)), non-impairment (Article 3(3)) or compensation for expropriation

(Article 7).

19) First, the Claimant mischaracterises the conditional right to apply for a mining lease

under the CHEJVA as a right to mine the Reko Diq Area despite the Feasibility Study

TCCP submitted in support of the Mining Lease Application, which clearly states that:

36 The Claimant’s ICC claim was registered on 28 November 2011. The Claimant’s ICSID claim wasregistered on 12 January 2012.


16

“TCCP has the right to apply for the granting of a Mining Lease(ML)”37 (emphasis added)

20) Second, this right to apply for a mining lease only arises under the CHEJVA if the

contractual pre-conditions and qualifying criteria in the 2002 BM Rules are satisfied.38

The Claimant failed to satisfy the criteria and hence that right never arose in this case.

Even if the right had arisen, it was subject to compliance with routine Government

requirements.39 There was not, and could not be, a guarantee that any mining lease would

in fact be obtained under the CHEJVA or the 2002 BM Rules. In fact, such a guarantee,

which would have fettered the exercise of regulatory powers for the award of mineral

titles, would be illegal under Pakistani law. The Claimant was well-aware from the outset

that “permitting” (i.e. obtaining a mining lease) was a “trigger” or “kill” point for Reko

Diq (i.e. that it ran the risk of not obtaining such a mining lease), yet it disingenuously

argues that receiving a mining lease was a foregone conclusion.40 The Claimant’s later

correspondence and conduct – e.g., its attempt to negotiate a Mineral Agreement with the

Respondent and the Government of Balochistan to “override” the 2002 BM Rules before

TCCP applied for the mining lease – likewise confirm its awareness that the granting of a

mining lease was far from automatic.

21) Third, TCCP’s Mining Lease Application for a mining lease dated 8 February 2011

patently failed to meet the contractual pre-conditions in the CHEJVA and the qualifying

criteria in the 2002 BM Rules. In particular, Article 11 of the CHEJVA obliged the

Claimant to offer its joint venture partner an opportunity to become a Participating Party

in respect of all “Mineral deposits” covered by any application for a mining lease. The

Claimant manifestly did not do so, and the Feasibility Study presented did not cover all

the “Mineral deposits” in the “Mining Area” for which TCCP sought the lease. The

Claimant also failed to acquire its joint venture partner’s interest in the mining lease area

prior to making the application. The proposal in the Feasibility Study to include a 682

37 CE-97, para 1.8.5, page 1-20.38 CE-01, CHEJVA, Article 11.4.2.39 CE-01, CHEJVA, Article 11.8.2.40 CE-153, The Hatch Final Scoping Study Report dated 12 October 2007 stated that the “trigger” or “kill”

points for RekoDiq were “Permitting, Water Supply, Transportation, Port facilities. Para 1.4 (page 3) istitled “Risk”.


17

kilometre pipeline through some of the most hostile territory in the world was

unsatisfactory and singly failed to ensure the efficient, beneficial and timely use of the

mineral resources. The proposal also failed to include value addition for Balochistan and

Pakistan.

22) Fourth, TCCP made the Mining Lease Application without any interference or

obstruction. The Supreme Court of Pakistan made it plain that the ongoing public interest

litigation pursuant to which the legality of the CHEJVA Agreements were challenged

should not impact upon the Licensing Authority’s consideration of TCCP’s application,

which should follow the routine and regular course pursuant to the 2002 BM Rules.41 The

Respondent, therefore, in no way interfered with the Claimant’s purported right to apply

for a mining lease.

23) Fifth, the Claimant fails to discharge the burden of proving that acts attributable to the

Respondent were sufficiently egregious and shocking to constitute a breach of the fair

and equitable treatment standard in the BIT. In fact, the Licensing Authority’s decision to

reject TCCP’s Mining Lease Application is reasoned and proper under the 2002 BM

Rules. Notwithstanding TCCP’s lack of standing to make such an application pursuant to

Rule 48 of the 2002 BM Rules, the Licensing Authority provided it with detailed reasons

for its refusal pursuant to Rule 48(4) of the 2002 BM Rules. It is uncontested that the

Licensing Authority had the right to refuse the lease under Rule 48 of the 2002 BM

Rules. Rule 48(3) provides that the Licensing Authority shall not grant the Mining Lease

Application if an applicant fails to satisfy any one of the eight criteria in Rule 48(3)(a)

and (b). The Claimant contends that it met or exceeded all the requirements for grant of a

lease under Rule 48 of the 2002 BM Rules. The facts disclose a different story. Amongst

other flaws: (i) TCCP failed to give its joint venture partner an opportunity to participate

in the proposed mining project or to purchase its joint venture partner’s interest in such

project prior to making the Mining Lease Application, and therefore lacked standing to

41 Ex RE-5 Order of Supreme Court dated 25 May 2011 ¶ 14: “The competent authority is the Government ofBalochistan shall proceed to expeditiously decide TCC’s application for the grant of mining leasetransparently and fairly in accordance with the law and the rules. In so doing the Government ofBalochistan shall not be influenced in any manner whatsoever by the pendency of these proceedings or bythe orders therein passed by this Court.”


18

make the application; (ii) TCCP failed to submit a feasibility study covering the area

over which the lease was sought; and (iii) TCCP failed to provide for the required value-

addition in the form of a smelter and refinery. The Licensing Authority therefore behaved

entirely properly – and in accordance with Pakistani law – in rejecting TCCP’s

application.

24) Sixth, the Claimant likewise cannot credibly argue that the Licensing Authority’s decision

to reject TCCP’s mining lease application “impaired” its so-called investment (i.e. the

right to apply for a mining lease). Article 3(3) of the BIT provides that “[e]ach Party

shall, subject to its laws…not impair the management, maintenance, use, enjoyment or

disposal of investments” (emphasis added). The Licensing Authority acted entirely

properly in exercising its (uncontested) power under Article 48(3) of the 2002 BM Rules

to reject TCCP’s application.

25) Seventh, similarly, the Claimant’s allegation that its “right to mine” has been expropriated

is untenable. The Claimant was never granted a right to mine that could be the object of

an expropriation. The Claimant was permitted to exercise its right to apply for a mining

lease pursuant to the 2002 BM Rules. On the facts, this right to apply never arose because

the Claimant never met the contractual pre-conditions to exercising this alleged right

prior to the expiration of Exploration Licence EL-5 on 19 February 2011. There was not –

nor could there have been on the facts – a taking away or destruction of this right. In any

event, the concept of a “taking” or “expropriation” is not intended to apply to normal and

lawful regulatory measures. The Licensing Authority’s refusal of TCCP’s application for

a mining lease was in the exercise of its routine and regular regulatory powers for the

grant or refusal of mineral titles under Article 48(3) of the 2002 BM Rules.

26) The Claimant’s claim that the Respondent expropriated its information and data arising

from the exploration of Reko Diq for the “Reko Diq Gold & Copper Project” is equally

flawed. Not only is this a baseless allegation, but the debate also becomes moot when that

information and data has in fact been at all relevant times the exclusive property of the

Government of Balochistan pursuant to Rule 71 of the 2002 BM Rules. The Claimant


19

provided an express Undertaking consenting to the 2002 BM Rules (including Rule 71)

as a condition of being admitted as a partner in Exploration License EL-5 in 2006.42

27) The Respondent also notes that – whilst the issue of quantum has been bifurcated in this

arbitration – it is plain that even if TCCP’s Mining Lease Application was granted, its

proposed mining project would not have been possible without a host of approvals and

consents. The Scoping Study notes that “Transportation” and/or “port facilities” issues

can be fatal to the project.43 In this case, TCCP planned to convert the ore mined into

copper concentrate to be pumped through a 682 kilometre pipeline through one of most

turbulent parts of the world. The Claimant wants this Tribunal to believe that the

approvals of the Respondent and the Government of Balochistan that would be required

for removing all the ore concentrate through “the longest pipeline in the world

transporting copper concentrate”44 would follow as a matter of course. It is uncontested

that the Claimant never sought, let alone obtained, any approval for such a pipeline. In

such circumstances, the Claimant will be unable to prove that the refusal of TCCP’s

Mining Lease Application caused any loss.

28) The Respondent also advances herein counter-claims for losses flowing from the

Claimant’s own substantial violations of the CHEJVA, the 2002 BM Rules and Pakistani

law. The BIT provides this Tribunal with jurisdiction over counter-claims made by the

Respondent.45 The Respondent submits its counter-claims without prejudice to its

jurisdiction and admissibility objections.

29) First, the Claimant’s role (and the role of its predecessor, BHP) in procuring the illegal

2000 Addendum and 2006 Novation Agreement constitutes a violation of Pakistani law.

The 2000 Addendum, which wilfully attempted unlawfully to bind the Government of

Balochistan, was to satisfy a condition precedent in the Mincor Option Agreement in

42 The Assignment Letter Ex RE-25, and the Claimant’s Undertaking CE-206.43 CE-153, The Hatch Final Scoping Study Report dated 12 October 2007 stated that the “trigger” or “kill”

points for Reko Diq were “Permitting, Water Supply, Transportation, Port facilities. Para 1.4 (page 3) istitled “Risk”.

44 Source: www.tethyan.com/TheRekoDiqProject/MiningProject.aspx Ex RE-2345 CE-04, BIT, Article 13(1).


20

2000. The Claimant sought to build upon this illegality by entering into the 2006

Novation Agreement.

30) Second, the Claimant’s Mining Lease Application was premised on its own violations of

the CHEJVA. The Claimant breached its obligations under the CHEJVA by appropriating

Joint Venture Property (as that term is defined in the CHEJVA). It developed its own

proposals to mine multiple deposits in the Exploration Area EL-5, without offering them

to its joint venture partner, thus breaching the obligations of good faith and cooperation in

the CHEJVA.46 Rather than obtaining (and paying for) feasibility studies for these

deposits so that both joint venture partners could consider developing them together, the

Claimant prepared a secret Expansion Pre-feasibility Study47 and attempted to acquire

these rights (without first offering them to its joint venture partner) by submitting a

Mining Lease Application (through TCCP). The Claimant disclosed its intent to mine

only two (H14 and H15) of the fourteen deposits – i.e., less than 5% of the proposed

Mining Lease Area – sought in the Mining Lease Application. Even in relation to the two

deposits it did offer to its joint venture partner, the Claimant never sought to acquire the

joint venture partner’s interest, which was a pre-condition to making an application to

pursue a sole risk mining project under the CHEJVA48.

31) Third, the Claimant made the Mining Lease Application through TCCP even though it

had defaulted on the terms of the Second Renewal of the Exploration Licence EL-5

requiring it to provide feasibility studies for all discovered deposits in the exploration

area.49

32) The reason for these breaches is clear. The Claimant sought to appropriate numerous

deposits for its own use without offering them to its joint venture partner. In an exercise

of good faith, both the Respondent and the Government of Balochistan engaged in

negotiating a potential Mineral Agreement in relation to a possible, undefined mining

46 CE-01, CHEJVA, Article 26 (“Continuing Cooperation and Good Faith”).47 The Claimant has not disclosed the Expansion Pre-feasibility study. It has however attached extracts at CE-

243 and CE-244.48 CE-01, CHEJVA, Article 11, in particular Articles 11.4.2 and 11.6.49 Ex RE-1 Rule 29(2)(c)(iii) and CE-206 Claimant’s Undertaking dated 10 April 2006.


21

project in the Reko Diq Area. The Claimant, without disclosing the scale and location of

its contemplated Mining Project(s), sought to pressure the Governments into agreeing to

its demands for exemptions from the fiscal and legal framework in Balochistan and

Pakistan, including taxation, mining and even labour laws. Unsurprisingly, the

Governments could not accede to these demands. The Claimant failed to achieve its

objectives and the negotiations foundered. The Claimant’s response to this development

was remarkable. In brazen violation of the very contract it now accuses the Government

of Balochistan of breaching, it sought a mining lease over at least 14 deposits.50 The

Claimant proceeded with TCCP’s Mining Lease Application, knowing full well that it

lacked standing to make the application and that the application was in any event

meritless.

33) The Claimant’s claim is a textbook example of the abuse of the investor-state arbitration

system, where a claimant forces a host government to incur significant costs and

reputational damage based on entirely unmeritorious claims. The circumstances in which

this case is brought are made far worse because the Claimant has invoked this Tribunal’s

jurisdiction notwithstanding the fact that it has constituted another Tribunal at the ICC to

hear the same claims. Both proceedings were designed to pressure the Respondent and

the Government of Balochistan to agree to the Claimant’s demands for an unacceptable

project to mine in Reko Diq. It is regrettable that the Respondent and the Government of

Balochistan have had to divert scarce public funds to defend two parallel, duplicative and

vexatious arbitration proceedings.

34) The Claimant builds its case on distorted facts and unconfirmed media reports. If the

Respondent were to rebut all of the Claimant’s misrepresentations and distortions, fuelled

by resources of one of the largest mining conglomerates in the world, this submission

would span thousands of pages. Instead, the Respondent will set out the relevant facts in

their proper context. For the avoidance of doubt, however, the Respondent does not

concede to any of the assertions in the Claimant’s Memorial and supporting witness

statements, whether they are expressly rebutted herein or not.

50 CE-01, CHEJVA, Article 11.


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III.

STATEMENT OF FACTS

III.1 THE REKO-DIQ AREA

35) “Reko Diq” is the name of a small town in the Chagai District of Balochistan, 70

kilometres north-west of Naukandi. Reko Diq, which means “sandy peak” in the Balochi

language, is also the name of an ancient volcano in the region. The Reko Diq area is part

of the Tethyan Magmatic Arc, known for its copper-gold mining potential. The Reko Diq

area has long been a source of mining activities. Located near the Respondent’s border

with Afghanistan (to the north) and Iran (to the west),51 the Reko Diq area had been a site

for small-scale mining by local tribes for many years before the twentieth century. In

1901, the identification of valuable mineral deposits in the area was formally recorded by

the Geological Survey overseen by the British Indian Empire. As the Deputy

Superintendent of the Geological Survey stated at the time:

“Ores of copper, lead and iron and some other minerals ofcommercial value … have been met with in several localities [inthe Reko-Diq area]. Some of them occur in small pockets as anoriginal constituent of some of the igneous rocks mentioned inprevious chapters. All the other are results of solfataric action,either in the recent volcanoes or in connection with some basalticintrusions that belong to an earlier period.”52

36) Despite this early detection of mineral deposits, including copper, significant

investigation of the mineral deposits at the Reko Diq site did not occur until several

decades later.

37) The first significant investigation was conducted by the Geological Survey of Pakistan

(“GSP”) in the 1960-70s. During that investigation, the GSP recognised that the Reko

51 For coordinates of the Exploration Licence sought and granted to BHP, See: Letter from DG Mines &Minerals Balochistan to BHP, 18 May 2002, at p.5, CE-16.

52 Memoirs of the Geological Survey of India, Vol. XXXI at p. 312 Ex RE-24


23

Diq area contained significant deposits of both copper and gold.53 As a result, the GSP

engaged in “geological mapping and geochemical sampling” to identify the composition

and quantity of the deposits.54 As admitted by the Claimant55 and identified by the GSP in

1978, the 99.473 square kilometres in the Reko Diq area over which the Claimant

controversially sought a mining lease contains at least 14 principal mineralized deposits

(known as H2, H3, H4, H7, H8, H9, H10, H13, H14, H15, H27, H35, H36 and H79)

(“Mining Lease Area”).

III.2 THE CLAIMANT MADE ITS ALLEGED INVESTMENT IN A UNIQUEPOLITICAL, GOVERNMENTAL, LEGAL AND SOCIAL CONTEXT

38) The Claimant’s Memorial fails to explain the political, governmental, legal and social

context in which the alleged investment was made. Neither does it mention the express

terms upon which the Licensing Authority permitted the Assignment to it of BHP’s

interest in the Exploration Licence EL-5 in 2006 and the Claimant’s Undertaking to abide

by all conditions in the Assignment letter, the CHEJVA and the 2002 BM Rules.56 The

Claimant also unreservedly accepted that the Licensing Authority could cancel any

mineral title should the Claimant breach any of the conditions in the Assignment letter,

the CHEJVA and the 2002 BM Rules (as the latter may be amended from time to time).

This is explained further below. In order that the Tribunal is better able to appreciate the

environment in which the Claimant alleges it made an investment, this section sets out

some preliminary political, governmental, legal and social information about Pakistan

and Balochistan.

53 Initial Mine Development Feasibility Study, August 2010 ¶4 and ¶4.1.1, CE-99; Submissions of theGovernment of Balochistan in the High Court of Balochistan, undated, p. 24, CE-212.

54 Submissions of the Government of Balochistan in the High Court of Balochistan, undated, p. 24, CE-212.The extent of any drilling is unclear, although it appears that data from drill holes was compiled by theGSP: Geological Survey of Pakistan, Report of Analysis, 1 June 1982, p. 1, CE-183.

55 Claimant’s Memorial ¶ 41.56 Claimant’s Undertaking CE-206- the Assignment Ex RE-25


24

39) The political, governmental, legal and social context in Pakistan – and more particularly

in Balochistan – is unique. The Claimant accepted this context when it made its alleged

investment.

40) Each of Pakistan’s four provinces (Sindh, Punjab, Balochistan and KP) has a Governor

and a Council of Ministers, the latter of which is headed by a Chief Minister elected by

the Provincial Assembly. Under President’s Order No. 8 of 196157, the title in the

minerals vests with the Federal Government of the Respondent, whereas under the 1948

Act58 provinces have complete autonomy over the disposal of the mineral wealth and are

empowered to make and administer rules for such purpose (with the exception of oil and

gas, which is administered by the Federal Government).59

41) The Chief Minister and other Provincial Ministers exercise executive authority in the

province subject to provincial legislation.60

42) Balochistan has a separate legal personality from the Federation, capable of suing and

being sued in its own name.61 The division of powers and the difference in the subject

matter of Federal and Provincial jurisdiction is found at Article 142, Part V, of the

Constitution of Pakistan.62 By constitutional pronouncement, and as a matter of Pakistani

57 Ex RE-17.58 Ex RE-19.59 See also ¶8 - ¶12 of the Khokhar Statement.60 Constitution of Pakistan, Part IV, Article 129 Ex RE-16, Also See: Article 173(1) “The executive authority

of the Federation and of a Province shall extend, subject to any Act of the appropriate Legislature, to the…”(emphasis added).

61 Ibid, Part VI, Article 174.62 Ibid, Part V Article 142 of the Constitution of Pakistan states:

“Subject to the Constitution –(a) Majlis-e-Shoora (Parliament) shall have exclusive power to make laws with respect to any

matter in the Federal Legislative List;

(b) Majlis-e-Shoora (Parliament) and a Provincial assembly shall have power to make laws withrespect to criminal law, criminal procedure and evidence.

(c) Subject to paragraph (b), a Provincial Assembly shall, and Majlis-e-Shoora (Parliament)shall not, have power to make laws with respect to any matter not enumerated in the FederalLegislative List;


25

law, Balochistan’s actions in the matter of rejecting TCCP’s Mining Lease Application

cannot be attributed to the Federal Government of the Respondent, given that the subject-

matter of mineral resources is entirely within the provincial domain under the

Constitution of Pakistan.

43) The Government of Balochistan has 39 departments63 and 5 autonomous bodies. The

Departments are headed by Provincial Secretaries. The Provincial Secretaries report to

the Chief Secretary.

44) It only takes a cursory visit to the Government of Balochistan’s official website to notice

that the MMDD is one of the 39 departments and that the BDA is one of the five

autonomous bodies (which is a statutory entity that is legally distinct from the

Government of Balochistan). It is elementary, as a matter of Pakistani law, that the BDA

is not empowered to enter into binding contracts on behalf of Balochistan. Article 173 of

the Constitution of Pakistan makes it plain that contracts on behalf of Balochistan shall be

made in the name of the Governor by those expressly and properly authorised by him or

her to execute them.64 The manner in which the Governor of Balochistan is able to

(d) Majlis-e-Shoora (Parliament) shall have exclusive power to make laws with respect to allmatters pertaining to such areas in the Federation as are not included in anyProvince.”(emphasis added)

63 The official website of the Government of Balochistan (www.balochistan.gov.pk) records the following 39departments: (1) Agriculture & Cooperatives; (2) Chief Minister's Inspection Team; (3) Communication,Works, Physical Planning & Housing; (4) Culture, Tourism & Archives; (5) Education; (6) Environment,Sports & Youth Affairs; (7) Finance; (8) Fisheries; (9) Food; (10) Forest & Wildlife; (11) Religious Affairsand Inter Faith Harmony; (12) Health; (13) Home & Tribal Affairs; (14) Industries & Commerce; (15)Information; (16) Science & Information Technology; (17) Inter Provincial Coordination; (18) Irrigation &Power; (19) Labour & Manpower; (20) Law & Parliamentary Affairs; (21) Livestock & DairyDevelopment; (22) Local Government &Rural Development; (23) Mines & Mineral; (24) Planning &Development; (25) Population Welfare; (26) Energy; (27) Prosecution; (28) Provincial DisasterManagement Authority; (29) Provincial Transport Authority; (30) Public Health Engineering; (31)Revenue, Land Utilization, Settlement & Relief; (32) Services & General Administration; (33) SocialWelfare, Special Education, Literacy/Non-Formal Education Development; (34) Civil Defence; (35) UrbanPlanning & Development; (36) Excise and Taxation; (37) Women Development; (38) Printing &Stationery; and (39) Police. Ex RE-26.

64 Article 173 is entitled “Power to acquire property and to make contracts, etc.”, and provides:

“(1) The executive authority of the Federation and of a Province shall extend, subject to any Act of theappropriate Legislature, to the grant, sale, disposition or mortgage of any property vested in, and to thepurchase or acquisition of property on behalf of, the Federal Government or, as the case may be, theProvincial Government, and to the making of contracts.

(2) All property acquired for the purposes of the Federation or of a Province shall vest in the FederalGovernment or, as the case may be, in the Provincial Government.


26

authorise is set out in the Balochistan Rules of Business 1976.65 Rule 7 of those Rules

makes it plain that only the Secretary, the Additional Secretary, the Joint Secretary, the

Deputy Secretary or the Section Officer to the government in a concerned department

may execute agreements on behalf of the Government, upon receipt of written

instructions and authorisations (save in the case where an officer has specifically been

empowered to sign an order or instrument of the Government). Rule 7 specifically states:

“Rule 7 Orders and instruments, agreements and contracts

(1) As provided for in the Constitution, all executive action ofGovernment shall be expressed in the name of the Governor.

(2) Save in cases where an officer has been specifically empoweredto sign an order or instrument of Government, every such order orinstrument shall be signed by the Secretary, the AdditionalSecretary, the Joint Secretary, the Deputy Secretary or the SectionOfficer to the Government in the department concerned and suchsignature shall be deemed to be the proper authentication of suchorder or instrument.

(3) Instructions for the making of contracts on behalf of theGovernor and the execution of such contracts and all assurances ofproperty shall be issued by the Law Department.”66

45) Rule 7(3) makes it clear that in the absence of instructions from the Law Department, the

Chairman of the BDA is not competent to execute contracts on behalf of the Government.

It is undisputed that there were no instructions under Rule 7(3) issued by the Law

Department for the execution of any of the CHEJVA Agreements. This is relevant in the

context of the illegality of the CHEJVA Agreements, which is discussed further below.

(3) All contracts made in the exercise of the executive authority of the Federation or of a Province shall beexpressed to be made in the name of the President or, as the case may be, the Governor of the Province, andall such contracts and all assurances of property made in the exercise of that authority shall be executed onbehalf of the President or Governor by such persons and in such manner as he may direct or authorize.

(4) Neither the President, nor the Governor of a Province, shall be personally liable in respect of anycontract or assurance made or executed in the exercise of the executive authority of the Federation or, as thecase may be, the Province, nor shall any person making or executing any such contract or assurance onbehalf of any of them be personally liable in respect thereof.

(5) Transfer of land by the Federal Government or a Provincial Government shall be regulated by law.”(emphasis added) Ex RE-16.

65 Balochistan Rules of Business, 1976 Ex RE-20.66 Ibid, at Rule 7.


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46) Balochistan covers nearly half of Pakistan’s land mass (43.6 per cent), but has the

smallest population.

47) 58.7 million out of 180 million people in Pakistan live below the poverty line.67 This is

equal to almost the entire population of the United Kingdom.68 The majority of those

who live below the poverty line are in Balochistan (52%). The magnitude of poverty in

Pakistan is exacerbated by both natural and man-made disasters. The former have come

in the form of regular flooding and earth-quakes. The most significant man-made

adversity is a terrorism epidemic, particularly in Balochistan and the KP, which results in

the loss of several thousand lives annually.69 The link between poverty and terrorism in

conflict-ridden Balochistan and the KP is self-evident. The battle against poverty and

terrorism requires deliberate measures from the government to invest in human

development, including local employment.

48) The silver lining for the people of Balochistan is the promise of mineral development. To

quote from the blog of a young Balochi girl:

“They say Balochistan is a province where children walk on goldbut they are usually barefoot…”.70

49) That is of course, if those children can beat the odds of the one of the highest infant

mortality rates in the world (182/1000, which is approximately twice the national

average). Access to clean drinking water is at 34%. Education is a luxury confined to

39% of boys and 16% of girls. Balochistan remains the least developed province in

Pakistan despite being immensely rich in natural resources.

67 The UNDP Human Development Report 2013 placed Pakistan 146th in the Human Development Index of187 countries. According to the World Bank’s World Development Indicators 2013, sixty percent ofPakistan's population lives below the poverty line. Ex RE-27.

68 Mid-2012 Estimate of the total population in the UK was 63.7 million.<http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Population> Ex RE-28.

69 According to partial data compiled by the South Asia Terrorism Portal (SATP), a total of at least 6,211terrorism-related fatalities, including 3,007 civilians, 2,472 militants and 732 Security Forces (SF)personnel took place in 2012. The first 69 days of 2013, have already witnessed 1,537 fatalities, including882 civilians, 116 SF personnel and 539 militants Ex RE-29. See also the Chief Secretary’s Statement ¶24 -¶31.

70 My Neglected Province- Balochistan, Mariam Magsi, 3 January 2012<http://blogs.thenews.com.pk/blogs/2012/01/my-neglected-province-balochistan/> Ex RE-30.


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50) The discovery of a world-class natural resource is not unprecedented in Balochistan.

Natural gas was discovered in the town of Sui, in the District of Dera Bugti, in 1952. At

the time of its discovery, the Sui Gas Field was considered among the largest natural gas

fields in the world with recoverable reserves of around 12 Tcf.71

51) Balochistan thus became the supplier of natural gas to the rest of Pakistan. In fact, natural

gas in Pakistan is known as “Sui gas”. Commercial exploitation of the Sui gas field began

in 1955, but a large number of Balochis felt short-changed. The residents of Balochistan

have seen their natural gas pumped into pipelines to supply gas to people outside their

province. Balochistan’s own consumption of “Sui gas” is minimal compared with other

provinces. In fact, those living in the outskirts of Sui burn wood for fuel instead of using

gas supplied through pipelines. The District of Dera Bugti is the least developed of all

Balochistan’s districts, has the lowest human development index in Balochistan, has the

highest illiteracy in Balochistan and is home to the poorest tribes of Balochistan.72

52) Similarly, the number of Balochis employed in the Sui Southern and Northern companies

is a tiny percentage of the total workforce.73

53) Unsurprisingly, the perception of resource disenfranchisement is used by Baloch

separatists, such as the Balochistan Liberation Army, to justify their attacks on gas

pipelines in Balochistan and disrupt gas supplies to the rest of the country.74 From 2005

until 2013,75 at least 203 attacks on gas pipelines were recorded leading to 16 deaths and

31 injuries.76 Separatist Baloch tribal leaders maintain that their struggle is for greater

71 Official Website of Pakistan Petroleum Limited <http://www.ppl.com.pk/content/sui-gas-field-overview>Ex RE-31.

72 See also ¶20-¶23 of the Chief Secretary’s Statement.73 In the National Assembly on April 14, 2006, the then Minister of Petroleum, Mr. Amanullah Jadoon, gave

the following employment figures for Sui Southern and Sui Northern companies: Total Employment:11,613; Employees from Sindh: 3,613 (of which 1,960 are for the urban domiciled); Employees fromPunjab: 5,454; and Employees from Balochistan: 353 Ex RE-32.

74 See Chief Secretary’s Statement, ¶26- ¶27.75 http://www.satp.org/satporgtp/countries/pakistan/Balochistan/data/Attacks_Gas_pipeline.htm. Ex RE-33.76 Ibid. See also ChiefSecretary’s Statement, ¶28.


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provincial autonomy and an increased share of mineral resources for the people of the

province.77

54) This has necessitated initiatives towards creating economic opportunities for the denizens

of Balochistan. This is the reason for the requirements of mineral development in the

interests of the province and value-addition in the 2002 BM Rules as a condition for

obtaining a mining lease.78

55) The authority to grant or refuse mineral titles, including exploration licences and mining

leases, rests exclusively with the Technical Head of Directorate-General of the MMDD of

Balochistan.79 No other government authority, whether provincial or federal, has the

power to grant mineral titles. The Directorate General is the section of the Department

with responsibility for the grant of mineral titles and mineral concessions.80 Moreover,

the “Department” is defined to mean “a separate self-contained administrative unit in the

secretariat responsible for the conduct of business of mines and minerals of the

Provincial Government in a distinct and specified sphere.”81 The 2002 BM Rules also

provide for a Mines Committee to advise the Licensing Authority in relation to matters

concerning the administration of these Rules, including the grant or refusal of a mining

lease (Rule 3(1)). The Members of Mines Committee are all officials of the Mines and

Minerals Department except a non-voting member who is a representative of the

Balochistan Mine Owner’s Association. No representative of the Governor, Chief

Minister or Government of Balochistan sits on the Mines Committee. The Governor,

Chief Minister and other Provincial Ministers comprising the Cabinet are extraneous

public office holders to the process of grant or refusal of license.

77 See also ¶20-¶31 of the Chief Secretary’s Statement.78 Rule 48(3)(a)(vii), Ex RE-1.79 Rule 2(z) of the 2002 BM Rules defines Licensing Authority as “...the Technical Head of the Directorate-

General of Mines and Minerals to whom application for mineral titles or mineral concessions are to besubmitted and who is empowered to grant mineral titles and mineral concessions pursuant to these Rules”.Ex RE-1.

80 Rule 2(j), 2002 BM Rules, Ex RE-1.81 Rule 2(i) 2002 BM Rules, Ex RE-1.


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56) This was the environment in which the Claimant alleges it had an investment and in

which the rejection of TCCP’s Mining Lease Application took place.

III.3 THE CHEJVA AGREEMENTS ARE ILLEGAL, VOID AND NON EST

A) THE CIRCUMSTANCES IN WHICH THE CHEJVA WASCONCLUDED

57) In 1990, discussions opened between the BDA and BHP to pursue exploration activities

in the areas identified by the GSP. Contrary to the Claimant’s allegation that the BDA

invited BHP to Balochistan, it was BHP who initially contacted Mr. Younus Mandokhail,

the then Chairman of the BDA, and wrote to the BDA to indicate its interest in

conducting exploration and to seek a site visit to the Ginga Lead-Zinc area in June

1990.82

58) On 29 May 1991, Mr. Mohammad Younas Khan, the then Chairman of the BDA, which

had been the only entity with whom BHP had been dealing, communicated the outcome

of his discussions with BHP to the Balochistan Secretary for Industries, Commerce and

Mining. In a letter notable chiefly for its expression of the views and interests of BHP,

the Chairman of the BDA recorded that:

“BHP contemplates to carry out the investigation in differentphases, depending on the achievement of positive results. Entireexpenditure on exploration and subsequently the preparation of afeasibility study will be borne by BHP. The BDA, on the otherhand, will contribute in the joint venture by providing security inthe field and reservation of areas (in the name of BDA) till theexploration and feasibility study would be accomplished. [ ]...thecopy of the draft agreement received from BHP-UTAH is enclosed

82 CE-184, Letter from BHP to BDA, 30 May 1990, p. 1. The letter begins “Please refer to your meeting withDr Alan C Moore, [illegible] Principle Geologist, Project Development in March, [illegible]90. Aselaborated, this company is a major international mineral company and is interested in the discovery anddevelopment of new mineral areas throughout the world, which could lead to new mines. Initially, inPakistan, we wish to establish which areas are geologically most gavourable [sic], to establish whatground rules would apply to a foreign company wishing to operate in the field of exploration and mining,both at a provincial level and at a federal level and to pay preliminary visits to areas which havegeological potential.”


31

for onward transmission to the Law Department for necessaryappraisement.”83

59) In other words:

a) BHP was “contemplate[ing]” carrying out “phases” of work at the site, which

extended only to include “exploration” and subsequently the preparation of a

feasibility study;84

b) BHP was aware that any grant of “mineral concessions” was a matter for further

discussion beyond the scope of the exploration work it would be performing, and

as such wished to receive representations relating to the grant of such concessions

“in the name of BDA”;85 and

c) BHP was willing to provide a draft of an exploration agreement, and this needed

to be reviewed by the relevant “Law Department” of Balochistan.86

60) Even in the earliest exchanges recording the discussions between the BDA and BHP

regarding prospective explorations in the Reko Diq area, it was thus acknowledged by all

sides that the rights potentially to be acquired by BHP related only to the exploration of

the area and the development of a feasibility study for the mining of specific deposits.

Those exploration rights, as is well-known in the mining industry, did not extend

automatically or, without further procedures, to the grant of mineral titles by the

Licensing Authority. BHP’s eagerness to secure an iron-cast guarantee for mineral

concessions is apparent from the contemporaneous record:

“BHP looks forward to have an assurance that mineral concessionscontaining proved reserves of gold and feasible for mining will begranted in the name of BDA and there will be no political restraintswhatsoever on the ownership of the property.” (emphasis added)87

83 Letter from BDA to Balochistan Secretary for Industries, Commerce and Mining, 29 May 1991, p. 1-2. CE-185.

84 Ibid, p. 1, CE-185.85 Ibid.86 Ibid, p. 2.87 Ibid, p. 1.


32

61) But BHP never received the desired assurance and remained subject, first under the 1970

and then later under the 2002 BM Rules. As explained below, the exercise of a licensing

authority’s discretion in the granting of mineral titles cannot be fettered in advance as a

matter of Pakistani law. BHP’s motive in concluding the CHEJVA was illegal, as is

evident from its in-house solicitor’s letter to the BDA of 31 October 1991, which stated

that:

“The purpose of the [CHEJVA] was to ensure that the effect ofthose provisions in the Mining Concession Rules which cause BHPdifficulty could be overridden”. 88

62) This letter also states the CHEJVA was not with the Government of Balochistan, as had

been BHP’s “original intention”.89

63) Discussions between the BDA and BHP continued throughout the early 1990s. These

discussions yielded several drafts which focused on the creation of an unincorporated

joint venture for administering exploration activities. According to these drafts, BHP

would fund and manage the joint venture’s exploration activities and the preparation of

feasibility studies in relation to mineral deposits, while the BDA would make all

applications on behalf of the joint venture, and provide local administrative support. This

is typical of joint venture relationships between foreign and local partners.

64) The Claimant’s assertion that the BDA had a free ride is not supported by the CHEJVA.

It was clear that not only would the BDA bear the expenses of providing liaison and local

administrative support, but that it would pay for its share of the joint venture expenditure

in relation to any future development of a mine should the parties conclude a new mining

joint venture. This was to be paid for by the Claimant through a loan to the BDA, which

would have to be paid back to it by the BDA.90

88 Letter from BHP to BDA, 31 October 1991, Ex RE-34. See also Letter from BHP to BDA, 4 December1991, Ex RE-35 (referring to the need to “overcome” the 1970 BM Rules).

89 Letter from BHP to BDA, 31 October 1991, Ex RE-34.90 CE-1, CHEJVA Article 12.4 and 12.5. Under the CHEJVA, BHP was entitled to recover from the BDA all

of the equity debt together with compound interest thereon at a rate of LIBOR plus two percent (2%) bymeans of fully allocating a percentage of its entitlement to available cash flows derived from the miningventure.


33

65) The final draft of the CHEJVA made a clear distinction between the BDA, the

Government of Balochistan and the Licensing Authority. The Government of Balochistan

was not made a party to the CHEJVA. This is unsurprising as both BHP and the BDA

knew that the Government of Balochistan was not a party to the CHEJVA.91 BHP’s

description of the CHEJVA in a letter dated 02 April 1993 makes this plain in the

following terms:

“The Agreement is a contract between the BDA and BHPM only.The Government of Balochistan is not a party to the Agreement.However, the Venture will be obliged to divulge certain MiningInformation to the Government’s Directorate of MineralDevelopment pursuant to the Mining Rules and conditionsattaching [to] the Prospecting Licences themselves.”92 (emphasisadded)

66) BHP submitted the final draft of the CHEJVA to the BDA on 27 June 1993.93 The BDA

communicated this draft, alongside a summary of the project and the exploration

agreement, to the Chief Minister of Balochistan on 13 July 1993.

67) This summary in relation to the proposed CHEJVA (which included a list of the topics of

negotiation)94 neither stated nor implied that the Joint Venture (let alone BHP by itself)

would acquire any automatic right to any mineral titles by virtue of executing or

performing the CHEJVA. Rather, pursuant to the CHEJVA and the applicable BM

Rules, those mineral titles (whether exploration licences or any ultimate mining lease)

would only be acquired by the Joint Venture upon application to the relevant authority

under the BM Rules. Thus, the Joint Venture established under the CHEJVA would only

acquire exploration licences upon application to the Directorate-General of the MMDD,

91 See Letter from BHP to BDA, 2 April 1993, item 81, Ex RE-36.92 Letter from BHP to BDA, 2 April 1993, p.8, Ex RE-36. received independent advice from the United

Nations which, having reviewed the CHEJVA, concluded that it was “unenforceable”, “unworkable” and“confusing”: Letter from United Nations on the CHEJVA, dated 18 December 1992, received 3 January1993, Ex RE-37.

93 Summary for the Chief Minister, Exploration Joint Venture between the BDA and BHPM for Gold andAssociated Minerals in the Chagai Hills Area, Balochistan, 13 July 2013, p.1 CE-186.

94 Ibid, p.2-3.


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and would acquire only by separate application a mining lease subject to routine

Government procedures.95

68) In other words, the CHEJVA – an unincorporated joint venture agreement – only

regulated the relations of the joint venture parties. Likewise, the CHEJVA did not give

any party the right to explore in Balochistan. As noted by BHP’s letter to the BDA on 2

April 1993,

“All Prospecting Licences will have attached conditions inaccordance with the Mining Rules. Such conditions may elaborateupon the Rules, or they may restate or exclude the same. … Thus,the Venture will be bound to comply by the PL’s themselves, byvirtue of their terms of issuance, or run the risk of forfeiture. It isnot for the Agreement itself to deal with such matters however asthey fall properly within the domain of the Mining Rules.”96

69) That right would have to be acquired by the Joint Venture through an application to the

relevant authority, as identified in the CHEJVA.97 The CHEJVA never was, and cannot

seriously be regarded as, a concession agreement, as BHP’s letter of 2 April 1993

indicates.

70) Ultimately, the CHEJVA was signed by the BDA and BHP on 29 July 1993, two weeks

after the BDA had created the summary, and sent it with a copy of the final draft

agreement to the Government of Balochistan. The summary did not raise the concerns of

the United Nations Development Program (which had found it “unenforceable” and

“unworkable”) and BDA’s own legal advisor.98

95 See Letter from BHP to BDA, 2 April 1993, p.7-8, Ex RE-36.96 Ibid, p.8.97 CHEJVA: Article 1.1 - definition of “Directorate of Mineral Development”. Also see: Article 5.2 – Grant

of Exploration Area; Article 5.3 - Area Available for Prospecting Licences. In both these articles, theparties would need to apply to the Provincial Government for rights and no automatic right was granted.Upon obtaining the assurances Article 5.4 of the CHEJVA, which is subject to Article 5.2, would becomeeffective CE-01.

98 See BDA’s summary of 3 March 1993 where it notes that its legal advisors, Chima and Ibrahim, “failed tocontribute significantly” and are not qualified, Ex RE-38. The BDA received independent advice from theUnited Nations which, having reviewed the CHEJVA, concluded that it was “unenforceable”,“unworkable” and “confusing”: Letter from United Nations on the CHEJVA, dated 18 December 1992,received 3 January 1993, Ex RE-37.


35

71) There is no evidence whatsoever of any written authorisation being given by the

Governor of Balochistan to authorise the BDA to act on the Government’s behalf, as

required by Article 173 of the Constitution of Pakistan (read alongside Rule 7 of the

Balochistan Government Rules of Business 1976). Instead, there is evidence that the

BDA and BHP deliberately took the decision to execute the CHEJVA without taking the

advice t of the Government of Balochistan and acting entirely in their own (illegal)

interests.

72) The starting point for these suspicions is that, contrary to the Claimant’s assertion that the

CHEJVA was vetted prior to its execution by the Balochistan Law Department and

approved by the Chief Minister of Balochistan,99 the evidence in fact establishes that the

BDA sought to evade any oversight by the remainder of the Balochistan’s civil service

when concluding the CHEJVA.

73) Contrary to the Claimant’s blithe enumeration of several Balochistan agencies that it

alleges provided “input, review, or authorization” of the CHEJVA,100 in fact the

Balochistan Law Department only received one copy of the first (of five) drafts of the

CHEJVA, more than two years before the final draft was submitted by BHP and signed

by BDA and BHP.101 Similarly the Claimant’s own evidence confirms that the Chief

Minister of Balochistan received only one briefing in the history of the negotiation of the

CHEJVA, which again was in relation to the first draft and was more than 18 months

before the final draft was submitted by BHP and signed by BDA and BHP.102 The

Claimant’s attempt to leave an impression that the BDA was consulting with the

Balochistan Law Department and the Chief Minister throughout the process of the

CHEJVA’s negotiation and execution is thus entirely misleading.

74) The Claimant also misrepresents the final vetting and approval of the CHEJVA that was

purportedly given by the Balochistan Law Department and Chief Minister. The Claimant

99 Claimant’s Memorial ¶ 49.100 Claimant’s Memorial ¶ 47.101 Summary for the Chief Minister, Exploration Joint Venture between the BDA and BHPM for Gold and

Associated Minerals in the Chagai Hills Area, Balochistan, 13 July 1993, p.3-4. CE-186.102 Ibid, p.4.


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insists that the CHEJVA was “vetted by the Provincial Government’s Law Department”

and that the “Chief Minister of Balochistan then granted his approval to the [CHEJVA]”

(despite neither entity receiving a copy of the final draft – or, indeed, any of the interim

drafts – of the CHEJVA until two weeks before it was to be executed).

75) However, the same summary sent by the BDA to the Chief Minister of Balochistan (on

which the Claimant wrongly relies to establish the wide consultation of Balochi officials)

contradicts the Claimant’s stated position. Following the letter written by then Chairman

of the BDA, Mr. Jaffar, the summary exhibits a handwritten note from the Balochistan

Chief Secretary to the Chief Minister of Balochistan. That note reads:

“C[hief] M[inister] may please see the foregoing summary and thenoting at paras. 1-13/N. The BDA should have moved theP[lanning] D[epartment] and F[inance] D[epartment] well in timeto vet the agreement. This was not done. P[lanning] D[epartment]says it requires time to vet the same.”103

76) The note continues by observing the time-pressure on Balochistan’s review of the

CHEJVA. The BDA and BHP were planning to sign it in a fortnight’s time, on 29 July

1993. The note also mentions that any such agreement has been proposed to be

“provisional” and subject to further amendments and modifications.

77) It is clear, on the face of the evidence, that the manuscript note was not the complete

story. At the end of the note in the Claimant’s exhibit, the summary is clearly marked for

the Chief Minister. The manuscript comments state that the reader should turn “overleaf”,

presumably for more information and commentary on the CHEJVA and to see the Chief

Minister’s remarks.104

78) The omission of the full manuscript from the Claimant’s memorial is telling. As the

Additional Chief Secretary for Development’s commentary on the draft CHEJVA notes,

the Government of Balochistan:

“requires the draft agreement to be vetted by the F[inance]D[epartment], Law Depart[ment] and P[lanning] &

103 Ibid, p.5.104 Ibid, p.5.


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D[evelopment] D[epartment]. This has not been done so far, noris it possible to do so before the scheduled date of signing of thisagreement (29th July).

We of course recognise that the proposed agreement is aconditional one, but this by itself does not provide adequateprotection to G[overnment] o[f] B[alochistan] ….

In all fairness BDA ought to have provided adequate opportunity tothe concerned depart[ment]s for a proper examination of the case;in the absence of this opportunity P[lanning] & D[evelopment]D[epartment] is not in a position to offer any comments on theagreement.”105

79) Although the Additional Chief Secretary Development marked the file for the attention of

the Chief Secretary, the Chairman of the BDA took the liberty to give unsolicited

clarifications. The Additional Chief Secretary for Development took note of this act by

the Chairman of the BDA and said “The file had been marked to the [Chief Secretary]

with my views at para 5-7/N. Chairman BDA who was hand carrying the file to the CS

considered it necessary to add his clarifications...”106 and repeated this commentary on

the draft CHEJVA in a longer note.107

80) The Additional Chief Secretary for Development continued to reflect how invidious a

position he had been placed in by the covert dealings of BHP with the BDA, and the short

timeframe in which those entities wanted the Chief Minister’s approval of the CHEJVA.

The Additional Chief Secretary Development’s notes (added on 23 July 1993) read as

follows:

“The fact is that few people in the Gov[ernmen]t really know whatwe are getting into in this agreement with BHP. We all of courseagree that BHP is a good party, mineral exploration in the area ishighly desirable and that we should do all we can to push thispossibility through. But we have to be mindful of our own interests– especially the possible reaction of the people of the area to a[licence] to act being reserved for BHP ...

105 Manuscript notes on the draft CHEJVA, 22 July 1993 Ex RE-39.106 Ibid.107 Ibid.


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However, as the date for the signing of the agreement has alreadybeen fixed (29th July), we may authorise the Chairman [of the]BDA to go ahead subject to the inclusion of a specific clause thatthis agreement would be of a provisional nature and anyreasonable additions/attenuations proposed by P[lanning] &D[evelopment] D[epartment]/F[inance] D[epartment], in a periodof one month from the signing of the agreement, shall beincorporated in the agreement.”108

81) This suggestion by the Additional Chief Secretary Development was reasonable and

limited, and reflected a willingness to accommodate the interests of all parties.

Unsurprisingly, the Chief Minister of Balochistan reviewed and approved it (on 26 July

1993), subject to the instructions that the agreement be provisional so the Planning and

Development Department’s comments could be incorporated.

82) The above notes also establish undue haste on the part of the BDA, presumably pushed

by BHP. The influence exerted by BHP staff on specific officials of BDA is blatantly

visible on the record. It is worrying that BHP’s staff had developed informal

communication channels with government officials and thus had access to the files and

also advance knowledge of proposed and possible governmental actions.

83) Mr. Jaffar is one such example who, as Chairman BDA, is on record pushing the

CHEJVA through the procedures in place in the Government of Balochistan, and making

every effort to fast track the process and override reservations by other senior government

officials and advisors. Mr. Jaffar was prosecuted for an offence of acquiring personal

assets much beyond his disclosed means which created a statutory presumption of corrupt

practices under the NAB Ordinance 1999.109 He was found guilty and convicted for

imprisonment of more than 12 years by the Accountability Court.110

84) Further, the Claimant misreads the “approval” of the Chief Minister of Balochistan.111

The approval of CHEJVA by the Chief Minister had to be done in the context of Section

108 Ibid, at p.9-10.109 Ex RE-40110 Judgment of the Quetta Accountability Court dated 21 May 2001 convicting Mr. Ata Muhammad Jaffar Ex

RE-41; see also ¶35 of the Kanrani Statement.111 Claimant’s Memorial ¶ 49.


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4(2)(g) of the Balochistan Development Authority Act, 1974.112 The said approval was

never processed or granted in terms of Rule 7 of the Government of Balochistan Rules of

Business 1976. The BDA is an autonomous statutory body, an independent legal entity

which can sue and be sued in its own name.113 Thus, if the BDA enters into an agreement

with any entity, it bears the sole responsibility for any and all consequences. The

Government of Balochistan cannot be held responsible for contracts entered into by the

BDA; otherwise, its statutory independence will cease to have any meaning. It is

important to emphasise that the two specific requirements under Rule 7 of the

Government of Balochistan Rules of Business 1976, namely that of signing authority and

instructions by the Law Department, were never complied with, clearly demonstrating

that the Government of Balochistan was never meant to be a party to the CHEJVA. For

any contract to bind the Government of Balochistan, the sine qua non is the meticulous

fulfilment of Rule 7 of the Balochistan Rules of Business 1976.114

85) Despite these explicit and entirely reasonable guidelines, the BDA and BHP failed to

abide by them. At a meeting on 29 July 1993, the BDA and BHP reviewed the

instructions of the Chief Minister of Balochistan.115 It is of note that the General Manager

of BHP, Mr. Shah Saad Hussain, was present in this meeting. As recorded in a document

notably omitted from the Claimant’s list of exhibits, the BDA and BHP “felt” that they

did not need to comply with the Government’s directions.116 Rather than ensure that those

instructions were reflected in a clause and thereby ensure that the interests of all parties

concerned were protected, the BDA and BHP determined on the spot and without input

from any other entity in the Government of Balochistan that the draft CHEJVA already

made provision for the Chief Minister’s guidelines. Those guidelines were, apparently,

112 Section 3(2) of the Balochistan Development Authority (“BDA”) Act 1974, Ex RE-42.113 Section 3(2) of the Balochistan Development Authority (“BDA”) Act 1974, Ex RE-42.114 In 2006 PLD 697 SC, RLA-11, the Supreme Court of Pakistan held “ … the procedural rules are not

ordinary rules framed under an Act of Parliament but are the rules which have been framed under theConstitutional provision, therefore, their status would not be less than that of an Act of the Parliament inany manner…”. The Constitution of Pakistan, Ex RE-16, at Article 139(2) makes it an obligation on theProvincial Government to make its Rules of Business.

115 RE Minutes of the Meeting Held with BHP Regarding Proposed Signing of the Agreement for JointVenture Exploration, 29 July 1993, Ex RE-43.

116 Ibid, p.1.


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covered by a clause in the CHEJVA allowing the parties “to annul, amend, modify or

supplement the provisions of this Agreement with mutual written consent” (emphasis

added).117 This clause is self-evidently a long way from the clause which was the subject

of the Chief Minister of Balochistan’s directions. The Chief Minister in effect requested

a month to vet and incorporate amendments to the final draft of the CHEJVA. The clause

on which the BDA and BHP relied in order to disregard the Chief Minister’s instructions

provided no such time period to Balochistan, and instead permitted only amendments to

the CHEJVA with which BHP agreed.

86) Directly contrary to the instructions of the Chief Minister of Balochistan, the BDA and

BHP signed the CHEJVA on 29 July 1993 without any amendments to the draft of that

document circulated only a fortnight earlier.

87) That the Chairman of a development agency “felt” able to disregard the advice of his

superior officer and to sign in haste an agreement under negotiation for at least three

years would, by itself, cast significant doubt over the motivations driving him and BHP

when executing the CHEJVA. However, the dubious circumstances in which the

CHEJVA was concluded did not end with its hasty signature on 29 July 1993.

B) THE CIRCUMSTANCES IN WHICH THE RELAXATIONS OF THE1970 BM RULES WERE OBTAINED BY BHP

88) Having procured a joint venture agreement with an autonomous government body, BHP

pushed the BDA to implement its plan to use the CHEJVA to “override” the 1970 BM

Rules.118 Hence it sought to engineer the exclusion – or, more euphemistically,

“relaxation” – of a multitude of existing Balochistan regulations which applied to the

mining sector. BHP claimed that these regulations made the CHEJVA impossible to

implement.119 BHP took the decision to use clause 2.1 of the CHEJVA (which states that

117 Ibid, p.2.118 Letter from BHP to BDA, 31 October 1991, Ex RE-34. See also Letter from BHP to BDA, 4 December

1991, Ex RE-35.119 At ¶14, page 21-22 of the Supreme Court Judgment Ex RE-18, BHP’s counsel has surprisingly admitted

that “The very text of the [CHEJVA] was potentially at variance (without prejudice) with some of BMCR1970, and therefore, it was inherently incumbent to seek relaxation thereof subject-wise so as to harmonizethe two instruments.”


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the CHEJVA was an agreement conditional on the granting of necessary approvals by the

Balochistan’s various governmental agencies) to seek an exemption from almost the

entire body of the 1970 BM Rules.

89) Thus, on 16 September 1993, BHP wrote to the BDA seeking such exemptions.120 In a

remarkable document, BHP disingenuously claims that, after 3 years of intensive

negotiations and the CHEJVA’s eventual execution, it had recently completed the due

diligence of the Balochistan mineral rules and seeks the BDA’s assistance in obtaining 13

“relaxations” of the relevant Balochistan mineral regulations, as found in the 1970 BM

Rules. The scope of these “relaxations” is enormous. BHP sought to obtain blanket

relaxations in respect of no less than 50 regulations under the 1970 BM Rules in 13

separate categories that it believed somehow hindered its wishes.121 It did so for the

purpose of circumventing the very approvals which it would otherwise have had to obtain

from the various governmental agencies under clause 2.1 of the CHEJVA.122

90) Contrary to Claimant’s assertion that “various stakeholder departments” in the

Government of Balochistan deliberated upon BHP’s requests for blanket relaxations of

the key Balochistan regulations governing the mining sector,123 the Chairman of the BDA

did virtually nothing to seek the input or authorisation of any other such agencies.

Rather, he sent only one short letter to the Balochistan Industries, Commerce and Mineral

Resources Department on Saturday 23 October 1993, noting the existence of BHP’s

request, terming them as “consents, approvals and assurances”.124 The letter was received

on 27 October 1993.

120 Letter of BHP’s Senior Counsel Martin Harris to BDA, 16 September 1993, CE-187.121 The clauses of the 1970 BM Rules which BHP cited in its letter as having some sort of impact on how it

wished to conduct its project in the Reko Diq area are Rules 3, 9(5), 10, 12, 17, 19, 20, 21, 23, 30, 31, 32b,32e, 34, 35, 37, 38, 40, 46, 47, 51, 53, 55, 56, 57, 62a, 63, 65, 66, 68, 69, 70b, 70c, 70f, 70g, 70h, 71, 72,74, 76, 77, 81, 82, 83, 86, 87, 92, 94, 95and 96: Letter from BHP to BDA, 16 September 1993, AttachmentA, CE-187.

122 Letter from BDA to Balochistan Industries, Commerce and Mineral Resources Department, 23 October1993, p.1-2, CE-188.

123 Claimant’s Memorial, ¶ 72.124 Letter from BDA to Balochistan Industries, Commerce and Mineral Resources Department, 23 October

1993, CE-188, p 2.


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91) In an astonishingly fast turn-around time for a letter of this nature, and apparently without

waiting for any response to this letter, on 28 October 1993 the research officer of the

BDA issued a notice stating that the Chairman of the BDA would convene and chair a

Provincial Development Working Party (“PDWP”) meeting on 30 October 1993.125

Attending the meeting were officials from the BDA and only three other Government of

Balochistan officials.126 Most surprising, however, was the presence of BHP’s General

Manager, Mr. Shah M Saad Husain, in what was in effect an internal government

meeting. There is, in fact, no indication in the evidence whatsoever that any detailed

deliberations were held in respect of the wide-ranging relaxations which sought

exemptions from virtually the entire body of the 1970 BM Rules.127 Instead, in a one-page

document, the meeting was recorded as deciding that the Balochistan Industries,

Commerce and Mineral Resources Department would grant the entirety of BHP’s request

for “relaxations.”128

92) Unsurprisingly, when the Law Department of Balochistan became aware that the PDWP

meeting had occurred, it immediately asked the BDA to supply a copy of the approval for

“relaxation” that had been given by the Chief Minister of Balochistan.129 The BDA was,

of course, unable to supply it and instead on 2 January 1994 furnished only a copy of the

minutes of the meeting which its Chairman himself had conducted on 30 October 1993.130

Consistent with its previous behaviour and in a threat that was barely veiled, the BDA in

125 Letter from BDA to Balochistan Industries, Commerce and Mineral Resources Department, 23 October1993, p.4, CE-188.

126 Letter from BDA to Balochistan Industries, Commerce and Mineral Resources Department, 23 October1993, p.4, CE-188.

127 Although the minutes of the meeting referred to “a great deal of discussion” of BHP’s request for“relaxations”, that discussion was not recorded in the minutes.

128 It is also pertinent to note that the Arbitration Clause 15.4 of the CHEJVA was also agreed to in this PDWPmeeting as shown in the minutes, CE-188, p.4.

129 Letter from Law Department of Balochistan to Balochistan Industries, Commerce and Mineral ResourcesDepartment, 4 December 1993 Ex RE-44; Letter from Balochistan Industries, Commerce and MineralResources Department to BDA, 30 December 1993, Ex RE-45.

130 Letter from BDA to Balochistan Industries, Commerce and Mineral Resources Department, 2 January1994, p.1 Ex RE-46.


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that same communication stressed that it wanted to receive the relevant Notification of

Relaxation by the end of the same month, or else the CHEJVA would collapse.131

93) Faced with yet another last-minute demand, and again without time for widespread

vetting of the CHEJVA by other stakeholders in the Government of Balochistan, the

Balochistan Industries, Commerce and Mineral Resources Department issued a short one-

page Notification of Relaxation on 20 January 1994.132 The Notification of Relaxation

reflected, verbatim, the 13 categories of requested relaxations contained in BHP’s letter

of 16 September 1993.133 Indeed, while the Chairman of the BDA told those attending

his meeting of 30 October 1993 of the 13 categories of requested “relaxations”134 (which

were then included, without change, in the Notification of Relaxation), there is no

evidence that the details of the requested relaxations were ever discussed by the

government. As the record stands, therefore, the BDA Chairman used his position to

cause the Balochistan Industries, Commerce and Mineral Resources Department to

hastily to issue a Notification of Relaxation without ever being made aware of the true

scope of the “relaxations” sought or the enormous number of provisions of the 1970 BM

Rules (in excess of 50) that were the subject of those “relaxations”.

94) In the rush to circumvent the 1970 BM Rules, BHP did not realise that the notification of

relaxation, rather than favouring the joint venture as a whole, in fact favoured BHP

personally. It was BHP who was the beneficiary of the illegal relaxations. In any event,

BHP abused Rule 98 of the 1970 BM Rules which provided for the relaxations of rules in

individual hardship circumstances. Rule 98 of the 1970 BM Rules reads:

“98 - The Government shall have the power to relax any or all theprovisions of these Rules in cases of individual hardship and underspecial circumstances to be recorded in writing and on terms andconditions to be fixed by it.”

131 Ibid, p.1-2.132 Notification of Relaxation, 20 January 1994, CE-189.133 Letter from BHP to BDA, 16 September 1993, CE-187. These were the same relaxations that were later

deemed by the Licensing Authority to be ultra vires: Letter from the Licensing Authority to the Secretaryof the MMDD, 8 February 2011, Ex RE-47.

134 CE-188, p.3.


44

95) It is plain, therefore, that the 1970 BM Rules could have been relaxed, but only in case of

individual hardship and special circumstances. No such case was ever made out. There is

no explanation or evidence of any “hardship” or “special circumstances” in BHP’s letter

(apart from the fact that the CHEJVA was not implementable in conformity with the

2002 BM Rules).135

96) The impact of these “relaxations” that were rushed through was felt for many years to

come. At the behest of BHP, the BDA took full advantage of the illegal “relaxations” and

obtained concessions such as:

a) the reservation of 3,347,226 acres of land in the Chagai District for the Joint

Venture on an Annual Fee of 3,347,226 Rupees;136

b) the grant of an extension for the deposit of the Annual Fee,137 and eventually, on

16 November 1994, a waiver of the amount of 3,347,226 Rupees;138

c) the extension of the area to which the relevant Prospecting Licence related from

50 square kilometres to 1000 square kilometres;139 and

d) the grant of an exclusive right for exploration in the reserved area140

97) However, those relaxations were specific to BHP and the 1970 BM Rules. The 2002 BM

Rules also paved the way for a new mineral regime with respect to which there were to be

no such relaxations. As noted by Mr Khokhar in his witness statement, there is no

equivalent of Rule 98 in 2002 BM Rules. A conscious policy choice was made by the

135 The Supreme Court spent considerable time discussing the relaxations. Pages 17 to 40 of its Judgment aredevoted to it. During hearings before the Supreme Court the Judges repeatedly asked any and all parties toproduce documents or files which could demonstrate that the relaxations were given in accordance with thestatutory framework of the 1970 BM Rules. It is a fact that the parties to the Supreme Court proceedingsfailed to produce them as such documents and or files never existed.

136 Letter dated 19 July 1994 Ex RE-48.137 Letter dated 19 September 1994, Ex RE-49. The rate at which the Annual Fee was calculated was 1 Rupee

per acre which was reduced from 5 Rupees via a relaxation of Rule 33 of the 1970 BM Rules.138 Letters dated 16 November 1994, Ex RE-50, and 21 November 1994, Ex RE-51.139 Letter dated 25 September 1995, Ex RE-52.140 Letter dated 23 November 1995, Ex RE-53.


45

drafters of the 2002 BM Rules to remove the mechanism of granting relaxations under

the Rules.141 The 2002 BM Rules made it explicit that any attempt to fetter the discretion

of the Licensing Authority in an agreement would be void.142

C) THE CIRCUMSTANCES IN WHICH THE 2000 ADDENDUM WASSIGNED

98) In 2000, BHP appeared to lose its appetite for exploration in its joint venture in the Reko

Diq area, despite having spent only US$8 million over a seven-year period:143

“Mineral exploration is a painstaking systematic step-by-step longterm process which is extremely risky. If an economical deposit isnot found in the end, all the exploration work is wasted andmillions of dollars have to be written off.

[...]

All in all, the area is under developed and is dominated by a tribalculture which has not changed over centuries. Conductingexploration and developing a mine is a unique challenge in thislargely unspoilt and isolated environment.” (emphasis added)

99) It sought to transfer its interest in CHEJVA to another company. It found Mincor with

whom it concluded the 2000 Option Agreement and the 2002 Alliance Agreement.

Mincor appears to have had concerns about the limited nature of CHEJVA as a simple

joint venture agreement which was not able to guarantee it any rights given that the

Government of Balochistan was not a contracting party to it. Hence, the condition

precedent of the Mincor Option was the conclusion of an Addendum confirming the role

of the Government of Balochistan in the CHEJVA. It is apparent that the 2000

Addendum was concluded to meet Mincor’s demands to ensnare the Government of

Balochistan. The Respondent reserves its right to seek from the Claimant an entire record

of these communications during the disclosure process so that Mincor’s precise role in

procuring this illegality can be revealed.

141 See Kokhar Statement, ¶13 - ¶14.142 Rule 9(5) and 9(6), Ex RE-1.143 History of BHP dated February 2000, Ex RE-54.


46

100) The Chairman of the BDA signed the 2000 Addendum on the BDA’s behalf and that of

the Governor of Balochistan notwithstanding the fact that he had no authority to sign on

behalf of the latter. Leaving aside the clear breach of the Balochistan Rules of Business

(Rule 7) and the Constitution of Pakistan (Article 173), this signature failed to bind the

Government of Balochistan as a matter of contract law.

101) The Pakistan Contract Act 1872,144 which governs the CHEJVA, contains detailed

provisions on agency. First, it is evident from the record that the BDA was never an

agent of the Government of Balochistan. Any contention otherwise is impossible as the

BDA Act does not empower the Chairman to execute agreements on behalf of the

Government on his own accord. Further, the BDA Chairman cannot contract the BDA out

of its statutory framework.145 The record amply demonstrates that no agency relationship

was established between the Government of Balochistan and the BDA for the execution

of the CHEJVA; neither are there any instructions from the Law Department conferring

any such authority on the BDA as required under Rule 7 of the Government of

Balochistan Rules of Business 1976. Counsel for both BDA and BHP were certain that no

such agency existed.146 BHP’s advisors stated that “it is abundantly clear on reading the

[CHE]JVA that it is in fact the BDA and not the [Government of Balochistan] who is the

other party to the [CHE]JVA” and that “the fact of Chairman BDA signing the

[CHE]JVA on behalf of the [Government of Balochistan] does not, by that fact alone,

confer an agency on the BDA”.147 Similarly, the BDA’s counsel advised as follows:

“The Parties to JVA cannot introduce GOB as 3rd Party to theagreement without its consent. Since GOB is not Party to JVA,therefore, BDA or BHP cannot compel either GOB or BDA to makethem a Party to the Addendum. The independent distinct andseparate status and capacity of BDA and GOB has been elaboratedby Mr. Kabraji in his opinions dates 3rd September, 1999 and 30thSeptember, 1999 (sic) which needs no further comment.

144 Ex RE-21.145 Messrs Gadoon Textile Mills v. WAPDA and others, 1997 SCMR 641 RLA-12.146 See Legal Opinion of Shakil Associates 10 November 1999, Ex RE-55; Kabraji and Talibuddin 3

September 1999 Ex RE-56; and Kabaraji and Talibuddin 30 September 1999, Ex RE-57.147 Legal Opinion of Kabraji and Talibuddin 3 September 1999, p.2, Ex RE-56


47

In our opinion, any addendum to the JVA can only be executedamongst the Parties, who are signatory to the JVA. As far as GOBis concerned, the same is not a party to JVA, therefore, they cannotbe included in the addendum.

Observations of the Law Department that all contracts on behalf ofthe Provincial Government under article 173 of the Constitutionare to be executed in the name of the Government of the Province,may be relevant in respect of contracts which are intended to beexecuted by the Government, whereas the JVA has been expresslyexecuted between BDA and BHP.”148

102) Second, an addendum to an agreement cannot be used to add a third party to a contract

even if it introduces the undisclosed principal of the agent who originally concluded that

contract. Under Pakistani law, an undisclosed principal can ratify an agent’s acts through

a deed of ratification. But such a deed does not include the principal as a new party to the

existing contract, but instead it is an express instrument through which the principal

adopts the agent’s acts and the promises contained in the contract.149 Modification of

agreements can only be effected by the parties to the existing contract whereas a party

can only be properly added to a contract through a novation. It is plain that the attempt to

bind the Government of Balochistan (as the purported principal of the BDA) through an

addendum agreement was not only illegal, but also invalid under the principles of

Pakistani contract law. The Supreme Court of Pakistan’s judgment considered these facts

in detail and confirmed that the 2000 Addendum was not binding on the Government of

Balochistan.

103) These, then, were the circumstances in which the CHEJVA was signed and amended and

the “relaxations” of the 1970 BM Rules were obtained. As the Tribunal will be aware

from previous pleadings in this arbitration, these circumstances have undergone recent

scrutiny by the Supreme Court of Pakistan. That Court, upon conducting a full review of

the case file, was unequivocal in its finding on 7 January 2013 that the CHEJVA

Agreements were illegal, void and non est. This was followed by a 150-page reasoned

judgment on 10 May 2013.

148 See Legal Opinion of Shakil Associates 10 November 1999, Ex-55.149 Illustrations at Section 197, Contract Act 1872 Ex RE-21. Also see Kadiresan Chetpiar v. Ramanathan

Chetti and Anr. AIR 1927 Mad 478 (SB), RLA-13.


48

D) THE CIRCUMSTANCES IN WHICH THE 2006 NOVATIONAGREEMENT WAS SIGNED

104) Eventually the 2006 Novation Agreement was concluded by BHP, the BDA (purportedly

on behalf of the Government of Balochistan) and the Claimant and had the general

purpose of replacing BHP in the CHEJVA with the Claimant. It flowed from the

CHEJVA and is part of the CHEJVA Agreements.

105) As in the case of the CHEJVA and the 2000 Addendum, the requirements of Article 173

of the Constitution of Pakistan and Rule 7 of the Government of Balochistan Rules of

Business 1976 were not met. The BDA had no authority to sign the 2006 Novation

Agreement on behalf of the Government of Balochistan.

106) The governing law of this agreement was clearly Pakistani law. The Parties agreed to

apply it and to submit to the non-exclusive jurisdiction of Pakistani courts. This point is

significant in light of the fact that Pakistani law has determined the validity of the 2006

Novation Agreement (and the other CHEJVA Agreements) in the form of the decision of

the Pakistani Supreme Court (to which the Respondent will turn shortly).

107) The Claimant proceeded to seek the Licensing Authority’s consent for the assignment of

the BHP’s interest in the Joint Venture’s Exploration Licence EL-5. The Licensing

Authority granted that request on the following express conditions in the Assignment

letter:

“M/S Tethyan Copper Company Limited (the assignee) shall payrent and royalty etc at the rate prescribed in the BalochistanMineral Rules, 2002 and as amended from time to time.

M/S Tethyan Copper Comany Limited (the assignee) shall have toassume all the obligations and to pay all outstanding dues inrespect of this Exploration License ever since its grant if theybecome due at the later stage.

M/S Tethyan Copper Comany Limited (the assignee) shall furnishan undertaking that they will observe and abide by all the termsand conditions as contained in this office letter No. DG(MM)-EL(5)/5011-22 dated 18-05-2002 and will also abide by all otherconditions of National Mineral Policy read with BalochistanMineral Rules, 2002 as approved/ amended from time to time.


49

M/S Tethyan Copper Comany Limited (the assignee) shall submitan undertaking to this effect that they will furnish regularlyquarterly progress report.

M/S Tethyan Copper Comany Limited (the assignee) shall performits obligation under the agreement signed between M/S BDA/BHPChagai Hills Joint Venture & Tethyan Copper Company Limited.

The Exploration License assigned to the M/S Tethyan CopperCompany Limited shall be terminated if they violate any of thesame terms and conditions as laid down above and in BalochistanMineral Rules, 2002.”

108) The Claimant obtained this Assignment by giving the following express Undertaking to

the Licensing Authority:

“As per the requirement of your Approval Letter, we herebyundertake that we shall observe and abide by all the terms andconditions as contained in your letter no. DG (MM)- EL (5)/2555-65 dated 8th April 2006 and will also abide by all other applicableconditions of the National Mineral Policy read with theBalochistan Mineral Rules, 2002 as approved/amended from timeto time.”150

109) The Claimant obtained the assignment of the Exploration Licence EL-5 and subsequent

renewals on the understanding that the Licensing Authority could revoke any mineral title

if any of the conditions in the Assignment letter and the 2002 BM Rules were not met.

E) THE SUPREME COURT OF PAKISTAN PROPERLY HELD THATTHE CHEJVA AGREEMENTS WERE ILLEGAL, VOID AND NONEST

110) The Supreme Court of Pakistan151 was seized of numerous petitions relating to the

conclusion of the CHEJVA, the first of which was an appeal in 2007 against the decision

of the Balochistan High Court. The centrepieces of those petitions were four

150 CE-206151 CP 796 of 2007; CP 68 of 2010; CP 69 OF 2010; Crim. Original Petition of 2011 and 95 of 2012; CP 1 of

2011; CP 4 of 2011, Ex RE-58; In 2007 the petitioner Mr. Maulana Abdul Haq Baloch lodged an appealbefore the Supreme Court against the decision of the Balochistan High Court in case Constitutional PetitionNo. 892 of 2006. During the proceedings, a number of other parties became interested parties and lodgedtheir own petitions, including Human Rights Petition No. 5377-P of 2010 and Criminal Original PetitionsNo.1 of 2011 and 95 of 2012 in Constitutional Petition No. 69 of 2010.


50

constitutional petitions which, though each different in detail, generally sought the

Supreme Court’s review of governmental actions relating to the CHEJVA Agreement.152

i) THE SUPREME COURT PROCEEDINGS

111) The Supreme Court of Pakistan is one of the most fiercely independent judiciaries of final

appeal in the Commonwealth. It reached its conclusions in relation to the CHEJVA and

other matters only after lengthy hearings, detailed submissions and its own full review of

the governmental case file. The last stretch of hearings before the Supreme Court lasted

for six weeks. Out of the said six weeks, at least four and a half were given to the

Claimant’s internationally reputed Senior Counsel and widely respected former Federal

Law Minister, Mr. Khalid Anwar, who addressed the court at length. Another three days

were taken up by the arguments of Mr. Hafiz Pirzada, another former Federal Law

Minister and reputed international counsel of BHP. The counsel for the Claimant’s parent

companies adopted the arguments of Mr. Khalid Anwar to save the time of the Court.

There was no suggestion that the Claimant’s rights to due process were not fully observed

during the Supreme Court proceedings. In fact, the Claimant was able to obtain from the

Supreme Court several favourable orders that became the foundation of its present claim.

For example, TCCP’s Mining Lease Application, which is the basis of its present claim,

was submitted under the directions of an interim order.153 The Mining Lease Application

was thus processed and decided under the orders of the Supreme Court.

112) Paragraph 13 and 14 of the Order of Supreme Court dated 25 May 2011 states:

“We are in agreement with the learned counsel for the parties andare of the opinion that at this stage it will not be proper for us toinquire into the Feasibility Study Report or to rule upon theentitlement of TCC to the mining lease. The reason, is that underthe governing law and 2002 Rules, this matter falls exclusively

152 Ibid. Also see: Constitutional Petition by M. Tariq Asad, 6 November 2010, CE-172; ConstitutionalPetition by the Watan Party, 8 November 2010, CE-173. Additional petitions were later filed:Constitutional Petition by Qazi Siraj Sanjrani and another, 4 January 2011, CE-268; Constitutional Petitionby Senator Swati and others, 24 January 2011, CE-270.

153 In the Order the Supreme Court noted: “Mr Khalid Anwar Sr. ASC has stated that as far as the partiesinterested in obtaining the mining lease are concerned, they have only to submit an application to theGovernment of Balochistan before 19.2.2011 and then it is for the Government of Balochistan through thecompetent authority to take the decision to consider the request or whatever position may be…” Ex RE-6.


51

within the domain of the Government of Balochistan and theGovernment is also seized of the Feasibility Report as well as theapplication of TCC. ... it will not be proper for us to pre-empt thedecision of the Government of Balochistan by entering into themerits of the case at this juncture.

[..]

The competent authority is the Government of Balochistan shallproceed to expeditiously decide TCC’s application for the grant ofmining lease transparently and fairly in accordance with the lawand the rules. In so doing the Government of Balochistan shall notbe influenced in any manner whatsoever by the pendency of theseproceedings or by the orders therein passed by this Court.”154

113) The Supreme Court record is attached as Ex RE-58 and demonstrates the various parties

and their positions adopted before the Supreme Court. All the petitioners and respondents

in the Supreme Court case would need to be recalled, all the documents examined anew

and all the parties heard afresh if this Tribunal desires to examine the established

illegality and invalidity of the CHEJVA and thereby challenge the Supreme Court’s

reasoned judgment.

114) The Claimant makes much of a change of position between the Government of

Balochistan’s final submissions to the Supreme Court and its earlier submissions to the

Balochistan High Court.155 However, this submission is not to the point. As the Supreme

Court noted in its Judgment, the Government of Balochistan altered the position adopted

by its predecessors upon its receipt and review of the full documents and facts of the case.

115) On 8 February 2011, the Supreme Court of Pakistan directed the Government of

Balochistan to produce and submit the entire record pertaining to the CHEJVA and the

related contracts. Earlier the Supreme Court had been annoyed at the failure on the part of

the Government of Balochistan to produce the record as it wanted to satisfy itself about

the reasoned basis of the different positions taken by the Government in its pleadings

before the Balochistan High Court and initially before the Supreme Court. In compliance

with the Supreme Court’s orders, the record was obtained from the archives of the BDA

154 Ex RE-5.155 Claimant’s Memorial, Section II.C.6; see also Submissions of the Government of Balochistan in the High

Court of Balochistan, undated, CE-212.


52

and other departments of the Government of Balochistan. The record was then filed

through several applications. It made shocking disclosures of extensive irregularities from

which corrupt practices could be inferred.

116) The then government officials, including the Advocate General, examined the record and

decided not to defend the irregularities and instead rendered full assistance to the court in

relation to the record. Indeed, the Governments of Pakistan and Balochistan have a duty

to assist the Supreme Court under the Constitution of Pakistan, and the counsel

representing the Governments is an officer of the Court. Neither can the Governments or

its counsel hide documents from the Supreme Court, nor can they misrepresent such

documents or the law pertaining thereto. Pakistani law permits a modification of a party’s

position if there are developments subsequent to the filing of the case.156 The decision to

adopt a neutral position was taken by the Government of Balochistan as the Supreme

Court has repeatedly encouraged and instructed officials to perform their duties while

disregarding any unlawful order or irregularities on the part of their predecessors.157 This

is explained more fully in the Kanrani Statement ¶27 to 29.

117) Once the full review of the case file had been completed, the Government of Balochistan,

in good faith, withdrew its support for the CHEJVA and adopted a neutral position,

submitting that the Supreme Court should decide the matter on the merits. Contrary to the

Claimant’s allegation, the Governments of Balochistan and Pakistan did not “attack” the

CHEJVA.158 The Government of Balochistan’s counsel performed its duty towards the

Supreme Court by handing over additional documents, explained the position of Pakistani

law to the best of their ability and left it to the Supreme Court to decide the matter on the

merits.

ii) THE FINDINGS OF THE SUPREME COURT

118) After lengthy hearings, the Supreme Court issued an order in relation to the various

petitions brought before it in relation to the CHEJVA and TCCA’s activities on 7 January

156 See: PLD 1985 SC 345 RLA-14; 2007 CLC 441 RLA-15; 2004 CLC 697 RLA-16.157 See: 2008 SCMR 105 RLA-17; PLD 1995 SC 530 RLA-18; PLD 2010 SC 759 RLA-19.158 Claimant’s Memorial ¶ 22, p. 4. See also the Kanrani Statement, paragraphs ¶28, ¶30-¶48.


53

2013.159 That order, though providing a summary of the basis of its dispositive part,

expressly stated that “detailed reasons [would] be recorded later”.160

119) Those reasons were rendered on 10 May 2013.161 They in essence rely on a finding that

the conclusion of the CHEJVA by the BDA in 1993 (and even when considered in light

of the 2000 Addendum) was ultra vires and thus void. In particular, the Supreme Court

held that the conclusion of the CHEJVA fell outside the powers granted to State

authorities under, inter alia, the 1948 Act and the 1970 BM Rules which were

promulgated pursuant to that statute. Similarly, it held that the “relaxations” of the 1970

BM Rules were not made in accordance with Pakistani law. In summary, Pakistani law

requires that such “relaxations” be granted only once “hardship” is established162 which it

had not been in the present circumstances. As the conclusion of the CHEJVA was ultra

vires, the Supreme Court declared that it was void and non est. As a matter of Pakistani

law, it did not exist and did not confer any rights on BHP, Mincor, the Claimant in this

arbitration, TCCP, Antofagasta or Barrick. This being so, each element of the contractual

regime premised on the CHEJVA – including the 2000 Addendum, the 2000 Option

Agreement, the 2002 Alliance Agreement and the 2006 Novation Agreement – was also

void.

120) In greater detail, the Supreme Court held:

a) once the Supreme Court had inspected the “entire record relating to CHEJVA”, it

found that the record “made shocking disclosures of extensive irregularities and

corruption”;163

159 Judgment of the Supreme Court of Pakistan delivered on 7 January 2013 Ex RE-22. The KanraniStatement sets out a detailed explanation of the Supreme Court proceedings.

160 Judgment of the Supreme Court of Pakistan delivered on 7 January 2013, p.15 Ex RE-22.161 Judgment of the Supreme Court of Pakistan released on 10 May 2013 Ex RE-18.162 Rule 98 of 1970 BM Rules provides as follow Ex RE-2: “Relaxation- The Government shall have power

to relax any or all the Provisions of these Rules in cases of individual hardship and special circumstancesto be recorded in writing and on terms and conditions to be fixed by it.”

163 Judgment of the Supreme Court of Pakistan released on 10 May 2013, p.79 and 139. Ex RE-18.


54

b) “BHP [was] well aware of the restrictions imposed by” the 1970 BM Rules when

it was concluding the CHEJVA with the BDA, that they sought and obtained an

agreement which “rendered nugatory [the 1970 BM Rules] in all substantial

aspects” and that they “also attempt[ed] to bind future governments to ratify the

departure being made from the law”;164

c) while a “plain reading of the provision [in] rule 98 [of the 1970 BM Rules] makes

it clear that it provides for relaxation of any of the provisions of [the 1970 BM

Rules] in cases of individual hardship and under special circumstances to be

recorded in writing”,165 BHP’s correspondence with the BDA at the time of

concluding the CHEJVA showed that “neither BHP nor BDA in seeking

relaxation of the rules fulfilled the requirements stated in rule 98” and that the

ultimate “grant” of those relaxations made “no grant of hardship of whatever

nature, or the existence of any special circumstances making out a case for

invoking the provision of said rule”;166

d) “all relaxations [of the 1970 BM Rules] were granted in excess of authority and

were entirely beyond the scope of the provisions of the law, and therefore ultra

vires the powers granted under rule 98 … and thus void”;167

e) “[a]s all key provisions of CHEJVA were made subject to a reliance on

relaxations that were illegal and void ab initio, the illegality of the agreement

seeps to its root. As such no operative part of the agreement survives to be

independently enforceable and the principles of severability cannot be applied to

save any part thereof. The agreement is, therefore, void and unenforceable in its

entirety, under the law”;168

164 Ibid, p.33.165 Ibid, p.34.166 Ibid, p.38-39.167 Ibid, p.39.168 Ibid, p.39.


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f) numerous aspects of the CHEJVA related to the procedure of applying for

prospecting licences were in breach of the 1970 BM Rules, including the rule

therein that “no prospecting licence shall be granted in the first instance for a

period of less than one and more than two years”;169

g) the CHEJVA “having been found and declared to be a void agreement, …there

was no room left for BHP to build the superstructure on its basis, namely,

Addendum No.1, Option Agreement, Mincor Option, Alliance Agreement,

Novation Agreement or the subsequent share purchase agreement”, and that as a

consequence, “the transfers of interest from BHP to Mincor NL to TCC to

Atacama to Barrick Gold to Antofagasta to TCCP all were illegal

transactions”;170

h) there was no evidence that “the Finance Department [of Balochistan] … had

approved” the CHEJVA and that the conclusion of the CHEJVA was an

“attempt[] to take undue advantage out of the political instability prevailing at the

time”;171

i) the Chairman of the BDA who ushered through the CHEJVA in the fashion

demanded by BHP, and the fact of whose “conviction has not been rebutted”, had

a “clear conflict of interest” which explained his “visible haste … to execute the

agreement” and his “disregard [of] caution sounded by several departments”;172

169 Ibid, p.42.170 Ibid, p.49. As noted previously, the transfers of the shareholdings in the Claimant from Mincor to

Antofagasta and Barrick not only occurred without the Respondent awareness or consent, but also resultedin a significant shift in the scope of the project in the Reko Diq which was being contemplated, from alimited project focused on H-4 requiring limited infrastructure, to a massive project encompassing at leastH-14 and H-15 and requiring huge infrastructure (such as a trans-provincial pipeline).

171 Ibid, p.60. It is plain from the record that BHP and the BDA pushed the CHEJVA during the tenure of acaretaker government after the premature dismissal of the Elected Government.

172 Ibid, p.65.


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j) the approval by the Governor of Balochistan of the ability of the Chairman of the

BDA to sign the 2000 Addendum, which was issued “on … undated plain paper

was improper and untenable in the eyes of law”;173 and, in any event

k) the BDA could not act as the agent of the Government of Balochistan when

signing various agreements because there existed no “document creating a

relationship of principal and agent between [the Government of Balochistan] and

the BDA”.174

121) The Supreme Court also referred to a more fundamental issue, namely, BHP’s awareness

by no later than 1999 that the CHEJVA suffered from basic uncertainties and was void.

On 3 and 30 September 1999, BHP received advice from a well-known Pakistani

commercial law firm, Kabraji and Talibuddin, stating that, inter alia: (1) there was some

confusion as to who were the parties to the CHEJVA, but it appeared that the BDA rather

the Government of Balochistan was the party opposite BHP; (2) the signature of the

CHEJVA by the Chairman of the BDA would not in itself create a relationship of agency

between him and the Government of Balochistan without some prior agreement of that

relationship; and (3) the attempt in clause 2.4 of the 2000 Addendum to rectify this

problem was not sufficient or effective.175 The existence of this legal advice clearly

indicates that BHP was aware that the CHEJVA was void and unenforceable and the

attempt to bind the Government of Balochistan through the 2000 Addendum was

ineffective.

122) The Supreme Court also determined that the Government of Balochistan is not, and never

was, party to the CHEJVA (or the 2000 Addendum or the 2006 Novation). It is worth

quoting the Supreme Court’s judgment in some detail:

“It may be noted that under Article 173(3) of the Constitution, allcontracts made on behalf of the Federation or of a Province shall

173 Ibid, p.89.174 Ibid, p.90.175 Opinion of Kabraji and Talibuddin, 3 September 1999, Ex RE-56; Opinion of Kabraji and Talibuddin, 30

September 1999, Ex RE-57; Judgment of the Supreme Court of Pakistan, released on10 May 2013, p.86-87, Ex RE-18.


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be expressed to be made in the name of the President or, as thecase may be, the Governor of the Province, and all such contractsand all assurances of property made in the exercise of thatauthority shall be executed on behalf of the President or Governorby such persons and in such manner as he may direct or authorize,whereas under Article 139(2), the Provincial Government shall, byrules, specify the manner in which orders and other instrumentsmade and executed in the name of Governor shall be authenticated.Under rule 7(2) of the GOB Rules of Business, 1976 framed byGOB in pursuance of Article 139(2) ibid, all executive actions ofGovernment shall be expressed in the name of the Governor; unlessan officer has been specifically empowered to sign an order orinstrument, it shall be signed by the Secretary, the AdditionalSecretary, the Joint Secretary, the Deputy Secretary or the SectionOfficer to the Government in the department concerned and suchsignature shall be deemed to be the proper authentication of suchorder or instrument; and that instructions for the making ofcontracts on behalf of the Governor and the execution of suchcontracts and all assurances of property shall be issued by the LawDepartment.”176

123) Having explained this position as a matter of Pakistani law, the Supreme Court

continued:

“Now, it is to be seen whether CHEJVA was entered following theabove parameters. The title page of CHEJVA recites that theAgreement for Chagai Hills Exploration Joint Venture is madebetween the Balochistan Development Authority and BHP MineralsInternational, Exploration Inc., whereas its opening page describesthat the Agreement is between “the Governor of Balochistanthrough the Chairman, Balochistan Development Authority, astatutory corporation of Balochistan Province” and “BHPMinerals International Exploration Inc., a corporation of the Stateof Delaware, USA”. The Agreement was signed on the one hand bythe Chairman BDA and on the other by the representative of BHP.Relying on these recitals, the learned counsel for BHP took theposition that GOB was a party to CHEJVA for all practicalpurposes, which it had executed through its agent BDA. In thisbehalf, it is noteworthy that as per the definition clause ofCHEJVA, “Parties” means BHP and BDA. Clause 2.1 of CHEJVAprovides, inter alia, that the Agreement shall be conditional uponthe Parties receiving from the Federal Government and/or theProvincial Government within six months of the date of theAgreement, or such other period as the parties may agree, all

176 Ex RE-18 ¶ 69 at p. 83.


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consents and approvals necessary under Pakistani law. This amplymakes it clear that both GOB and the Federal Government wereentities outside the ambit of “Parties” from where the “Parties” toCHEJVA were to seek the necessary consents and approvals.”177

124) On the basis of these facts and its interim conclusion that Balochistan was not, as a matter

of Pakistani law, one of the “Parties” to the CHEJVA, the Supreme Court drew further

conclusions:

“However, by execution of the Addendum, which was signed on04.03.2000, some 7 years after the signing of CHEJVA, wherebyCHEJVA was sought to be amended, a completely new turn wastaken in many respects. The opening page of the Addendum recitesthat the Addendum is made between the Governor of Balochistan,for and on behalf of the Province of Balochistan, referred to as“GOB”, and the Balochistan Development Authority, a statutorycorporation created by and existing under the BDA Act, 1974, andBHP Minerals. Thus, in the Addendum, as against the originalbipartite agreement, a tripartite agreement was executed, and GOBis purported to be made a party. Such an assumption constituted amistake of fact as rightly asserted by the learned counsel for GOB.Further, the last page of the Addendum shows that it was signed bythe Chairman BDA on two counts, firstly on behalf of the Governorof Balochistan, and secondly on behalf of BDA, and then by therepresentative of BHP. In this behalf, it must be mentioned herethat merely because Governor of Balochistan was mentioned in thetitle of CHEJVA would not mean that GOB had become a party tothe agreement. It is clear that CHEJVA was made between BDAand BHP alone for all practical purposes, and not between GOBthrough BDA and BHP. Therefore, recitals in the Addendum, byway of preamble, that GOB through Chairman BDA and BHPintended to enter into a Joint Venture Agreement and it wasdesirable to clarify the roles of GOB and BDA thereunder; thatGOB intended to appoint BDA as its agent in connection withCHEJVA, or GOB affirmed that BDA had been exercising rightsand discharging obligations under the Agreement as if it were ajoint venturer rather than the agent of GOB, or GOB clarified therole of BDA under CHEJVA as agent of GOB and the scope of itsauthority to act on behalf of GOB in connection with CHEJVA, orGOB ratified all past actions, matters and things done by BDA inconnection with CHEJVA all were devices to indirectly bring GOBinto the pale of CHEJVA, which object could only be achieved byfollowing the course provided under the law. All these

177 Ex RE-18 ¶ 69 at p. 84.


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clarifications and ratifications were based on a mistake of factwithin the contemplation of section 20 of the Contract Act, 1872,i.e., GOB was a party to CHEJVA and BDA was agent of GOB.Such a mistake of fact on the part of BHP made the contract voidand unenforceable.”178

iii) THE SUPREME COURT’S RULING IS UNDOUBTEDLYCORRECT AND ESTABLISHES PAKISTANI LAW AS AMATTER OF FACT

125) It is impossible for the Claimant to prove that the CHEJVA is a legally binding

agreement and is valid. The Supreme Court’s judgment establishes Pakistani law on this

point as a matter of fact. In addition to the many other failings associated with the

CHEJVA Agreement, it is abundantly plain that BHP never intended to work within the

ambit of the laws and rules of Pakistan nor Balochistan. In BHP’s letter dated 31 October

1991, it was stated:

“General Issues

1. Nature of Agreement: It was our original intention that theAgreement be entered into with the Government of Balochistan.The purpose of such an arrangement was to ensure that the effectof those provisions of the Mining Concession Rules which causeBHP difficulty could be overridden. When we meet, perhaps wecan discuss means by which those concerns which we have inrelation to certain aspects of the Mining Concession Rules might beaddressed.”179 (emphasis added)

126) In a later letter of 4 December 1991, BHP wrote to the BDA lawyers saying:

“Mining Concession Rules: As we discussed, various sections of theMining Concession Rules cause us some difficulty. We wouldexpect that the Agreement will specifically address those ruleswhich are problematic and be subject of a Notified Order so as toovercome the Rules.”180 (emphasis added)

127) This letter makes it plain that the purpose of the CHEJVA was to “override” and

“overcome” the laws of Balochistan. This is a blatant violation of Section 23 of the

178 Ex RE-18 ¶ 69 at p. 85.179 BHP Letter dated 31 October 1991 issued by Bernard M Joyce, Solicitor, BHP, Ex RE-34.180 BHP letter dated 4 December 1991 issued by Bernard M Joyce, Solicitor, BHP, Ex RE-35.


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Contract Act 1872181. It is an admitted fact that the CHEJVA was made solely for the

purpose of defeating the provisions of the Constitution of Pakistan182, the Mines Act

1948183 and the 1970 BM Rules. Such an agreement cannot be allowed to exist under

Pakistani law which makes it plain that all such agreements are unlawful and void.184

Section 23 of the Contract Act 1872 declares all agreements which “if permitted, …

would defeat the provisions of law” illegal and void.

128) One of the premises on which the Supreme Court struck down the CHEJVA Agreements

is Section 23 of the Contract Act 1872:

“No doubt foreign investment in any modern economy is to beencouraged by all means, but all such activities are required to becarried out observing due process of law, which alone is a sureguarantee of the protection and promotion of the public interest.Reference may be made to the case pertaining to establishment offast food restaurant in F-9 Park, Islamabad, reported as HumanRights Case No. 4668 of 2006 (PLD 2010 SC 759) wherein it hasbeen noted that a good number of foreign investors are doingtrade/business in the country in accordance with the law on thesubject. In the instant case, it appears that BDA entered intonegotiations with BHP and took up the issue of grant of explorationrights with GOB in a most haphazard manner. … In the instantcase, CHEJVA was entered into in violation of a large number ofprovisions of BMCR 1970. It is, therefore, opposed to publicpolicy, which calls for across the board enforcement and

181 Ex RE-21, Section 23: “What consideration and objects are lawful and what not – The consideration ofobject of an agreement is lawful, unless – it is forbidden by law; or. is of such a nature that, if permitted, itwould defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person orproperty of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases,the consideration or object of an agreement is said to be unlawful. Every agreement of which the object orconsideration is unlawful is void”.

182 Ex RE-16, Article 173(1): “173. Power to acquire property and to make contracts, etc.− (1) The executiveauthority of the Federation and of a Province shall extend, subject to any Act of the appropriateLegislature, to the grant, sale, disposition or mortgage of any property vested in, and to the purchase oracquisition of property on behalf of, the Federal Government or, as the case may be, the ProvincialGovernment, and to the making of contracts.”

183 Regulation of Mines and Oil-Fields and Mineral Development (Government Control) Act 1948, Section 2and Section 5 Ex RE-19.

184 See: 1995 CLC 1906, RLA-20; 1991 CLC 1591, RLA-21; 1984 SCMR 1, RLA-22.


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application of the laws of the land. CHEJVA is hit by section 23 ofthe Contract Act, on this score.”185 (emphasis added)

129) The Supreme Court also held:

“Considering the similarity of the facts and points of law involvedin the [Cudgen Rutile] case, the principles set therein have apersuasive value for the purposes of the case in hand. Variousrecitals in CHEJVA, Addendum, Novation Agreement, MincorOption, Alliance Agreement, all have purported to bind theGovernment and its functionaries in the discharge of theirstatutory duties, which is not permissible. This aspect too isopposed to public policy in terms of section 23 of the ContractAct, 1872. Accordingly, all the said instruments are void and notenforceable in the courts of law.”186 (emphasis added)

130) The result of the above is plain. The CHEJVA could not be saved because its object was

against public policy.

III.4 THE CLAIMANT NEVER HAD A RIGHT TO MINE THE REKO DIQ AREA

131) As noted above, the CHEJVA was concluded on 29 July 1993. Contrary to the

Claimant’s selective and misleading presentation of the CHEJVA, that agreement

bestowed no right to a mining lease on the Claimant or any other party associated with

the Claimant. It was clear that all mineral titles, including any mining lease, must be

granted pursuant to the routine procedures of the applicable BM Rules. Further, all

applicants were expected to strictly fulfil the requirements of the rules when submitting

their applications. Thereafter, the Licensing Authority had a broad discretion whether to

accept or reject the said application under the BM Rules.

A) THE CHEJVA DOES NOT CONFER A RIGHT TO ANY MINERAL TITLE

132) As explained above, the CHEJVA was an unincorporated joint venture agreement which

regulated the relationship of the joint venture parties. As is to be expected from such an

agreement, the CHEJVA stipulates, inter alia, which of the parties will: (1) finance the

project; (2) manage the project; (3) make applications; (4) provide administrative support;

185 Ex RE-18 at ¶44.186 Ibid, at ¶47.


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and (5) provide accommodation for staff. The work programme and phases of work

envisaged were also stipulated in the CHEJVA.

133) However, considering that the Claimant has based its entire case for an entitlement to a

mining lease on the terms of the CHEJVA, it is quite remarkable that it is unable to point

to any explicit stipulation therein to the effect that the BDA, or the Licensing Authority,

or any specific arm of the government will grant it a mining lease. This is because of the

simple reason that no such provision exists in the CHEJVA. Indeed, if one of the

responsibilities of the BDA was to grant mineral titles, the CHEJVA would have

recorded it as an obligation owed by the BDA to the Joint Venture.

134) Likewise, the Claimant cannot show an entitlement to mine 99.4 square kilometres of

Reko Diq under the CHEJVA and/or the 2002 BM Rules. TCCP’s Mining Lease

Application sought to mine 99.473 square kilometres in the exploration area EL-5,

without providing for any value addition in the form of a smelter or refinery and on the

premise that the concentrate would be pumped out in a 682 kilometre pipeline to the

port.187

135) If the CHEJVA did in fact give the Joint Venture any rights to mine in Balochistan, then

the Pakistan Contract Act 1872 would have deemed the CHEJVA invalid on yet another

count – that it defeats the provisions of the licensing regime by effectively overriding and

circumventing them. Such an interpretation would be frustrated by Section 23 of the

Contract Act which stipulates:

“What considerations and objects are lawful and what not:

The consideration or object of an agreement is lawful, unless—it isforbidden by law; or

is fraudulent; or

involves or implies injury to the person or property of another; or

the Court regards it as immoral, or opposed to public policy.

187 The practicality of this proposal is address in the Chief Secretary’s Statement at ¶35, 36, 37, 38 and 39.


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In each of these cases, the consideration or object of an agreementis said to be unlawful. Every agreement of which the considerationor object is unlawful is void.”

136) Article 5.2 of the CHEJVA makes it plain that the agreement by itself does not confer any

rights upon any of the parties to even conduct exploration activities in the Reko Diq area,

much less mining. Even the right to explore has to be obtained from the Licencing

Authority through an application.

137) The cornerstone of the Claimant’s interpretation of the CHEJVA is that Article 11.8.2

gave it the right to convert the Joint Venture’s exploration licence into a mining lease for

itself.188 In advancing this construction of the CHEJVA, the Claimant relies on a

selective and misleading interpretation of the CHEJVA. Article 11.8.2 of the CHEJVA

reads as follows:

“Where the Joint Venture or, pursuant to sub-clause 11.3.2, aParticipating Party elects to develop a mine then, subject only tocompliance with routine Government requirements, it shall beentitled to convert the relevant Prospecting Licence(s) held by itinto Mining leases so as to give secure title over the requiredMining Area.”189

138) The Claimant emphasises the words “shall be entitled” in that provision.190 This, it says,

gives it “a right under … the CHEJVA … to mine Reko-Diq”.191 Such an interpretation is

flawed. The Claimant was fully aware that not only did the CHEJVA not grant it a right

to explore, but that any right to explore, obtained from the Licensing Authority under

licence, did not automatically entail the right to mine. This is clearly stated throughout

CHEJVA. The very first paragraph of the preamble to CHEJVA where the parties

announced their intention to enter into the agreement plainly states that the lease is not

guaranteed:

188 See Claimant’s Memorial ¶ 58.189 CE-1.CHEJVA, 29 July 1993, Article 11.8.2.190 Claimant’s Memorial ¶ 58, 414 and 509.191 Claimant’s Memorial ¶ 509.


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“The parties wish to enter into a joint venture for the purpose ofconducting exploration for and, if warranted, developing anyMineral deposits within the Exploration Area”.192 (emphasis added)

139) Even a cursory reading of Article 11.8.2, let alone also of the context of the remainder of

the CHEJVA in which it is located, confirms that the Claimant had no such automatic

“right … to mine Reko-Diq”.193 The terms of Article 11.8.2, even when read alone,

clarify that the provision speaks to the standing of the Joint Venture or sole Participating

Party to apply for a mining lease, subject to satisfying the preconditions in the CHEJVA

and “routine Government requirements”. This is not a promise by the BDA (or

Balochistan) to grant a mining lease. Instead it is a clarification of how the relations

between the parties will operate in the event the Joint Venture or a Participating Party

elects to develop a mine.194 It expressly recognised that any attempt to obtain a mining

lease must comply with “routine Government requirements”, which for present purposes

are primarily those in the 2002 BM Rules. The Claimant tries to downplay the

significance of this precondition, and appears to suggest that the burden of the

requirements set out in the 2002 BM Rules is insignificant,195 but this is incorrect.

140) Article 11.8.2 is located in Article 11, which is entitled “Decision as to Mine

Development”. Article 11 of the CHEJVA is a long provision setting out in detail how a

decision to develop a “Mining Area”196 in relation to a specific “Mineral deposit”197 is to

be taken. The connection between Article 11.8.2 and that broader context in Article 11 is

clearly evidenced in the words “to give secure title over the required Mining Area” in

Article 11.8.2 (emphasis added). The requirement that a mining lease be sought only in

relation to a “Mining Area” is an explicit limitation of the scope of the lease that can be

sought. In other words, a mining lease can only be sought and granted in relation to a

“Mining Area” rather than to any area over which the Joint Venture or the Participating

192 CE-1, CHEJVA, 29 July 1993, Preamble.193 ICC Transcripts, Hearing of 4 December 2012 Ex RE-59 ¶ 108.194 BHP’s letter of 2 April 1993 noted that Article 11 provides for the possibility of one party proceeding with

a sole risk development: Letter from BHP to BDA, 2 April 1993, p.7-8, Ex RE-36.195 See, e.g., Claimant’s Memorial, ¶ 421.196 CE-1, CHEJVA, 29 July 1993, Article 11.1.197 Ibid, Article 11.1.


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Party wishes to obtain rights to mine. The full import of this limitation is clarified by the

context of the provision.

141) As a threshold issue, therefore, a mining lease can only be sought over a specific mineral

deposit located within an identified mining area. Further, before the Joint Venture or a

Participating Party can apply for a mining lease in relation to a Mineral Deposit, a

feasibility study must be conducted (whose scope must be approved by the Operating

Committee) and then the other partner must be given an opportunity to elect participation

in making a mining lease application under Article 11.3.2. A mining lease is not,

therefore, validly to be sought in relation to any area of land which is broader than that

which is covered by a “Mining Area” without going through the procedures set out in

Article 11. The provisions of Article 11 of the CHEJVA thus legislate for this purpose in

the following steps.198

142) First, either party to the CHEJVA could during the explorations conducted under the

agreement, after giving notice to the other party, require the Operating Committee199 to

consider whether a feasibility study should be conducted in respect of any area which

contains “any mineral deposit which has been discovered” in the area the subject of the

exploration.200 Article 11.1 begins by stating that “At any time during the Exploration

Programme any Party may by notice given to the other parties require the Operating

Committee to consider at its next appointed meeting whether or not a Feasibility Study

should be conducted in respect of any area ...”. The remainder of Article 11 outlines how

the parties to the joint venture would proceed if they considered that they should

undertake a feasibility study over an area containing a mineral deposit. This provision,

like all others in the CHEJVA, manifestly does not confer any rights upon the Joint

Venture, or the parties to the Joint Venture, and only serves to regulate their relations.

198 See also: Respondent’s Response to the Claimant’s Request for Provisional Measures, ¶ 61-80;Respondent’s Answer to the Claimant’s Reply on Provisional Measures ¶ 42-52.

199 The Operating Committee was the body constituted of two appointees of each party to the agreement forthe purpose of, broadly expressed, oversee the exploration activities conducted under the agreement anddecide whether a mining venture might be appropriate and possible in light of information gathered as aresult of exploration activities: CE-1, CHEJVA, 29 July 1993, Article 8.

200 CE-1, CHEJVA, 29 July 1993, Article 11.1.


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143) Second, the Operating Committee would decide by majority vote whether the Manager –

which was defined as BHP or any successor to it201 – should conduct such a feasibility

study.202

144) Third, upon receipt of any such feasibility study, each party had 90 days to advise the

Manager whether it intended to participate in the development of “the said Mineral

deposit as a Mining Area”.203 If it did so intend, it became a “Participating Party”; if not

(or if it did not reply), it became a “Non-participating Party”.204 This is an important

step. Because the feasibility study must cover a “Mining Area” and relate to a specific

“Mineral deposit”,205 this in effect means that the decision of each party on whether or

not to become a Participating Party must be based on a feasibility study for every covered

“Mineral deposit”. In other words, the obligation of BHP (or any successor to it) to

present a feasibility study for a proposed “Mining Area” to the BDA in the forum of the

Operating Committee in effect meant that BHP was obliged to offer the BDA an

opportunity to become a Participating Party in respect of all “Mineral deposits” covered

by its Feasibility Study which would form the basis of the Mining Lease Application.

BHP or any successor to it were thus not permitted to present a feasibility study for one

or more specified mineral deposits and then use any decision by the BDA not to become

a Participating Party as an excuse to seek a mining lease over additional and different

mineral deposits in the area covered by Exploration Licence EL-5. Such a mismatch

between the feasibility study presented to the Operating Committee and the Mining Lease

Application presented to the relevant approval authority is clearly forbidden by the

operation of Article 11 of the CHEJVA.

145) Fourth, if the BDA did not intend to become a Participating Party, then the other party to

the CHEJVA (at the time of execution, BHP) could elect to develop a mineral deposit on

its own sole risk or in a consortium, provided that it obtained “all routine Government

201 Ibid, Article 1.1.202 Ibid, Article 11.2.203 Ibid, Article 11.3.1.204 Ibid, Article 11.3.2-3.205 Ibid, Articles 11.1 and 11.3.2-3.


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approvals required”206 and followed the contractual procedure for its acquisition of the

Non-participating Party interest in the Joint Venture Property in accordance with Article

11.6.207 The precise scenario of the BDA being the non-Participating Party is considered

in Article 11.4, which the Claimant has conveniently glossed over because it failed to

satisfy the condition precedent of acquiring the BDA’s interest. Although not mentioned

in its pleadings, the Claimant did attempt to engage in negotiations to acquire that

interest, but only after making the Mining Lease Application. This fatal failing is

discussed further below.

146) Fifth, the Participating Parties were, within a set timeframe,208 to “segregate” from the

area subject to the exploration licence the “boundaries of the Mining Area established by

the said [Feasibility] Study and shall thereby establish a joint venture in respect of such

area (the ‘Mining Venture’).”209 Hence, the boundaries of the Mining Area are

established by the scope of the Feasibility Study.

147) It is worth pausing in the process at this point. Even in these preparatory stages, it is

clear that the concept of a “Mining Area” has a particular meaning in the terms of the

CHEJVA. It is something very different to the (much vaster) area that comprises the

exploration area. Rather, from the above provisions, it is already evident that a Mining

Area is an area that: contains a “mineral deposit which has been discovered” during the

exploration;210 should be, and then is, the subject of a feasibility study to assess whether it

might be suitable for mining development;211 can be, and then is, segregated from the

remainder of the (much vaster) exploration area;212 and, can be, and then is, defined in its

206 Ibid, Article 11.4.2.207 Ibid, Article 11.6. The exploration licences held pursuant to the CHEJVA were held in the name of the

Joint Venture, rather than in the name of one of the parties.208 Namely, timeframe was 180 days from the “Election Date”, which Article 11.3.2 defined as “the date of

receipt by the manager of the last notice affirming an intention to participate in mining development.”209 CE-1, CHEJVA, 29 July 1993, Article 11.7210 Ibid, Article 11.1211 Ibid, Article 11.2212 Ibid, Article 11.7


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geographical parameters by the feasibility study which is conducted in respect of it.213 It

is of prime importance to note that Article 11.7 stipulates that a new joint venture would

be deemed to exist between the Participating Parties in respect of the Mining Area, in

other words, the relations of the parties as detailed in CHEJVA would no longer be

applicable, and instead the parameters of the new relationship between the parties as

detailed in Article 12 would apply.214 As BHP’s letter of 2 April 1993 states, “no mining

activities shall get underway in the absence of a purpose-made Project Agreement. … No

doubt any future Project Agreement will be far removed from the CHJV Agreement.”215

148) This is also evidenced in the joint venture parties’ practice of developing particular

deposits (e.g. the Scoping Study in relation to H4, and more recently the Feasibility Study

in relation to H14 and H15) into possible mining ventures.

149) Thus, sixth, the boundaries of the “Mining Area”, as established by the relevant feasibility

study, must only encompass a single mining enterprise (which is thus based on that

feasibility study).216 Pursuant to the express terms of the CHEJVA, a “Mining Area”

does not, and cannot, encompass a space larger than that required for that single mining

enterprise as defined in scope by the feasibility study.217 As Article 11.8.1 of the

CHEJVA states in full:

“Unless otherwise unanimously agreed by all Parties, theboundaries of the Mining Venture shall not contain a greater landarea than is necessary to encompass all ore resources which maybe properly mined as a single mining enterprise together with anynecessary plan or facilities for the milling and treatment of ore andother appropriate infrastructure and, thereafter, a new jointventure shall be deemed to exist between the Participating Partiesin respect of that are (the ‘Mining Area’).”

213 Ibid, Article 11.7214 Ibid, CHEJVA Article 12.2. The stipulations in Articles 12.2 and 12.7 of the CHEJVA again relate to the

conduct of business between the participating parties and are aimed at regulating their relationships. Anyright to exploit or extract minerals under the new joint venture agreement in relation to the mining area isalso absent, mainly because the CHEJVA or the new joint venture agreement was not able to confer suchrights.

215 See Letter from BHP to BDA, 2 April 1993, p.7-8, Ex RE-36216 CE-1, CHEJVA, 29 July 1993, Article 11.8.1217 Ibid, Article 11.8.1


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150) In other words, no right is granted under the CHEJVA to any Participating Party to apply

for, let alone receive, a mining lease in respect of an area of land larger than that required

for a unified mining enterprise, as defined in scope by the feasibility study. Through

Article 11.8.1, as amplified by the preceding provisions in Article 11, the concept of a

“Mining Area” is thus carefully circumscribed, and any rights which arguably or in fact

attach to that concept are similarly limited by its circumscribed scope.

151) It is only now, after a full appreciation of the context in which it appears, that one comes

to Article 11.8.2 of the CHEJVA, and the Claimant’s assertion that that provision gives it

“a right under … the CHEJVA … to mine Reko-Diq”.218 In the light of the foregoing

review of Article 11 of the CHEJVA, the Claimant’s assertion is utterly untenable.

Putting aside the need to comply with “routine Government requirements” such as

applying to the relevant licensing authority for a mining lease, Article 11.8.2 makes it

clear that any mining lease which a Participating Party might apply for concerns a “mine”

which is the subject of a “Mining Area”, as geographically defined and limited by the

relevant feasibility study. The Claimant’s putative “right … to mine Reko-Diq” is also

entirely conditional upon first complying with the contractual provisions in Article 11.6

to acquire the BDA’s interest in the Joint Venture through negotiations or expert-

determination219 before it could make any application for a mining lease (namely, under

the applicable BM Rules) in respect of the specific area that has been the subject of the

feasibility study, that is, the “Mining Area”. Any application for a mining lease in respect

of an area which does not match the scope of that feasibility study and which does not

fulfil the condition precedent of acquiring the BDA’s interest is made in violation of the

CHEJVA.

152) By insisting that the CHEJVA gives it a “right … to mine Reko-Diq ”which is not limited

in this way – and, in particular, that such a right allowed it to mine 99.473 square

kilometres of Reko Diq (containing at least 14 deposits) when the applicable Feasibility

Study (and therefore, by definition, the relevant “Mining Area”) related only to less than

218 Claimant’s Memorial ¶ 58, ¶ 414 and ¶ 509.219 CE-1, CHEJVA, Articles 11.5, 11.6.


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six square kilometres (covering two deposits)220 – the Claimant is in effect seeking to

aggregate to itself rights that it could never had and that never existed under the

CHEJVA.

153) That the Claimant’s interpretation of the CHEJVA is wrong is also demonstrated by

reference to broader contextual evidence in that agreement. As the Respondent has

submitted previously,221 there are numerous provisions in the CHEJVA which indicate,

without regulating the issue as directly as Article 11, that the CHEJVA did not grant

mineral titles or rights to any party, and that no party to the CHEJVA had a right to a

mining lease subsequent to the conduct of exploration activities. This contextual

confirmation is evident in several provisions outside Article 11.

a) First, the provisions in Article 12 of the CHEJVA rely on the same limited

conception of a “Mining Area” as that discussed above in relation to Article 11.222

The term is used throughout Article 12, and the effect is to stress that, even when

a mining venture is undertaken pursuant to a joint venture mining development

between the Participating Parties, it can only be in respect of the same

circumscribed area that was the subject of the feasibility study conducted pursuant

to Article 11. The remainder of the area outside the scope of the feasibility study,

and thus by definition not part of the Mining Area, remained subject to the terms

of the CHEJVA.223

b) Second, Article 17(a), as noted above, recognises that the laws and regulations

applicable in Pakistan and Balochistan may change, and that the Joint Venture

which was established under the CHEJVA would need to apply to receive any

benefits there under, and obliges all parties to it to use their “best efforts” vis-à-vis

such applications. This provision clearly demonstrates that any benefits under the

CHEJVA regarding how the relationship between the joint venture parties is

220 This is the Claimant’s description of the size of the open pit mine which would result from the miningdevelopment the subject of the relevant feasibility study: Claimant’s Memorial ¶ 249.

221 See Respondent’s Response to the Claimant’s Request for Provisional Measures, ¶ 61-¶ 80.222 CE-1, CHEJVA, 29 July 1993, Article 12.223 Ibid, Article 12.8.


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structured, is subject to confirmation, if necessary, upon a change in the law.224

Accordingly, the Claimant, by incorporating Article 17 in the CHEJVA, clearly

anticipated that changes in local laws and policies may occur, may be adverse to

its position, and could be dealt with in CHEJVA only in so far as obliging the

parties to that agreement to use “best efforts” to procure a favourable outcome for

the Joint Venture in the context of the new laws and policies. Such context to

Article 11 of the CHEJVA only further highlights that the Claimant’s assertion

that it has a “right … to mine Reko-Diq” is fanciful. Furthermore, the Claimant

when seeking an Assignment of the Exploration Licence EL-5 expressly gave an

Undertaking to be subject to the 2002 BM Rules and any future amendments

thereto.225

c) Third, Article 5.9 provides, in summary, that the parties to the Joint Venture

would seek an assurance from the Government that it would be entitled to “apply”

for a mining lease during the stages of work relating to the initiation and

completion of a feasibility study. Again, it is plain that the CHEJVA does not

grant any party or the Joint Venture a right to make a mining application – instead

it regulates the relations of the parties and stipulates that the parties may apply to

obtain such a right. Further, it is also plain that the Joint Venture is not entitled to

the receipt of a mining lease. Accordingly, in the context relevant to Article 5.9,

the CHEJVA again precludes any interpretation that purports to afford a party to

that agreement an automatic right to a mineral title or a mining lease.

d) Fourth, the Licensing Authority was clearly treated as a third party to the

CHEJVA, and was not bound to grant or reject those applications. Thus the

CHEJVA is consistently clear that exploration licences and mining leases needed

to be obtained from the relevant licensing authority. Thus, for example, clauses

5.2, 5.3 and 5.4 emphasise that the grant of exploration and prospecting licences

224 The joint venture moved from the 1970 BM Rules to the 2002 BM Rules in accordance with this provision.225 See: Letter from DG Mines to BDA/BHP 8 April 2006 granting the assignment of EL-5 on certain terms

and conditions, Ex RE-25; Letter from Tim Hargreaves, Chief Executive Officer, of the Claimant dated10April 2006 accepting the DG’s terms and conditions as set out in the letter of 8 April 2006 and providing anundertaking to the same, CE-206.


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must be sought from the relevant authority, which was entirely separate from the

parties to the CHEJVA.

e) Fifth, and following on from the fourth point, clauses 5.3 and 5.4 make it

abundantly clear that the parties to the CHEJVA did not have a right to obtain

prospecting licences. They had no more than a “right to apply for Prospecting

Licences within the Exploration Area”.226 It can hardly be a sensible interpretation

of the CHEJVA to maintain that the need to apply, and to invoke and abide by the

exercise of discretion which will determine such applications, is relevant and

decisive for prospecting licences but not for mining leases. That the CHEJVA

clearly states that the parties did not have a right even to explore makes a mockery

of the Claimant’s submission that the same agreement gave it a right to mine.

f) Sixth, it is clear that the BDA, as signatory to the CHEJVA, was unable to bestow

any rights – exploration or mining – upon the counterparty to that agreement. The

BDA’s role under the CHEJVA was to facilitate the liaison between the Joint

Venture and the Government of Balochistan (see, for example, the description of

the BDA’s role in clause 5.7). The fact that the BDA – rather than an entity

empowered to grant mineral titles – signed the CHEJVA confirms that the

CHEJVA did not intend to bestow an entitlement to a mining lease (or even an

exploration licence).

g) Seventh, clause 13 envisages the withdrawal of both parties from the CHEJVA,

including the BDA. Clause 13.2 permits either party (the BDA or BHP) to

withdraw from the joint venture altogether at any time after BHP’s completion of

the Exploration Programme by giving 30 days’ notice. Upon the giving of such

notice, clause 13.3 operates so that “each Party shall cease to have any rights or

obligations under this Agreement.” The fact that the BDA could withdraw from

the joint venture in itself illustrates that there was no guarantee to be given any

mineral title.

226 CHEJVA, 29 July 1993, Article 5.3.1, CE-1.


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h) Finally, the Feasibility Study pursuant to which the Claimant made the Mining

Lease Application clearly notes that the application was to be decided under 2002

BM Rules.227

154) For the foregoing reasons, it is patently obvious that the terms of the CHEJVA do not

confer upon any party a right to a mining lease.

155) This conclusion is correct even when the signatory seeking to rely on the putative right to

mine has fulfilled all the requirements in Article 11. However, in this case, the Claimant

and TCCP had manifestly failed to fulfil those requirements. The result of this is that,

even if TCCP did have a right to mine Reko Diq pursuant to Article 11.8.2 of the

CHEJVA, that right never arose in this case.

156) The reason for this is simple. Article 11 establishes certain conditions precedent to the

existence (and, thus, exercise) of the “right” in Article 11.8.2 (which, to be clear, is no

more than a “right to apply”). One condition precedent is specifically applicable in

circumstances where the BDA becomes a Non-Participating Party pursuant to Article

11.3. In those circumstances, the relevant condition precedent is set out in Article 11.4.2.

It provides that any “entitle[ment] to undertake [a] sole risk investment … in a mining

development” on the part of the remaining Participating Party only arises when that entity

“obtain[s] all routine Government approvals required” and “compli[es] with Clause

11.6” of the CHEJVA.228

157) Article 11.6 sets out the requirements for the purchase by the Participating Party of the

Non-Participating Party’s “Percentage Interest” in the “Joint Venture Property” (which

includes the exploration licence). Article 11.6.2 makes it clear that, where the parties

cannot agree the amount of compensation to be paid in these circumstances, that question

“shall be referred to an Expert appointed pursuant to Clause 15.2”.229 Article 15.2 then

sets out the procedures for the appointment of an expert to determine the amount of

compensation (which appointment is either by the parties’ agreement or, in the absence of

227 Section 3, Legal and Title p. 3-4 of the IMD Feasibility Study Volume 1 of 21, Ex RE-60.228 CHEJVA, 29 July 1993, Article 11.4.2, CE-1.229 CHEJVA, 29 July 1993, Article 11.6.2, CE-1.


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agreement, by a nominated appointing authority). It is only then, upon the making of the

expert’s determination, that the “Non-Participating Party shall do all things reasonable

and necessary to transfer all legal and beneficial interest in the Non-Participating

Party’s Transfer Interest to the Participating Party.”

158) The Claimant contends that Balochistan was a Non-Participating Party as of 24

November 2010.230 If this is so, then TCCP was only entitled to undertake a “sole risk”

mining development after it had paid compensation to the Non-Participating Party

pursuant to the agreement of the parties or pursuant to an expert determination. However,

at no point did such a payment ever occur. This was despite TCCP’s express

acknowledgment that any purported election by Balochistan not to participate in a

proposed mining development triggered “a procedure laid down in [the] CHEJVA”.231

TCCP never agreed (or even raised) with Balochistan before making its Mining Lease

Application the amount of compensation that would be required for it to receive its joint

venture partner’s Percentage Interest in the proposed mining development. Nor did the

procedure for determination of that figure by an expert ever run its course, either with an

expert appointed by the parties or (as would be the case where the parties did not

mutually appoint an expert) by the nominated appointing authority. Rather, TCCP sought

to ignore these requirements and jump straight to its so-called “right to mine” in Article

11.8.2. The fact that TCCP attempted to do so after the Mining Lease Application had

been made illustrates the wilful nature of its violation.232

230 Claimant’s Memorial ¶ 282.231 Letter from TCCP to Secretary of the MMDD, 30 November 2010, p.1, CE-24.232 See: TCCP’s letter of 3 March 2011, CE-25; and TCCP’s letter of 29 April 2011, CE-115:

“Kindly note that under clause 11.6.2 of the Chagai Hills Exploration Joint Venture Agreement dated July29, 1993 (CHEJVA) in case the parties are unable to reach a mutually acceptable decision pursuant toClause 11.5 within one hundred and twenty (120) days of the Election Date (as such term in defined inCHEJVA) then any party can refer to an expert appointed pursuant to clause 15/2 the question of fair valueof the Non-participating Party’s Transfer Interest (as such term is defined in CHEJVA).

You will appreciate that through its letter dated March 3, 2011, Tethyan Copper Company Pty. Limited(“TCC”) had invited GOB to engage with it in agreeing the fair value of the Non-participating Party’sTransfer interest as is contemplated by clause 11.5.3 of CHEJVA.

Since the parties have been unable to reach a mutually acceptable decision regarding fair value of the Non-participating Party’s Transfer Interest within the stipulated period of one hundred and twenty (120) daysfrom the Election Date, TCC is compelled to hereby serve on the GOB notice of its intent to submit the


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159) Accordingly, it is clear that, even if the CHEJVA did give the Claimant a “right to mine”

Reko Diq (which, as the Respondent has explained above, it clearly did not), the

Claimant did not in any event satisfy the relevant pre-conditions within the relevant time

period for that right to arise. The result was that any such putative right under the

CHEJVA never came into existence, and so could never have been exercised by the

Claimant or its successors.

B) NO SUBSEQUENT AGREEMENT CONFERRED A RIGHT TO A MINERALTITLE

160) As noted above, several instruments were concluded by relevant entities in this dispute

after the CHEJVA was concluded between BHP and the BDA in 1993. None of these

subsequent instruments, however, altered the fact that, as explained above, the terms of

the CHEJVA do not grant a right to a mining lease for any signatory to it (or any

successor to a signatory, such as the Claimant).

161) The first such instrument was the 2000 Addendum to the CHEJVA. This document was

signed by the BDA (on its own behalf), BHP and in addition the Chairman of the BDA

purportedly for and on behalf of the Governor of Balochistan. Self-evidently, this

document was intended to repair some of the glaring problems connected with the

conclusion of the CHEJVA, discussed above. No doubt uncomfortable with their

awareness that the CHEJVA did not bind the Government of Balochistan,233 BHP (and

Mincor) apparently now wished to ensure that the Government of Balochistan was in fact

bound by the CHEJVA (a desire likely enhanced by the fact that the Chairman of the

BDA appears to have changed in the meantime). Thus, to that end, clauses 2.1 and 2.2 of

the 2000 Addendum purported to add the Government of Balochistan as a party to the

matter in dispute to an independent Expert (as such term is defined in CHEJVA0. TCC accordinglyproposes the name of Deutsche Bank as an Expert and request the consent of GOB to this appointment. Incase both parties fail to agree upon the appointment of the Expert within thirty (30) days of the notice tosubmit the dispute to Expert, the President of the Institution of Mining and Metallurgy (U.UL shall be askedto designate an Expert.”

233 See the legal advice to this effect which BHP obtained from its counsel: Opinion of Kabraji and Talibuddin,3 September 1999, Ex RE-56; Opinion of Kabraji and Talibuddin, 30 September 1999, Ex RE-57;Judgment of the Supreme Court of Pakistan, released on 10 May 2013, p.86-87, Ex RE-18.


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CHEJVA, with the BDA purportedly acting only as its agent in matters relating to that

agreement.234

162) This effort was, of course, futile. A document purporting to amend the terms of a contract

between two parties cannot simply add a further party to that contract without its consent.

At the time of executing the CHEJVA, the BDA signed the CHEJVA solely in its own

name and no relation of agent and principal existed between the BDA and the

Government of Balochistan. If the Government wanted to become a party to the CHEJVA

in 2000, the appropriate instrument by which such a result is achieved would have been a

contract of novation, which was not concluded.235

163) The opinion of Shakil Law Firm, given to the BDA, made this point clearly and

unequivocally:

“The Parties to JVA cannot introduce GOB as 3rd Party to theagreement without its consent. Since GOB is not Party to JVA,therefore, BDA or BHP cannot compel either GOB or BDA to makethem a Party to the Addendum. The independent distinct andseparate status and capacity of BDA and GOB has been elaboratedby Mr. Kabraji in his opinions dates 3rd September, 1999 and 30th

September, 1999 (sic) which needs no further comment.

In our opinion, any addendum to the JVA can only be executedamongst the Parties, who are signatory to the JVA. As far as GOBis concerned, the same is not a party to JVA, therefore, they cannotbe included in the addendum.

Observations of the Law Department that all contracts on behalf ofthe Provincial Government under article 173 of the Constitutionare to be executed in the name of the Government of the Province,may be relevant in respect of contracts which are intended to beexecuted by the Government, whereas the JVA has been expresslyexecuted between BDA and BHP.”

234 2000 Addendum, clauses 2.1-2.2, CE-2. Other clauses also sought to ensure that the CHEJVA’s faultswere patched over by this new instrument. In particular, clause 2.4 provided that the Government ofBalochistan accepted the work done up to 4 March 2000 was valid under the CHEJVA, while clauses 4.1and 15 contained an acknowledgment that the CHEJVA was in “full force and effect.”

235 Indeed, BHP was aware of this problem, having received advice that the CHEJVA was unclear as to whowas a party to that agreement, and that this uncertainty could only be cured by a contract of novation:Opinion of Kabraji and Talibuddin, 3 September 1999, Ex RE-56. Moreover, the authorisation given to theChairman of the BDA to conclude the 2000 Addendum was regarded as “improper and untenable in theeyes of the law” by the Respondent’s Supreme Court.


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164) In addition, it was far from clear that the authorisation from the Governor of Balochistan,

which was necessary to entitle the BDA to sign the 2000 Addendum itself, was

legitimate. It was given on paper without letterhead, was not stamped or authenticated in

any way, did not have an identification number or any reference to any approval by the

Balochistan Cabinet. These circumstances all highlight that the 2000 Addendum was as

problematic in its conclusion as the CHEJVA.236

165) Even putting aside these difficulties with the conclusion of the 2000 Addendum, the 2000

Addendum did not alter the interpretation of the CHEJVA, including Article 11

thereof.237

166) The second instrument was the 2000 Option Agreement signed by BHP and Mincor. The

Claimant asserts that the 2000 Option Agreement granted Mincor (or, apparently, its

nominee) an exclusive 180-day option to enter into an Alliance Agreement with BHP

regarding the exploration of Reko Diq.238 The 2000 Option Agreement cannot be

regarded as altering the interpretation of the CHEJVA explained above. In fact, the 2000

Option Agreement made it clear that all rights were subject to the “statutory requirements

for a Mining Lease.” It also made clear that it regarded the CHEJVA as not binding on

the Government of Balochistan. This emerges without ambiguity from clause 5.1.1.(a) of

the 2000 Option Agreement, which stresses that the conclusion of the 2000 Addendum

was necessary to ensure that the Government of Balochistan was the joint venture

partner.239 Further, no mention is made of any unconditional “right” under the CHEJVA

to a mining title. As clause 3.3.12 of the Option Agreement stated:

“At any time Mincor may request, and BHP must oblige, that aproject area be excised from the Licenses and converted into aMining Lease in Mincor’s name (provided that it meets thestatutory requirements for a Mining Lease). For the avoidance ofdoubt, as specified in Clause 3.3.11 BHP’s Clawback Right

236 Moreover, as the Respondent’s Supreme Court stated, the authorisation given to the Chairman of the BDAto conclude the 2000 Addendum was “improper and untenable in the eyes of the law”.

237 The 2000 Addendum did alter the terms of some clauses in Article 11 of the CHEJVA, but none whichpertained to the definition of the concept of a “Mining Area”: see 2000 Addendum, clauses 8, CE-2.

238 Claimant’s Memorial ¶ 99.239 2000 Option Agreement, 28 April 2000, clause 5.1.1.(a), CE-12.


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continues only until Mincor has commenced a sole-fundedbankable feasibility study.”(emphasis added)

167) The third instrument was the 2002 Alliance Agreement, which Mincor’s wholly-owned

subsidiary, the Claimant, entered into with BHP shortly after it was incorporated.240 The

purpose of the 2002 Alliance Agreement was apparently to allow Mincor/TCC to acquire

a share of BHP’s interest in the Joint Venture established under the CHEJVA in return for

undertaking exploration activities held by the Joint Venture.241 In fact, like the 2000

Option Agreement, it made plain that the rights to any mineral title were entirely subject

to the statute. Clause 14 deals with mining leases in the 2002 Alliance Agreement:

“14.1 Conversion of H4 ZonePursuant to Clause 5.4(b), BHP must do all things reasonablenecessary to excise the H4 Zone from the Licences and convertthat area into a Mining Lease in TCC’s name (provided that itmeets the statutory requirements for a Mining Lease). Thisobligation is subject to TCC entering into an agreement withBHP and GOB over the H4 Zone, which excises the H4 Zonefrom the CHJV and creates joint venture between TCC and GOBconcerning the H4 Zone.

14.2 Conversion to Mining LeaseAt any time TCC may request, and BHP must oblige, that a projectarea be excised from the Licenses and converted to a Mining Leasein TCC’s name (provided that it meets the statutory requirementsfor a Mining Lease). For the avoidance of doubt, as specified inClause 9.3, BHP’s Clawback Right continues only until TCC hascommenced a sole-funded bankable feasibility study.” (emphasisadded)

168) The purpose of the 2002 Alliance Agreement was not to give Mincor/TCC any greater

rights than those held by BHP under the CHEJVA, or to purport to alter the terms of the

CHEJVA. In fact, it served to clarify that all rights were subject to the “statutory

requirement for a mining lease.” This was clearly the premise upon which the Claimant

first became involved in the Reko Diq area. Moreover, it emphasised that to convert the

240 2002 Alliance Agreement, 3 April 2002, CE-198.241 2002 Alliance Agreement, clause 2.1, CE-198. The Government of Balochistan, acting through the BDA,

consented to the transfer of interests contemplated in the 2002 Alliance Agreement: Deed of Waiver andConsent, 23 June 2000, CE-194.


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exploration licence into a mining lease, TCC would need to enter into a separate

(mineral) agreement with the GOB “which excises the H4 Zone from the CHJV and

create joint venture between TCC and GOB concerning the H4 Zone.” As a consequence,

nothing in the 2002 Alliance Agreement alters the interpretation of the CHEJVA

explained above.

The final instrument is the 2006 Novation Agreement signed by BHP, the Claimant and

the BDA Chairman (purportedly on behalf of the Government of Balochistan) on 1 April

2006.242 The essential purpose of this instrument was to replace BHP with the Claimant

as a party to the CHEJVA. This replacement was purportedly achieved by clause 2 of the

2006 Novation Agreement, which also provided that the Claimant would acquire “all

rights and benefits” previously held by BHP under the CHEJVA.243 Importantly, the

original party, the BDA, did not sign the 2006 Novation Agreement on its own behalf as

it ought to have done in the usual circumstances of a novation. Instead, it signed only on

behalf of the Government of Balochistan. Accordingly, not only was the 2000

Addendum ineffective, the 2006 Novation Agreement was not even properly executed by

the party who signed the CHEJVA and was now purporting to recognise a different

counterparty (TCCA instead of BHP). In any event, as with the 2002 Alliance

Agreement, nothing in the 2006 Novation Agreement intended to, or in fact did, give any

greater rights than those held by BHP under the CHEJVA, or to purport to alter the terms

of the CHEJVA and their interpretation, as explained above.244

242 CE-3, 2006 Novation Agreement, 1 April 2006.243 Ibid, article 2.244 Eventually the Claimant transferred its rights to its wholly-owned subsidiary in Pakistan, TCCP, under a

scheme of arrangement the subject of an order by the Lahore High Court: Order of the Lahore High Court,11 April 2008, Ex RE-61.


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III.5 THE CLAIMANT TRANSFERRED ITS (LIMITED) RIGHTS UNDER THECHEJVA TO TCCP IN 2008

169) Two years after the 2006 Novation Agreement, the Claimant and TCCP developed a

Scheme of Arrangement for Amalgamation, which was approved and sanctioned under

Pakistani law.245

170) The Claimant tries to downplay the effect of this Scheme of Arrangement. It submits

that, as a result of the Scheme, only the then current Exploration Licence EL-5 was

transferred from the Claimant to TCCP.246 The Claimant is obviously bound to make

such a submission, even though it contradicts the very purpose of this (and almost every)

Scheme of Arrangement. The reason for this counterintuitive proposition by the

Claimant is clear. If the Claimant concedes that the alleged “right under … the CHEJVA

… to mine Reko-Diq”247 was transferred to TCCP during the Scheme of Arrangement, it

would no longer be able to assert that it holds those rights.

171) Hence the Claimant has sought to obfuscate this issue. As part of this tactic, the Claimant

has withheld key documents in relation to the Scheme of Arrangement (which, in the

Respondent’s submission, should be disclosed). The Claimant’s exhibits omit its

complete petition to the Lahore High Court in relation to the proposed Scheme. The

Claimant submits only the first page of that petition (in CE-21). Furthermore, even when

it discloses the Islamabad High Court judgment (in CE-21), which granted that petition,

the Claimant again omits the critical Annexure A containing the actual proposed “Scheme

of Arrangement.” The complete Petition along with the complete set of Annexures is

exhibited by the Respondent.248

172) In any event, putting the Claimant’s troubling omissions aside, it is clear that its argument

that it only transferred the Exploration Licence EL-5 to TCCP must be rejected. That

proposition is contradicted by the Islamabad High Court’s judgment that approved the

245 Order of the Islamabad High Court, 11 April 2008, Ex RE-61.246 Claimant’s Memorial ¶142;247 Claimant’s Memorial ¶ 509.248 In the Lahore High Court, Rawalpindi Bench, Rawalpindi, Civil Original No. 1/2008 dated 15 January

2008 along with Annexures A-I, Ex RE-61.


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Scheme of Arrangement. Pursuant to that judgment and the approved Scheme, the

Claimant transferred all its rights under the CHEJVA to TCCP. As the Court stated:

“The petitioners further contended that the principle object of theScheme of Arrangement for Amalgamation (hereinafter referred toas the “Scheme of Arrangement”) (annexure A) is to affectamalgamation by way of merger of petitioner No. 2 into petitionerNo. 1 by transfer to and vesting in petitioner No. 1 the whole of thebusiness of petitioner No. 2 together with all the property, assets,rights, liabilities and obligations of every description (includingbut not limited to the Licences) of petitioner No. 2 againstallotment of fully paid ordinary shares of petitioner No. 1 to theshareholders of petitioner No. 2 and to dissolve petitioner No. 2without going into winding up. It was further stated in the petitionthat the “Scheme of Arrangement” along with the Statement ofInformation was comprehensive and gave full particulars as to theobject of amalgamation, inter alia, the benefits of amalgamation,the details of the assets, licences, contracts, undertaking andbusiness that will be transferred, the consequences of theamalgamation, the consideration for shareholders and all otherrelated matters.”

173) Having duly ordered that all rights and entitlements would, pursuant to the Claimant’s

application, be transferred from the Claimant to TCCP as a matter of Pakistani law,249 the

Court also stated that:

“all contracts, agreements [etc] … entered into by or subsisting infavour of [TCCA] upon being transferred and vested in [TCCP]shall remain in full force and effect as if originally entered into byor granted in favour of [TCCP] instead of [TCCA] as the case maybe, and that [TCCP] may enforce all rights and perform allobligations and discharge[] all liabilities arising there underaccordingly.”250

174) Turning to the text of the application to the High Court for approving the Scheme, the

Claimant’s purpose is laid bare. At ¶ 9 of its application, the Claimant states:

“That the government of Balochistan and the Government ofBalochistan’s agent The Balochistan Developmental Authority([TCCA Pakistan Branch’s] joint venture partner) have already

249 Judgment of the Islamabad High Court, 11 April 2008, p. 10, Ex RE-61.250 Judgment of the Islamabad High Court, 11 April 2008, p. 11, Ex RE-61.


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given their no objection to the amalgamation as the same isnecessary to meet the requirement of Rule 47(1) of the BalochistanMineral Rules. 2002.” (emphasis added)

175) The Claimant cannot have it both ways. It cannot on the one hand obtain an order

implementing its desired Scheme of Arrangement that transfers all its contracts and

assets, including the CHEJVA, to another entity (TCCP, which is not a claimant before

this tribunal), but then insist that it retained “rights” under that contract. As a matter of

Pakistani law, and thus as a matter of fact in this arbitration, the Claimant simply does not

have the rights it claims it has.

176) The fact is that instead of a novation, the Claimant took advantage of the terms of the

CHEJVA, which allows for a transfer by amalgamation, and Pakistani Law, which

provides for a transfer of interests, assets and contracts by statutory amalgamation. In the

joint venture Operating Committee meeting of 26 October 2007,251 at Agenda Item 6, the

Claimant discloses that the entire intention behind the scheme of arrangement for

amalgamation was to: (i) transfer, without limitation, it’s rights, interests, assets and

contracts in Pakistan to TCCP; (ii) enable TCCP to comply with Rule 47 BM Rules 2002

and eventually apply for a mining lease; (iii) create a vehicle that would hold 100%

interest in Expropriation Licence EL-5 (TCCA’s 75% and the BDA’s 25%); and (iv) put

in place a shareholder’s agreement which would replace the CHEJVA.

177) The Claimant applied to the High Court and obtained its statutory transfer of its interest

in EL-5 and the CHEJVA in favour of TCCP. Accordingly, since the date of

amalgamation, TCCP holds 75% interest in EL-5 and the CHEJVA. The Claimant cannot

now undo this, and thus cannot assert before this Tribunal rights that it no longer has.

178) As a result, this Tribunal lacks jurisdiction over the Claimant as a result of the Claimant’s

transfer of its rights and obligation under the CHEJVA and the 2002 BM Rules pursuant

to the Scheme of Amalgamation.

251 CE-64.


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III.6 THE 2002 BM RULES GOVERNED THE GRANTING OF MINERAL TITLESAND GAVE THE LICENSING AUTHORITY A BROAD DISCRETION AS TOWHETHER TO GRANT OR REFUSE SUCH MINERAL TITLES

179) There is no dispute in this arbitration that:

a) in order to obtain a mining lease to develop a mine pursuant to Article 11 of the

CHEJVA, the “Participating Parties” needed to apply to the Licensing Authority

to obtain a mining lease (although there is, of course, significant dispute as to the

extent of the entitlement to be awarded a mining lease that those Participating

Parties had upon making the application);252

b) the relevant authority was, pursuant to Rule 48 of the 2002 BM Rules, the

Licensing Authority,253 to which the Claimant’s subsidiary, TCCP, made its

Mining Lease Application and to which previous applications for exploration

licences had been made on behalf of the joint venture;254 and

c) the relevant regulations governing the application for and potential grant of a

mining lease were, as at the time TCCP made its Mining Lease Application, the

2002 BM Rules.255

180) The essence of the dispute in this arbitration, however, is whether, on making its Mining

Lease Application, TCCP was entitled to receive that lease on the basis that the Claimant

purportedly had “a right” under the CHEJVA and the 2002 BM Rules to mine Reko

Diq.256 That no such automatic or absolute right existed under the CHEJVA has been

explained above. The Respondent now explains that no such right existed under the

routine requirements of the 2002 BM Rules.

181) The Claimant in its Memorial relies on Rule 48(1) of the 2002 BM Rules in support of its

submission that it had a right to the Mining Lease under the 2002 BM Rules. This is

252 Claimant’s Memorial, ¶ 58.253 Claimant’s Memorial, ¶ 307.254 Claimant’s Memorial, ¶ 57.255 Claimant’s Memorial, ¶ 308-309.256 Claimant’s Memorial, ¶ 509.


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surprising given that TCCP not only lacked the standing to make an application under

Rule 48(1) but failed to meet both the objective and subjective tests for a successful

mining lease application.257 Rule 48(1) provides that the Licensing Authority shall grant a

mining lease to the holder of an exploration licence subject to the fulfilment of certain

criteria set out in the remainder of the rule. Rule 48(3)258 completes Rule 48(1) to

stipulate the conditions in which the Licensing Authority “shall not” grant the mining

lease if any one of the eight conditions are not satisfied.259 Each of these conditions is

self-standing, hence, the Licensing Authority shall not grant a mining lease even if one of

the provisions in Rule 48(3) is not met with. As the next section shows the Claimant’s

Mining Lease Application failed to satisfy virtually all these conditions that were in force

at the time application was made.

182) Rule 48(3)(a)provides:

“Subject to subclauses (4) and (5), a mining lease shall not begranted

(a) unless –

(i) the feasibility studies show that the mine can beprofitably developed and operated;

(ii) the proposed plans or development and operation of themine and the programme of the mining operations of theapplicant will ensure the efficient, beneficial and timelyuse of the mineral resources;

(iii) the applicant in question has or can obtain the technicaland financial resources and experience to carry outmining operations effectively;

(iv) the applicant is a fit and proper person to hold thelease;

(v) the proposals submitted with the application aresatisfactory;

257 2006 PLD 697 Watan Party v Federation of Pakistan RLA-11258 2002 BM Rules, Article 48(1) Ex RE-1259 See 2002 BM Rules, Articles 48(2) and 48(3) Ex RE-1


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(vi) it is in the interest of the development of the mineralresources of Balochistan to grant the lease”260; and

(vii) a concrete proposal for value addition for the Ore to beproduced/exploited from the applicant’s mining leasewithin the country is submitted, or if the facility is notavailable in the province, the Ore could be taken out ofthe province with the prior approval of the ProvincialGovernment.261

183) Rule 48(3)(b) provides that the Licensing Authority shall not grant the mining lease if the

applicant is in default at the time of the application. Hence, if the applicant has violated a

condition of its exploration licence or any other provision in the 2002 BM Rules, the

Licensing Authority must deny its mining lease application.

184) The scope of discretion granted to the Licensing Authority by the 2002 BM Rules is

immediately apparent. It has the obligation to reject a mining lease application if it fails to

satisfy objective criteria. Under Rule 48(3)(a)(i), the absence of feasibility studies which

show that the mine can be profitably developed will lead to an application being

rejected.262 In addition, under Rule 48(3)(a)(ii), the absence of a plan to ensure the

efficient, beneficial and timely use of the mineral resources will lead to an application

being rejected. Further, under Rule 48(3)(a)(vii), the absence of value-addition in the

proposed mining project will lead to an application being rejected. Mr Khokhar, who

helped draft the template which the 2002 BM Rules followed, confirmed the purpose of

these objective criteria: “the core concern here was to address the hoarding of mineral

rich land, without actually mining the deposits”.263 However, even if the objective

criteria were satisfied, the Licensing Authority still had a wide margin of discretion under

260 2002 BM Rules, Article 48(3)(a), Ex RE-1. Sub-clauses (4) and (5) of Article 48 require, in summary, thatthe Licensing Authority provide applicants with reasons for its decisions and a right to be heard in respectof those reasons.

261 By Notification No. SOT (MMD)/3-5/2009/2191-2221 dated 01 October 2010 (which amends Articles47(2), 48(3) and 52(3)) Rule 48(3) was amended to include an additional requirement. The Claimantconveniently omits this all-important amendment from the version of the 2002 BM Rules it exhibited. ExRE-1 contains all the subsequent amendments to the 2002 BM Rules which were omitted from Claimant’ssubmitted 2002 BM Rules as CE-05. The obligation of submitting a proposal for value addition is alsoconspicuously absent from the “Legal” section of the submitted Feasibility Study

262 The definition of mine is provided in Rule 1(z).a of the 2002 BM Rules Ex RE-1263 Kokhar Statement, paragraph 23.


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Rule 48(3)(a)(vi).264 Hence, if the Licensing Authority, in the exercise of its judgement,

believes that the grant of a mining lease is not in the “interest” of Balochistan vis-à-vis

“the development of its mineral resources”, then it is entitled (even obliged by the words

“shall not” in the chapeau to Article 48(3)) to refuse the application for a mining lease.265

The result of this broad discretion is that no applicant for a mining lease can seriously

maintain that it has an unqualified “right” to receive an approval of its application from

that agency.

185) That this position is self-evident, and was broadly known, is obvious from the record in

this case. The Government of Balochistan, for its part, clearly appreciated the distinction

between the right to explore under the CHEJVA and the right to mine which neither the

CHEJVA nor the 2002 BM Rules countenanced on the facts. Thus the Government of

Balochistan, in a document prepared for a provincial cabinet meeting in the Government

of Balochistan, stated in 2009:

“TCCP at present is working on Exploration License and that nomining lease has since been issued to them …. The competency toissue [a] Mining Lease is with the Licensing Authority (DG mines)under BMR 2002 and the Licensing Authority can exercise itspower to reject Mining Lease for better interest of the province.”266

186) The Claimant’s subsidiary, TCCP, likewise recognised the discretion afforded to the

Licensing Authority to grant or refuse mining lease applications under the applicable

2002 BM Rules. In the context of negotiating a Mineral Agreement which was sought to

circumvent the 2002 BM Rules, TCCP acknowledged that:

264 Rule 48(3)(a)(vi) of the 2002 BM Rules Ex RE-1265 Moreover, under Rule 48(3)(a)(i), the Licensing Authority “shall not” grant the mining lease “unless … the

feasibility studies show that the mine can be profitably developed and operated”. It is of course impossiblethat the feasibility study submitted by TCCP could show this, given that it only related to two of thenumerous mines that would be covered by the mining lease. Other than the Western Porphyries, there wasno indication at all as to whether, or how, the other mines might be profitably developed. Ex RE-1

266 Government of Balochistan MMDD, Working Paper for the Provincial Cabinet Meeting on 24-12-2009, 24December 2009, p.3, Ex RE-62 See also the statements of the Chief Minister at a meeting of the Board ofGovernors of the Reko-Diq project on 28 May 2010, where he emphasised that “national interest is aboveall” and that “the future role of [TCCP] will be decided” at the point “when they apply for a mining lease”:Minutes of Meeting of the Board of Governors of the Reko Diq Project, 28 May 2010, Ex RE-63.


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“4.2 The BMR include a number of powers and discretions that areinconsistent with creating the certainty and security of tenurerequired for investment and financing on the scale for Reko Diq.Our primary concern is that these problems [would be] addressedin the Mineral Agreement by agreement of the parties, but thisagreement would be negated by any changes to the BMR in thefuture. The legal certainty we are looking for can be accomplishedby either:

4.2.1 amendment to the BMR, and express statement within theMineral Agreement, to reflect that terms of the Mineral Agreementoverride any inconsistency with the BMR (as had beencontemplated in the initial TCCP Draft); or

4.2.2 amendment to the BMR of all rules requiring suchamendment so as to ensure compatibility with MineralAgreement.”267

187) TCCP’s recognition of this fact is further revealed in its letter dated 27 October 2008 in

which it expressly asked the Government to amend the 2002 BM Rules:

“Similar to BMCR 1970 which provided that the MineralAgreement provisions would take precedence over the rules in theevent of conflict or inconsistency, and Section 3A of the Regulationof Mines and Oil-Fields and Mineral Development (GovernmentControl) Act, 1948, we would like to request the GOVERNMENTOF BALOCHISTAN to graciously consider to introduce thefollowing generally applicable amendment to the BMR:

Rule 9 – sub-rule(1): at line 3, delete the words “not inconsistentwith these Rules or any other law.”

– sub-rule (5): Replace entirely by: “The provisions of a mineralagreement executed between the Government of Balochistan and amineral title holder, shall be considered to be complementary tothese Rules for the particular mineral title holder and shall takeprecedence over the provisions of these Rules in case of anyinconsistency at any given time.”

– sub-rule (6): add “Except as provided in sub-rule 9(5),” at thebeginning of the Rule.”268

267 Letter from TCCP to Ministry of Petroleum and Natural Resources, 18 August 2008, p.4, CE-227.268 Ex RE-64.


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188) The above communications make it plain that the Claimant and TCCP was well aware

that the 2002 BM Rules prevailed over any contractual undertakings to guarantee mineral

rights. That was, of course, the true basis of the request to amend the 2002 BM Rules to

suit its agenda.

189) The evidence thus establishes that both the Government of Balochistan and the Claimant

were, in the period immediately prior to the latter’s application for a mining lease, aware

of the scope of discretion afforded to the Licensing Authority when considering whether

to grant the lease. Indeed, it speaks volumes that TCCP sought to negotiate a Mineral

Agreement to “override” the 2002 BM Rules before it sought to apply for the award of a

mining lease from the Licensing Authority. Having failed to procure such preferential

treatment in a Mineral Agreement, TCCP and the Claimant was fully aware that the 2002

BM Rules contained significant discretions for the Licensing Authority and certainly did

not create an unconditional right for an exploration licence-holder to convert their

licences into mining leases.

190) The knowledge of the discretion reserved to the Licensing Authority and the lack of a

right to convert exploration licences into mining leases was also known more broadly.

The World Bank also conducted and published a detailed report on Pakistan’s policy on

the development of its mineral sector.269 The World Bank in that report expressly

considered the means by which an exploration licence could be developed into a mining

lease under provincial rules relating to the Respondent’s mineral sector. It concluded that

all “provincial rules” such as the 2002 BM Rules:

“include as a criteria [sic] for the grant of a mining lease that itmust be ‘in the best interest of the development of the mineralresources of [the province] to grant the lease.’ This criterionintroduces a discretionary element into the procedure for grantingmining rights to an investor who has completed a successfulexploration program. …

The provincial rules do require notice to the applicant and anopportunity for the applicant to respond to an issue or cure a defectin his mining proposal before the licensing authority can refuse to

269 World Bank Report, Republic of Pakistan, Mineral Sector Development Policy Note, 20 November 2003,Ex RE-65.


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grant a mining lease. However, it may be impossible for anapplicant to effectively respond to a determination that thedevelopment of a particular mine is not in the best interests of theprovince. That determination is essentially a politicalone.”270(emphasis added)

191) Accordingly, any application for a mining lease must be determined pursuant to the 2002

BM Rules, under which the Licensing Authority had a broad discretion to grant or refuse

an application for a lease on the basis of, inter alia, its determination of the best interests

of Balochistan. Whether the Claimant believes the inclusion of such discretion is unjust,

unfair or inconvenient is irrelevant. The fact is the Claimant chose to allegedly invest in

Balochistan knowing full well that the applicable 2002 BM Rules pursuant to which any

mining lease application would be granted or refused provided for such a broad

discretion. It also made an express Undertaking to abide by those Rules (including any

amendments thereto) as a condition of its purported investment.

III.7 TCCP’S MINING LEASE APPLICATION WAS FATALLY FLAWED ANDDEFICIENT UNDER THE 2002 BM RULES

192) In this Section, the Respondent will explain how TCCP’s Mining Lease Application was

fatally flawed. However, before turning to the specific conditions it failed to meet

pursuant to Rule 48(3), this section sets out the background to TCCP’s Mining Lease

Application, namely (i) BHP’s failure to conduct any meaningful exploration activities,

(ii) TCC’s quest dramatically to increase the scope of the project, and (iii) TCCP’s and

the Claimant’s failed attempt to negotiate a Mineral Agreement with the Respondent and

the Government of Balochistan.

A) BHP’S FAILURE TO CONDUCT MEANINGFUL EXPLORATIONACTIVITIES AFTER SIGNING THE CHEJVA

193) As explained above, BHP signed the CHEJVA in circumstances that were highly

dubious, and then moved immediately to procure from Balochistan broad “relaxations” of

the applicable 1970 BM Rules. Having done so, however, BHP did not invest similar

270 World Bank Report, Republic of Pakistan, Mineral Sector Development Policy Note, 20 November 2003,p.22, Ex RE-65. See also Kokhar Statement, paragraph 28.


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energy in the conduct of exploration activities under the CHEJVA. Rather, it conducted

little work of any significance, despite the Respondent’s facilitation of the project.

194) The work which BHP undertook on behalf of the joint venture during the nine years that

it was responsible for exploration activities under the CHEJVA is summarised in less

than one page in the Claimant’s Memorial.271 That work, which the Claimant describes

as “reconnaissance and exploration activities”,272 comprised obtaining satellite images,

geochemically analysing rock samples, applying for the grant (or renewal) of prospecting

licences, engaging in first-phase drilling and conducting preliminary exploration activities

on the H4 deposit. This was the extent of the development of the important mineral

reserves in the Chagai Hills between 1993, when the CHEJVA was signed, and 2002,

when TCCA commenced its “initial” exploration work.273

195) In the context of this slow progress on exploration work, BHP devoted significant

attention to restructuring the contractual arrangements relating to, and arranging for its

phased removal from, the project. Thus, in 2000, when the Joint Venture ought to have

been completing additional drilling, completing feasibility studies and pushing towards

making a mining lease application (most pertinently, for the deposit known as “Tanjeel”

or “H4”), BHP instead pursued the conclusion of the 2000 Addendum with the BDA, the

2000 Option Agreement and the 2002 Alliance Agreement. None of these agreements

hastened the conduct of drilling or the completion of feasibility studies in respect of Reko

Diq (or any other area the subject of the prospecting licences hitherto gained by the Joint

Venture).

196) The content of these agreements has been summarised above. Their collective purpose

was, ultimately, to remove BHP from the contractual regime created by the CHEJVA.

They were also the first step towards bestowing those duties on the Claimant and TCCP.

197) The years of delay in BHP’s conduct of the exploration work occurred despite the BDA

facilitating the project wherever possible. BHP was assisted in the following manner:

271 Claimant’s Memorial, ¶ 85-90.272 Claimant’s Memorial, ¶ 85.273 See Claimant’s Memorial, Sections II.B.5 and II.C.3.


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a) facilitating the application for, and obtaining of, the relevant prospecting licences

from the Licensing Authority, which would have allowed BHP to commence

drilling in 10 different sites (although it only commenced first-phase drilling at six

of them);274

b) permitting BHP to enter into the Option Agreement with Mincor and the Alliance

Agreement with the Claimant in order to allow the Claimant to undertake

exploration activities in the Reko Diq and thereby enabling it to acquire a share of

BHP’s interest in the Joint Venture established under the CHEJVA;275 and

c) undertaking to allow BHP to transfer its interest in the licences to Mincor in

accordance with the Option Agreement, as and when it was obliged to do so.276

198) Nonetheless, despite the BDA’s assistance in allowing BHP to progress its exploration

activities, BHP ultimately performed very little work of significance in the huge area that

it licensed to prospect. It appeared that its priorities in respect of the Reko Diq area were

no longer in expeditiously exploiting the vast mineral deposits contained there (especially

given that, from 1993 until 2006, BHP failed to produce a single complete feasibility

study). Rather, with the Respondent modernising its mineral policy, and with the former

Chairman of the BDA with whom it had liaised so closely no longer in that post and

instead facing charges of corruption, BHP sought to phase out its involvement in the

project.

B) THE CLAIMANT, UPON JOINING THE PROJECT, SOUGHTDRAMATICALLY TO INCREASE ITS SCOPE

199) With this background of delay and minimal tangible progress characterising BHP’s

involvement in the project, it was not until almost a decade after the conclusion of the

CHEJVA, and more than five years after BHP had completed its “first-phase drilling”,

274 BHP Reply Submission in the Supreme Court of Pakistan, 7 February 2011, CE-271. Between thesignature of the CHEJVA and present, the Licensing Authority granted now less than three prospecting orexploration licences: “PL-4” which ran, with one renewal, from 8 December 1996 to 28 July 1999, when itwas merged into “PL-14” which ran until 18 May 2002, when it was converted into “EL-5 which ran, withtwo renewals with retroactive effect from 21 February 2002 until 19 February 2011

275 Deed of Waiver and Consent, 23 June 2000, clause 3, CE-194276 Deed of Waiver and Consent, 23 June 2000, clause 4, CE-194


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that the Claimant commenced its own exploration program. Between 2002 and 2005, the

Claimant completed a drilling program and raised capital to devote to the preparation of

feasibility studies.277 This, as the Claimant’s Memorial indicates,278 was sufficient for the

Claimant to discharge its obligations under the 2002 Alliance Agreement, as of 11 July

2005.279 It also signalled a shift in the conceived scope of the mining project pursuant to

the CHEJVA. Whereas BHP’s and the Claimant’s focus had generally been on a limited

project of manageable size with the Tanjeel or H4 deposit which would need only

ordinary infrastructure (i.e., not a trans-provincial pipeline to carry slurry from the mining

site to a port), the arrival of the Claimant’s affiliates280 significantly amplified the scope

of the project to encompass the much larger deposits known as the “Western Porphyries”

or “H14 and H15” which would need much more significant infrastructure (such as a

trans-provincial pipeline).

200) The final step in the purported replacement of BHP with the Claimant was the conclusion

of the 2006 Novation Agreement. The content of that agreement is summarised above.281

As clause 3 of the 2006 Novation Agreement states, TCCA replaced BHP as a party to

the CHEJVA and all references to BHP therein were to be regarded as reference to

TCCA.282 The 2006 Novation Agreement did not vary Article 11 of the CHEJVA, or its

proper interpretation, as explained above, although it did provide the Respondent’s courts

with non-exclusive jurisdiction and stipulated that Pakistani law was the applicable

law.283

201) The Claimant also sought the Assignment of the Exploration Licence EL-5 in 2006 to

permit it to substitute BHP in the unincorporated joint venture that held that licence. The

277 Claimant’s Memorial, Section II.C.3.278 Claimant’s Memorial, ¶ 136.279 Letter from TCCA to BHP, 11 July 2005, p.2, CE-200.280 Notably, as the Claimant’s Memorial conspicuously failed to deny (Claimant’s Memorial, Section II.C.5),

the Claimant never sought permission from or gave advance notice to the Licencing Authority in respect ofits ownership being transferred from Mincor to Antofagasta and Barrick.

281 See also Claimant’s Memorial ¶138-140.282 2006 Novation Agreement, 1 April 2006, clause 2, CE-3.283 2006 Novation Agreement, 1 April 2006, clause 11, CE-3.


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Claimant’s request for assignment was granted by the Licensing Authority on the

following express conditions:

“1. M/S Tethyan Copper Company Limited (the assignee) shallpay rent and royalty etc at the rate prescribed in the BalochistanMineral Rules, 2002 and as amended from time to time.

2. M/S Tethyan Copper Company Limited (the assignee) shallhave to assume all the obligations and to pay all outstanding duesin respect of this Exploration License ever since its grant if theybecome due at the later stage.

3. M/S Tethyan Copper Company Limited (the assignee) shallfurnish an undertaking that they will observe and abide by all theterms and conditions as contained in this office letter No.DG(MM)-EL(5)/5011-22 dated 18-05-2002 and will also abide byall other conditions of National Mineral Policy read withBalochistan Mineral Rules, 2002 as approved/ amended fromtime to time.

4. M/S Tethyan Copper Company Limited (the assignee) shallsubmit an undertaking to this effect that they will furnishregularly quarterly progress report.

5. M/S Tethyan Copper Company Limited (the assignee) shallperform its obligation under the agreement signed between M/SBDA/BHP Chagai Hills Joint Venture & Tethyan CopperCompany Limited.

6. The Exploration License assigned to the M/S Tethyan CopperCompany Limited shall be terminated if they violate any of thesame terms and conditions as laid down above and in BalochistanMineral Rules, 2002.”284

202) The Claimant obtained this Assignment by giving the following express Undertaking to

the Licensing Authority:

“As per the requirement of your Approval Letter, we hereby undertakethat we shall observe and abide by all the terms and conditions ascontained in your letter no. DG (MM)-EL (5)/2555-65 dated 8th April2006 and will also abide by all other applicable conditions of the

284 Ex RE-25.


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National Mineral Policy read with the Balochistan Mineral Rules,2002 as approved/amended from time to time.”285

203) Finally, it is worth noting that after the 2006 Novation Agreement, the Claimant began to

attend the meetings of the Operating Committee established under the CHEJVA.286 It

attended these meetings opposite representatives of the BDA. It was in this context that

applications were made by the Joint Venture to the Licencing Authority. Thus the second

renewal of Exploration Licence EL-5 was applied for by, and granted to, the Joint

Venture.287 This application for renewal was decided by the Licencing Authority in

conformity with Rule 29(2) of the 2002 BM Rules. It was obvious from these events that

the Licencing Authority was a third party to the CHEJVA and the Operating Committee.

C) THE CLAIMANT SOUGHT, BUT FAILED, TO NEGOTIATE A MINERALAGREEMENT

204) As noted above, TCCP was party to the CHEJVA as of 1 April 2006, although it was not

until 23 November 2006 that all of BHP’s claw-back rights under the Alliance Agreement

were extinguished.288 However, doubtless aware that its successor in title had no right to

a mining lease pursuant to the CHEJVA or 2002 BM Rules, the Claimant immediately

tried to persuade the Governments of Balochistan and Pakistan to enter into a Mineral

Agreement which would effectively bypass the 2002 BM Rules and afford them more

preferential treatment than that prescribed in the 2002 BM Rules. This had an element of

déjà vu. The Claimant, like its predecessor, BHP, wanted broad exemptions from the

regulatory framework, although in this case the Claimant went further and did not limit

itself to the mining regime.

205) Within two months of the final extinguishment of BHP’s rights, the Claimant had

discussed with the BDA the proposal to submit a draft Mineral Agreement to the

Respondent and the Government of Balochistan.289 Within one month more, the Claimant

285 CE-206.286 See, for the first two meetings: Minutes of the Operating Committee, 11 February 2006, CE-55; Minutes of

the Operating Committee, 24 February 2007, CE-60.287 See Letter of Director General to Chagai Hill Joint Venture, 1 December 2007, CE-20.288 Claimant’s Memorial, ¶147.289 Minutes of Operating Committee, 24 February 2007, p.4, CE-60.


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had prepared a draft Mineral Agreement and was ready to present it to the Respondent

and the Government of Balochistan.290 The Respondent entered into these discussions

even though there was, of course, no obligation on it to negotiate (let alone conclude) a

Mineral Agreement.

206) A Steering Committee composed of the key stakeholders was established by the Prime

Minister of Pakistan to negotiate the content of any Mineral Agreement.291 This clearly

showed the Respondent’s willingness to engage in good faith discussions with the

Claimant and TCCP. However, it transpired that the Claimant was attempting to install a

contractual arrangement that would override the requirements laid down under the laws.

In particular, it sought to negotiate a Mineral Agreement that would obviate the need for

TCCP to apply to the Licensing Authority for a Mining Lease pursuant to the terms of the

2002 BM Rules. Senior representatives of Antofagasta and Barrick presented a copy of

the Claimant’s draft Mineral Agreement to the Respondent’s Prime Minister (and

apparently also sent copies to officials in the Government of Pakistan and Government of

Balochistan) in July 2007.292

207) The Steering Committee was drawn from no less than 13 departments across the federal

and provincial governments, reflecting not only how serious the Government was in

encouraging the Claimant as opposed to being obstructive but also the need for various

governmental departments and bodies to be part of the decision making process.

208) The first meeting of the Steering Committee was held on 23 February 2008. The minutes

of that meeting recorded that the purpose of the Steering Committee was to “review and

initiat[e] negotiations on the Draft Mineral Agreement for Reko Diq [sic]”.293 The

Respondent duly reflected upon the draft Mineral Agreement provided by the Claimant

290 Ibid.291 Letter from TCCA to Chief Minister of Balochistan, 4 July 2007, p.4, CE-214. See also: Letter from

TCCA to MNPR, 5 July 2007, CE-215; Draft Mineral Agreement provided by TCCA to the Respondent, 9July 2007, CE-216; Notification by Ministry of Petroleum and Natural Resources, 3 September 2007, CE-62.

292 Witness Statement of Catherine Boggs, 31 January 2103 ¶ 37; Claimant’ Memorial, ¶181.293 Minutes of First meeting of Steering Committee, 23 February 2008, p.1, CE-222.


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(which ran to 123 pages) and, after it had had an opportunity to consider it, provided its

comments and counterproposals to the Claimant.294

209) Immediately apparent from a comparison of the two drafts are the concerns that the

Respondent and the Government of Balochistan had over the Claimant’s proposals, and

the benefits which the Claimant sought to reserve to itself. Thus, the Respondent’s

revisions emphasised aspects of the potential mining project which were of major concern

to it. These included:

a) a requirement that TCCP observe all the obligations under the 2002 BM Rules and

any agreement be subject to those rules;

b) a requirement that TCCP install smelter and refinery capacity for the processing

of ore at the project site (or any other feasible site in Pakistan);295

c) a requirement that TCCP endeavour to add local value to the project by installing

facilities for “downstream” activities within Pakistan;296

d) a requirement that TCCP would comply with and operate under the 2002 BM

Rules and that no waivers and or exemptions from the applicable law or rules

would be applied for;

e) a modest increase in the applicable royalty rate from 2% to 5%;297 and

f) a clear retention of regulatory powers relating to the reduction of certain tax

incentives and stabilisation requirements sought by the Claimant.298

294 Letter from Ministry of Petroleum and Natural Resources to TCCA attaching counterproposal MineralAgreement, 7 August 2008, CE-226.

295 Letter from Ministry of Petroleum and Natural Resources to TCCA attaching counterproposal MineralAgreement, 7 August 2008, clause 5.5, CE-226.

296 Ibid, clause 8.5, CE-226.297 Ibid, clause 17, CE-226.298 Letter from Ministry of Petroleum and Natural Resources to TCCA attaching counterproposal Mineral

Agreement, 7 August 2008, clause 17, CE-226; Draft Mineral Agreement provided by TCCA to theRespondent, 9 July 2007, clause 18, CE-216.


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210) The common theme in all of these proposals, many of which are noted by the Claimant in

its Memorial, is that they reflect the Respondent’s concerns that any project in the Reko

Diq area should be structured in a fashion that benefits the public interest in the country

while adhering to the laws and rules of Balochistan and Pakistan. Each of the proposals

listed above is directly concerned with ensuring that the Governments met their duty to

develop mineral resources for the public benefit. None are unreasonable. None are

surprising. None seek to do anything other than apply the existing law and make

reasonable use of the largest copper and gold deposit located in Pakistan. They are,

therefore, proposals which any responsible government would make when seeking to

ensure that its natural resources generate an appropriate degree of benefit for its public.

211) TCCP, failing to appreciate that the counterproposals of the Respondent were motivated

by a desire to advance the public interest and to uphold its existing legislation, moved

quickly to complain about those counterproposals. Within six weeks, TCCP had replied

to the Respondent stating that the counterproposals were detrimental “economically and

commercially” to TCCP.299 It also disingenuously complained that the counter proposals

left it in a “worse position than it currently enjoys under the terms of its EL-5 joint

ownership”.300

212) Despite these fundamental disagreements, discussions between the parties continued.

The Claimant in its Memorial states that “significant progress” was made in these

discussion and that the parties “were very close” to reaching agreement on them,301

thereby implying that the Respondent retreated from its public interest concerns. The

record, however, indicates that major differences between the parties subsisted. Thus, on

24 October 2008, TCCP wrote to MPNR and listed several areas that were still under

discussion.302 Taking only the first of these issues, concerning the “Tax Regime”, TCCP

was still demanding enormous reductions in the tax which it would pay in completing

(and the corollary benefit to the public interest that would accrue from) the proposed

299 Letter from TCCP to MPNR, 18 August 2008, p.1, CE-227.300 Letter from TCCP to MPNR, 18 August 2008, p.1, CE-227.301 Claimant’s Memorial, ¶ 94.302 Letter from TCCP to MPNR, 24 October 2008, p.1-3, CE-230.


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mining project. To repeat in full the tax concessions which it believed were “very close”

to being agreed:

“In particular, we are seeking:

a. a reduction of the corporate tax rate applicable to miningprojects from 35% to 25%;

b. reduction from 5% to 0% of the customs duties, sales tax,excise duty rates and other taxes on the importation ofplant, machinery, equipment, specialized motor vehiclesand supplies applicable to Tethyan and its contractors andsubcontractors;

c. reduction of the applicable tax on profit on foreign debtfrom 10% to 0%;

d. reduction of the dividend withholding rate from 10% to3.75%;

e. extension of the concentrating/refining profits exemptionfrom 5 to 10 years; and

f. confirmation through an Advisory Opinion that any internalreorganizations within the group of companies of whichTCC is relevant will not constitute an event subject tocapital gains tax.”303

213) This summary by TCCP hardly suggests that they were in truth “very close” to

agreement, and that, by implication, the Respondent had abandoned its desire for the

mineral agreement to be subject to the 2002 BM Rules and to advance the interest of its

public (as expressed in its counterproposal draft of the Mineral Agreement).304

214) Rather, the Respondent’s and the Government of Balochistan’s insistence on the

importance of the issues raised confirmed what had in fact been known to the Claimant

all along. Mr Khokhar’s Statement explains how the Respondent and the Government of

Balochistan have been remarkably consistent in their expectations, including the clear

position that the 2002 BM Rules (with future amendments) would apply at all times and

303 Letter from TCCP to MPNR, 24 October 2008, p.1, CE-230.304 Letter from Hussain & Hussain to TCCP, 24 October 2008 provided comments on the Project Agreement

TCCP sought to negotiate with Balochistan, CE-231.


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the request for value-addition in the form of a smelter.305 The Respondent’s and the

Government of Balochistan’s expectations from the Claimant were not subjective, but

were grounded in the statutory requirements laid down by Rule 48(3)(a) of the 2002 BM

Rules. Unsurprisingly, the negotiations did not lead to the conclusion of a mineral

agreement.

D) TCCP’S FLAWED APPLICATION FOR A MINING LEASE

215) As explained above, the Claimant knew that its proposal for a mining project did not

comply with the 2002 BM Rules (and, indeed, with other provisions of Pakistani law

relating to matters of tax, transport and security). TCCP nevertheless prepared, and filed,

an application to the Licensing Authority under the 2002 BM Rules. The Claimant did so

knowing full well that its proposals did not meet the relevant requirements, given its

detailed discussions with both the Federal and Provincial Governments. Its blunt refusal

during the negotiations for the draft Mineral Agreement to create even a small smelter (of

a 50,000 ton capacity) on the pretext that it would affect the economics of its project

should in itself have made that visible. To add insult to injury, the Feasibility Study

supporting TCCP’s Mining Lease Application included the entirely novel proposal for a

“concentrate pipeline to transport the product from the mine site to the port of Gwadar,

and a dedicated marine terminal facility at the port for storage and transfer to shipping

vessels for supply to smelters throughout the world”306 (emphasis added).307

216) However, quite remarkably, the Claimant did not think it necessary to raise with the

Respondent or the Government of Balochistan its proposal of a 682 kilometre

underground pipeline to transport the concentrate from the mining pit to the port of

Gwadar. The Claimant is either blinded by its presumption or was ill-advised to think that

any government agency, let alone a provincial directorate of mines and minerals, could

approve a unilateral proposal by the Claimant to build what itself concedes would be the

305 Khokhar Statement, paragraphs 40 to 47.306 Ex RE-23, Reko Diq project: <http://www.tethyan.com/TheRekoDiqProject/MiningProject.aspx>307 Further, and quite apart from the matter of the Claimant requiring consent to take mineral resources out of

the country, Mr Khokhar confirms that the pipeline proposal was never discussed by the Claimant or TCCPwith the Respondent: Kokhar Statement, paragraph 42-.


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“longest pipeline in the world transporting copper concentrate.”308 The fact that the

pipeline would go through an area of Pakistan where gas pipelines are routinely bombed

by separatists and terrorists speaks volumes of the Claimant’s failure to understand the

environment in which it purported to carry out a “56 year” project.309

217) Cognisant that the Respondent was not willing to circumvent the 2002 BM Rules by

entering into a Mineral Agreement that did not reflect the interests of its public, the

Claimant and TCCP decided to construe Article 11.8.2 of the CHEJVA as conferring a

“right” to a mining lease. Given the vigour with which the Claimant and TCCP had tried

to persuade the Respondent and Balochistan to enter into a Mineral Agreement, which it

hoped would “override” the regime established by the 2002 BM Rules, the Claimant was

well aware that that regime did not afford it an automatic right to mine Reko Diq. With

that awareness, therefore, TCCP prepared and filed its Mining Lease Application with the

Licensing Authority under the 2002 BM Rules, albeit for a Mining Area the focus of

which was about six times the original project the Claimant had proposed to its joint

venture partner in the framework of the CHEJVA.

218) The Mining Lease Application occurred in a context that was already contentious. For

instance, on 18 July 2006, the Licensing Authority wrote to the Claimant stating:

“TCC in its progress reports and presentations had been informingof preparing feasibility studies to launch H-4 (Tanjeel) Project oncompletion of all reserves estimates. TCC has also reported to havefurther proven the reserves at H-4 thus increasing the ore reservesestimates. Consequent upon proving the reserves, no furtherexploration at H-4 is warranted and the deposit is deemed to theready for commercial exploitation.

In pursuance to the Balochistan Mining Concession Rules noexploration licence could be granted/renewed for more than 10years. Whereas, at H-4 exploration is underway since 1993. You

308 “This concentrate is the final product of the Reko Diq Mining Project which shall then be transported to theGwadar port in Balochistan via a 682 km long underground slurry pipeline. This will be the longestpipeline in the world transporting copper concentrate. The scope of operations at the Gwadar port shall belimited to receiving, de-watering, storing and ship-loading concentrate for onwards selling to smelting unitsglobally.” Ex RE-23, Reko Diq project:<http://www.tethyan.com/TheRekoDiqProject/MiningProject.aspx>

309 See also the Chief Secretary’s Statement, paragraphs 32-39.


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are, therefore, advised to apply for mining lease of H-4 deposits sothat mining operation could be launched, as the Government ofBalochistan as well as Government of Pakistan is taking keeninterest in this project.”310

219) The Claimant did not reply to this letter or submit the requested feasibility study for the

H4 deposit. On 12 September 2006, the Licensing Authority sent a reminder for the

submission of a feasibility study for the H4 deposit stating, inter alia, that the

commissioning of a feasibility study for the H4 deposit had been an on-going issue since

2001 and that, after a lapse of five years, the Claimant was now required to submit a copy

of that long-promised feasibility study over the H4 deposit on priority basis.311 The

Claimant denied that it had an obligation to make an application for a mining lease over

the H4 deposit, even though it had been extensively explored, stating that it would make a

mining lease application when it wanted to do so.

220) The Claimant eventually submitted a feasibility study – though, as discussed below, it

was not related to the H4 deposit at all.312 This was the Feasibility Study created in

August 2010 and submitted as part of the Mining Lease Application in February 2011.

221) The first stage in the preparation for the ultimate application for a mining lease was

therefore known to all parties: the Joint Venture had to generate a feasibility study. It did

so, albeit only in relation to the limited area that comprised the “Western Porphyries” or

“H14 and H15” deposits.313 The Claimant alleges that this limited scope of the feasibility

study was the result of a “decision” taken by TCCP and the BDA at a meeting for the

Operating Committee (as established under the CHEJVA) on 26 October 2007.

However, as the minutes of that meeting reflect, no such limitation was formally agreed

at that meeting, and the discussion concerning the feasibility study focused on what was

an economical prospect for a mine.314 The Claimant’s attempt to read the minutes of this

310 Letter from Licensing Authority to the Claimant, 18 July 2006, Ex RE-66.311 Letter from Licensing Authority to the Claimant, 12 September 2006, Ex RE-67.312 Letter from the Claimant to the Director-General of the MMDD, 10 April 2006, CE-206.313 Claimant’s Memorial ¶ 246-249. The Respondent reserve sits right to submit expert evidence on the

adequacy and accuracy of the Feasibility Study, in particular whether it even covered both H-4 and H15.314 Minutes of Operating Committee, 26 October 2007, p.2-3, CE-64.


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meeting more expansively is, in truth, little more than an attempt to hide the overreaching

scope of its ultimate application for a mining lease from the Licensing Authority (which

was thus unsupported by a feasibility study of equal scope).

222) In addition, the Claimant’s attempt to justify its Mining Lease Application for a much

larger area of land also contradicts the CHEJVA. As explained above, Article 11 of the

CHEJVA obliged BHP, or its successor, to offer the BDA an opportunity to become a

Participating Party in respect of all “Mineral deposits” covered by the relevant

application for a mining lease. TCCP manifestly did not do so in the present case. The

Feasibility Study it ultimately presented to the Licensing Authority did not cover, to

quote from Article 11, all the “Mineral deposits” in the “Mining Area” for which it

sought a lease. This mismatch between the Feasibility Study and the Mining Lease

Application was forbidden by the operation of Article 11 of the CHEJVA.

223) In any event, on 26 August 2010, the Claimant formally submitted the feasibility study

over the less than six square kilometres comprising the Western Porphyries pursuant to

Article 11.3.1 of the CHEJVA, stating in its cover letter that the joint venture partners

had 90 days in which to elect whether to be Participating Parties in an application to

develop a mine. 315

224) Within those 90 days, and at a meeting of the Operating Committee on 8 November 2010,

the Secretary of the MMDD raised concerns about the completeness of the feasibility

study for the purposes of the requirements of the CHEJVA and the 2002 BM Rules. As

those minutes record, the Secretary of the MMDD:

“Asked by the [Environmental and Social Impact Assessment] isnot ready and was not delivered at the same time of the FeasibilityStudy. He said the F[easibility] S[tudy] was not complete if theE[nvironmental and] S[ocial] I[mpact] A[ssessment] was notsubmitted.”316

315 Letter from TCCP to Secretary of MMDD, 26 August 2010, CE-22.316 Minutes of Operating Committee, 8 November 2010, p.2, CE-103. The Secretary of the MMDD also

observed that he had “already found many flaws on [sic] the Feasibility Study”: Minutes of OperatingCommittee, 8 November 2010, p.3, CE-103.


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225) Although the Claimant at the time sought to argue that an Environmental and Social

Impact Assessment was not a necessary part of the feasibility study,317 the next step

which emerged from the meeting of the Operating Committee was that the “flaws” that

the Secretary of the MMDD had identified in the feasibility study would be “addressed

by the technical expert advisors first”.318

226) However, without either arranging for, or waiting for the arrangement of, such technical

advisors to address the flaws in its feasibility study, TCCP pushed forward with the

process. On the very same day as the Operating Committee meeting, TCCP formally

elected to be a Participating Party pursuant to Article 11.3.2 of the CHEJVA,319 and

allowed the 90-day election period to lapse (on 24 November 2010) without further

discussion with the Respondent.320 It was only after this period had lapsed that TCCP

wrote to the Secretary of the MMDD.321 This letter was not, as the Claimant now

pretends, to “encourage Balochistan to participate in the planned mine development”.322

Rather, as the terms of the letter indicate, it was to tell the Secretary of the MMDD that

the period for election had lapsed and that:

“the procedure laid down in the CHEJVA in relation to the miningdevelopment of the Mining Area (as defined in the CHEJVA) shallnow follow.”323

227) This letter was as uncompromising and sharp as its tone suggests. It was also particularly

intransigent considering that the very basis of the project to date – the CHEJVA – had

been challenged before the Respondent’s Supreme Court. The applications to the

317 The Claimant apparently maintains now its insistence that the feasibility study was sufficient without anEnvironmental and Social Impact Assessment, highlighting the aspects of the feasibility study which itbelieves addresses the same content as an Environmental and Social Impact Assessment: Claimant’sMemorial ¶ 257-258.

318 Minutes of Operating Committee, 8 November 2010, p.3, CE-103. The study was sent to the MMDD as ithad assumed operational control over the BDA’s role in the CHEJVA since the Operating Committee of 25August 2010 (although the notice of this transition was in December 2009).

319 Letter from TCCP to TCCA, 8 November 2010, CE-23.320 Claimant’s Memorial, ¶ 281-282.321 Letter from TCCP to Secretary of the MMDD, 30 November 2010, CE-24.322 Claimant’s Memorial, ¶ 283.323 Letter from TCCP to Secretary of the MMDD, 30 November 2010, p.1, CE-24.


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Supreme Court sought, in short, a judicial review of governmental actions relating to the

CHEJVA and relating to any forthcoming decision on an application for a mining lease

pursuant to the CHEVA.324 Although the Supreme Court challenges relating directly to

the CHEJVA and any mining lease under it, the Claimant through TCCP pushed forward

regardless, even though it must have known that its Joint Venture partner would be

unable to take action during the pendency of the Supreme Court proceedings. In fact, the

Claimant flatly refused the Secretary’s request for an extension of time to consider the

Feasibility Study.

228) Aware that the relevant exploration licence would soon be expiring, TCCP on 8 February

2011 wrote to the Secretary of the MMDD and stated that it would be applying for a

mining lease.325 The application would not be made in the name of the exploration

licence holder – the Joint Venture – but solely on behalf of TCCP. In doing so, TCCP

expressly noted that its application would be made “[a]s per requirements of rule 47(1)

of the Balochistan Mineral Rules, 2002”.326 The letter was sent only “to keep the

Government of Balochistan in picture”.327

229) On 3 February 2011, the Claimant applied to the Supreme Court to make a mining lease

application before the exploration licence expired. The Supreme Court granted the

request of the Claimant328 and, on 08 February 2011, TCCP made the Mining Lease

Application to the Licensing Authority.329

230) As the Claimant acknowledges,330 the Feasibility Study which TCCP submitted alongside

its Mining Lease Application was the same feasibility study it had previously prepared,

324 Constitutional Petition by M. Tariq Asad, 6 November 2010, CE-172; Constitutional Petition by the WatanParty, 8 November 2010, CE-173. Additional petitions were later filed: Constitutional Petition by QaziSiraj Sanjrani and another, 4 January 2011, CE-268; Constitutional Petition by Senator Swati and others,24 January 2011, CE-270.

325 Letter from TCCP to Secretary of the MMDD, 8 February 2011, CE-113.326 Letter from TCCP to Secretary of the MMDD, 8 February 2011, p.1, CE-113.327 Letter from TCCP to Secretary of the MMDD, 8 February 2011, p.1, CE-113.328 Order of the Supreme Court of Pakistan, issued on 03 February 2011 Ex RE-6.329 Letter from TCCP to Director of the MMDD, 15 February 2011, CE-6.330 Claimant’s Memorial ¶ 309.


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that is, the feasibility study in relation to the limited area of less than six square

kilometres that comprised the Western Porphyries (also known as H14 and H15). As its

application made clear, however, the size of the area the subject of the mining lease

sought was vastly in excess of the size of the area that had been the subject of the

Feasibility Study of the relevant “Mining Area” under Article 11 of the CHEJVA. Thus

TCCP’s application sought title over 99.473 square kilometres.331 It did so regardless of

the fact that the feasibility study only related to less than six square kilometres, and that

the study blatantly ignored the Government of Balochistan’s concerns that the project

include smelting and refining capacities.332 It was also plain from the submitted

Feasibility Study that the Claimant rescinded on the some of the points that were agreed

to during the draft Mineral Agreement negotiations. To the contrary, the Feasibility Study

only confirmed the theme which had been emerging ever since the Claimant became

involved, namely, that the project was taking on enormous dimensions and making

untenable demands of the Government of Balochistan, without any meaningful defence to

the terms of its Undertaking and the CHEJVA, and to the impossibility presented by the

expanded scope (such as, the need to pump vast quantities of slurry through 682

kilometres of pipeline across hostile territory to a port destination). In truth, therefore, it

was an entirely unfeasible feasibility study. The Claimant itself noted that in order to

prepare a bankable feasibility study it needed certain approvals and consents.

“Major Milestones for bankable Feasibility Study• Shareholders Agreement with Baluchistan Development Authority.

• Mineral Agreement with the Governments of Baluchistan and Pakistan(currently being drafted).

• Reach agreement with the Governments of Baluchistan and Pakistan on theimplementation modalities for critical infrastructure (e.g. power, roads andtraining institutions).

• Obtain necessary permits and approvals from the Governments of Baluchistanand Pakistan to implement the project.

331 Letter from TCCP to Director of the MMDD, 15 February 2011, p.7, CE-6.332 See Letter from MPNR to TCCA attaching counterproposal Mineral Agreement, 7 August 2008, clause 5.5,

CE-226. Note also that the Claimant also included in its feasibility study the need for a trans-provincialpipeline (which would run 680 kilometres across Balochistan) without any prior significant discussion ofhow this infrastructure would be installed, maintained and, most importantly of all, protected and securedagainst any harm being done to it in the context of the difficult circumstances prevailing in Balochistan.


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• Completion of financing.”333

231) Nor could the Claimant and TCCP have been unaware of the inadequacy of the

Feasibility Study. That the Feasibility Study was drastically limited in scope is evidenced

by the fact that the Claimant and TCCP secretly prepared a pre-feasibility expansion

study, the core purpose of which was to assess the viability of mining projects outside the

Western Porphyries.334 At no point prior to the completion of the feasibility study which

it ultimately submitted to the Licensing Authority did the Claimant and TCCP disclose to

the Respondent, BDA or Balochistan the contents of the pre-feasibility expansion study.

Indeed, neither the Government nor the Licensing Authority ever saw the pre-feasibility

expansion study before the Claimant was forced to submit them in these arbitral

proceedings. This concealment demonstrates that the intention of the Claimant and

TCCP was to hide for as long as possible its real intention for the approximately 99.4

square kilometres it sought in its mining lease application (which area contained at least

14 known mineral deposits – H2, H3, H4, H7, H8, H9, H10, H13, H14, H15, H27, H35,

H36 and H79335 – even though the Feasibility Study was limited to only two deposits

(H14 and H15). The Mining Lease Application sought rights over mineral deposits in

respect of which the joint venture partner had never been given an opportunity to

participate as required under Article 11 of the CHEJVA).

232) The Claimant is sensitive that this disingenuousness reflects poorly on it. As a result, it

attempts to argue that Balochistan was aware of the pre-feasibility expansion study prior

to its completion. The Claimant in its Memorial particularly relies on the minutes of the

Operating Committee meeting of 26 October 2007,336 and references to the pre-feasibility

333 Quarterly Report 31/12.2006, Tanjeel Bankable Feasibility Study, CE-209.334 The Claimant has exhibited extracts of the Pre-Feasibility Expansion Study at CE-243 Expansion Study

and CE-244. The Expansion Study follows the Initial Mine Development Feasibility Study (IMD FS)which was completed in June 2010, the Initial Mine Development Prefeasibility Study (IMD PFS) whichwas completed in June 2009 and a scoping study completed in October 2007. The objectives of theExpansion Study are: To assess the technical and economic viability of an expansion to the project from110 000 t/d to a prefeasibility level.

335 Map of Reko Diq deposits, Ex RE-68.336 Claimant’s Memorial ¶ 264.


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expansion study in the feasibility study which it ultimately provided to the Licensing

Authority.337 Neither supports the Claimant.

233) First, the minutes of the Operating Committee meeting of 26 October 2007 do not come

close to establishing that Balochistan was aware of a pre-feasibility expansion study in

relation to the feasibility of mining mineral deposits outside the Western Porphyries. The

minutes of that meeting only referred to: “possibly developing” such deposits in the

future; the fact that the mining project on which the feasibility study focused “could lead

to a larger mining project”; and the Tanjeel (or H4) deposit was not economic on its own,

but may be so if it was exploited as part of a larger project with “additional work outside

the Tanjeel area”.338 Nothing in those minutes reflected an express recognition, let alone

authorisation, that the Claimant and TCCP would prepare a pre-feasibility expansion

study.

234) Second, the fact that the Claimant referred in its feasibility study to the potential to

expand the project only reinforces the secrecy surrounding the pre-feasibility expansion

study. The pre-feasibility study was completed in July 2010,339 which was before the

feasibility study for the Western Porphyries was completed, summarised at an Operating

Committee meeting and delivered to the MMDD – all of which happened only in August

2010.340 That the Claimant and TCCP included cryptic references to the possibility of

(but not a copy of the actual) pre-feasibility study in the Feasibility Study for the Western

Porphyries hardly contradicts the Respondent’s concerns that the Claimant and TCCP

were seeking to usurp the 92 or so square kilometres of the requested mining lease which

were not covered by the Feasibility Study. To the contrary, such an omission by the

Claimant only confirms the inadequacy of the Feasibility Study and the Claimant’s lack

of good faith.

337 Fourth Witness Statement of Timothy Livesey, 1 February 2013, Section III.B.338 Minutes of Operating Committee, 26 October 2007, p.2-3, CE-64.339 Claimant’s Memorial, ¶265.340 Claimant’s Memorial ¶ 241 and 271.


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235) In any event, at the provisional measures application hearing in London on 6 November

2012, the Claimant’s counsel admitted that the pre-expansion feasibility study was not

provided to the BDA, Balochistan or the Respondent prior to these proceedings.341

236) It was against this background of inadequacy that the Claimant and TCCP pushed for the

Licensing Authority to decide its Mining Lease Application in accordance with the 2002

BM Rules. As discussed further below, the Licensing Authority did so, notably in

pursuance of the direction of the Supreme Court on 25 May 2011 that it should

expeditiously decide the application lodged by TCCP.342

III.8 THE LICENSING AUTHORITY, WHICH IS NOT A PARTY TO THE CHEJVAAND EXERCISES ITS REGULATORY POWERS INDEPENDENTLY OF THECHEJVA, PROPERLY REJECTED THE CLAIMANT’S APPLICATION FOR AMINING LEASE

237) As this Section discusses: (1) the Licensing Authority is not a party to the CHEJVA and

exercises its regulatory powers independently of the CHEJVA (and its signatories); (2)

the Licensing Authority gave a reasoned decision properly rejecting the Claimant’s

application for a mining lease; and (3) the Claimant and TCCP availed itself of several

stages of review of the Licensing Authority’s decision.

A) THE LICENSING AUTHORITY IS NOT A PARTY TO THE CHEJVA ANDEXERCISES ITS REGULATORY POWERS INDEPENDENTLY OF THECHEJVA (AND ITS SIGNATORIES)

238) It is indisputable that the Licensing Authority is not a party to the CHEJVA and exercises

its regulatory powers independently of the CHEJVA (and its signatories). The Supreme

Court’s decision has been discussed above. Furthermore, as the Respondent has noted

previously in this arbitration,343 the term “Parties” is defined in the CHEJVA to mean

341 Transcript of Provisional Measures Hearing, 6 November 2012, Page 146, lines 10-14, Ex RE-69 (“MRDONOVAN: This pre-feasibility report has not been given to the government. We have it here. We did notinclude it in the record. We have it here.”).

342 Order of the Supreme Court of Pakistan, 25 May 2011, p.12, Ex RE-5.343 Respondent’s Response to the Claimant’s Request for Provisional Measures, ¶ 59-60.


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“BHPM and the BDA”,344 whereas the Licensing Authority is identified separately in the

definitions as “the Provincial Government Directorate responsible for administering the

Mining Rules”.345

239) The inevitable result of this position, pursuant to the most basic of contract law

principles, is that the Licensing Authority is not bound by the terms of the CHEJVA.

Accordingly, even if the CHEJVA did establish a right for the Claimant or TCCP to

obtain a mining lease (which the Respondent strongly denies), that right was not binding

on the Licensing Authority. Rather, the Licensing Authority is obliged to determine any

mining lease application (made by any party) pursuant to its powers under the 2002 BM

Rules. That is why, even in correspondence immediately prior to its Mining Lease

Application, the Claimant and TCCP confirmed that an application for a mining lease

would need to be made and determined “[a]s per requirements of rule 47(1) of the

Balochistan Mineral Rules, 2002”.346 Pakistani law makes it plain that no body or

department can interfere in the discretion of a regulator or licensing authority.

240) In an attempt to overcome the operation of elementary principles of contract and

administrative law, the Claimant tries to manufacture a situation in which the Licensing

Authority – though not a party to the CHEJVA and empowered only to decide mining

lease applications pursuant only to the 2002 BM Rules – nevertheless was limited in the

exercise of its discretion by its earlier connection with the CHEJVA and TCCP.

241) The essence of the Claimant’s position in this regard is its submission that the Director

General of the MMDD, who was also responsible under the 2002 BM Rules for making

the Licensing Authority’s determination, was aware of and expressed no objection to the

(summary of the) content of the Feasibility Study several months before TCCP’s Mining

Lease Application was made when it was presented to him at the Operating Committee

344 CHEJVA, 29 July 1993, Article 1.1. Notes also that BHP received legal advice that the CHEJVA wasunclear as to who was a party to that agreement, and that this uncertainty could only be cured by a contractof Novation: Opinion of Kabraji and Talibuddin, 3 September 1999, Ex RE-56.

345 CHEJVA, 29 July 1993, Article 1.1.346 Letter from TCCP to Secretary of the MMDD, 8 February 2011, p.1, CE-113. Note in this context the

inability of a contract to constrain the operation of the 2002 BM Rules (see Rule 9), including the operationand exercise of the Licensing Authority’s discretion under Rule 48 of the 2002 BM Rules.


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meeting of 25 August 2010.347 In particular (and further indicating the Claimant’s

awareness of the key inadequacy in the mining lease application), the Claimant submits

that the Director General of the MMDD was specifically aware of and made no objection

to the size of the of the Mining Area for which the lease was sought (i.e., 99.473 square

kilometres, in contrast to the less than six square kilometres of the Feasibility Study).348

242) It is entirely unsurprising that the Director-General of the MMDD did not raise any

objection to the presentation given by the Claimant and TCCP on 25 August 2010. The

previous Operating Committee meeting had been held more than a year earlier, and there

is no evidence that the Director-General of the MMDD attended that meeting, or any

other Operating Committee meeting, prior to the one on 25 August 2010 (other than as

observers).349 This was in the context where management of the CHEJVA had been

transferred from the BDA to the MMDD in 2009 on account of the latter taking note of

the former’s mismanagement of the project. Similarly, the Director-General of the

MMDD did not attend the subsequent meeting of the Operating Committee.350

243) In such a context, it would be extremely unlikely for the Director-General of the MMDD

to provide, at the meeting of 25 August 2010, an on-the-spot assessment (let alone

approval) of the Claimant’s presentation, which ran to no less than 78 PowerPoint slides.

His silence in such circumstances is thus more naturally construed as indicating his

neutrality in relation to the Claimant’s presentation, rather than his tacit support, contrary

to what the Claimant has indicated in its Memorial.

244) With the Claimant’s attempt to establish a connection between the Licensing Authority

and the CHEJVA (or, more particularly, its incorrect assertion of a putative right to a

mining lease following on from the CHEJVA) thus being thoroughly artificial, only one

conclusion remains open. As a plain matter of fact, it is clear that the Licensing

Authority is not a party to the CHEJVA and exercises its regulatory powers

347 Claimant’s Memorial, ¶271 and 308.348 Claimant’s Memorial ¶ 308.349 As the minutes of that meeting indicate, the attendees at Operating Committee meetings are assiduously

recorded: Minutes of Operating Committee, 25 August 2010, p.1, CE-102.350 Minutes of Operating Committee, 8 November 2010, p.2-3, CE-103.


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independently of the CHEJVA (and its signatories). It was in the due exercise of its

powers under the 2002 BM Rules, therefore, that the Licensing Authority rendered its

decision in respect of the Claimant’s application for a mining lease.

B) THE LICENSING AUTHORITY GAVE A REASONED DECISIONPROPERLY REJECTING TCCP’S APPLICATION FOR A MINING LEASE

245) As the Claimant notes in its Memorial, the Licensing Authority refused the Mining Lease

Application made by TCCP.351 Contrary to the complaints of the Claimant, however, the

refusal by the Licensing Authority was a proper exercise of its regulatory powers and

discretion under the 2002 BM Rules.

246) The first step in the Licensing Authority’s decision to refuse the Mining Lease

Application was duly taken under Rule 48(4)(a) of the 2002 BM Rules.352 That provision

of the 2002 BM Rules requires, in summary, that the Licensing Authority give reasons

for refusal of a mining lease and allow the applicant a reasonable period in which to make

representations about those reasons.353

247) Irrespective of the fact that TCCP was not itself the holder of an exploration licence, and

thus did not have the appropriate standing to make the application to the Licensing

Authority, the latter entity provided TCCP with its reasons for intended refusal of the

mining lease.354 In fulfilment of (and citing) Rule 48(4)(a) of the 2002 BM Rules, the

Licensing Authority issued a notice of intended reasons for refusal of mining lease

application.355 It was issued, sent to and received by TCCP on 21 September 2011.356 It

set out, in clear terms, some ten intended reasons why the Licensing Authority was

planning to refuse the application.

351 Claimant’s Memorial, ¶ 318 and 327.352 Notice of Intended Reasons for Refusal of Mining Lease Application, 21 September 2011, p.1, CE-7.353 Rule 48(4)(a), 2002 BM Rules, Ex RE-1.354 The exploration licence over EL-5 was held in the name of the unincorporated joint venture (“Tethyan

Copper Company (Pvt) Limited – BDA Chagai Hills Exploration, Joint Venture”). The CHEJVA confirmsthe exploration licence was the property of the joint venture. TCCP made an application on its own behalfrather than on behalf of the joint venture. Hence, TCCP did not even make it past this preliminary hurdle.

355 Notice of Intended Reasons for Refusal of Mining Lease Application, 21 September 2011, CE-7.356 Notice of Intended Reasons for Refusal of Mining Lease Application, 21 September 2011, CE-7 (the issue

date appears on p.1, and the date of receipt on p.2).


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248) The Claimant lambasts this decision. In a remarkable assault, TCCP dismissed the

validity of the reasons provided by the Licensing Authority as “vague, factually incorrect

and pretextual”.357 In truth, however, the reasons provided by the Licensing Authority

conveyed – in terms which, though perhaps not in the perfect English that the Claimant

and its backers speak and write, are nevertheless eminently clear enough for any reader to

comprehend – the basis on which it was exercising its discretion under Rule 48(3)(a) of

the 2002 BM Rules to refuse the application. Surprisingly, the Claimant never took issue

with the expression of previous decisions issued by the Licensing Authority or other

authorities in its favour, including exploration licences and, of course, the infamous

“relaxation” of the 1970 BM Rules. The Claimant’s assault, therefore, represents not the

articulation of genuine grievances about the content of the notice, but rather an attempt to

degrade before this Tribunal the integrity of the notice and the Licensing Authority’s

processes in issuing it. In fact, the same aggressive and disparaging tone was employed

in TCCP’s response of 19 October 2011358 to the Licensing Authority’s notice. Instead of

reconsidering, and taking the opportunity to amend, its application in an attempt to meet

the requirements of the 2002 BM Rules, TCCP arrogantly dismissed all the reasons set

out in the Licensing Authority’s notice by deliberately misconstruing the bases for

rejection. It did so, however, while also noting in its response of 19 October 2011 the

existence of the discretion of the Licensing Authority to reject the mining lease

application under 48(3) of the BM Rules 2002.359 It merely disagreed with the decision

reached by the Licensing Authority.360

249) A careful review of the notice of intent to reject shows that this attempt by the Claimant

must fail. Throughout the notice, the Licensing Authority repeatedly emphasised a

357 Claimant’s Memorial, ¶ 318.358 CE-8.359 See ¶ 2.13 of the Claimant’s response 19 October 2011. This can be compared with ¶3.2 of the same

response where the Claimant contradicts itself. Further, in ¶3.2 the Claimant invokes Rule 9(1) of the BMRules 2002, conveniently disregarding Rules 9(5) and 9(6) of the BM Rules 2002.

360 In this arbitration, and the arbitration before the ICC Tribunal, the Claimant has changed its story, statingthat the Licensing authority never had the discretion to reject the mining lease and that it should have beengranted as a matter of right.


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number of themes. Two themes emerge as seminal to the Licensing Authority’s decision

to refuse the application, however.

250) First, it is abundantly clear from the notice that the Licensing Authority had deep

reservations about the scope of the Feasibility Study submitted as part of the Mining

Lease Application, and in particular that the Feasibility Study covered only a tiny portion

of the area of the request mining lease and a small minority of the deposits already

identified as existing within that larger area. Thus, on this theme, the Licensing

Authority expressed its concerns, inter alia, that:

a) the Feasibility Study “failed to comment or dilate upon [the] rest of the

discover[ed] deposits” that were known to exist within the area the subject of the

mining lease application, “except [for] H-14 and H-15” (known commonly as the

Western Porphyries). It is plain that Rule 48(3)(a)(i) requires the “feasibility

studies to show that the mine can be profitably development and operated” and

“the proposed plans for development and operation of the mine and the

programme of the mining operations of the applicant will ensure the efficient,

beneficent and timely use of the resources” (Rule 48(3)(a)(ii);361

b) The Licensing Authority stated that as a result, the “proposed development,

operation and scheme of the mines in [the] programme of the mining operation

for the 11 other potential resources”, in the area the subject of the mining lease

application, other than H14 and H15, “is missing/omitted to be considered in [the]

feasibility report”;362

c) It noted that this failure to submit a full and proper feasibility study was even less

explicable in the context that the Exploration Licence EL-5 had been “enjoy[ed]

… for the last 17 years, alongside ‘special relaxations’”;363 and

361 Notice of Intended Reasons for Refusal of Mining Lease Application, 21 September 2011 ¶ 7(i), CE-7.362 Ibid, ¶ 7(ii), CE-7.363 Ibid, ¶ 7(iv), CE-7.


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d) “the company did not make [a] proper feasibility or exploration of the discovered

deposits” in the area the subject of the mining lease application, other than H14

and H15, and that therefore “the submission of the application relating to H-4, H-

8, H-13, H-35 and H-79 etc is in violation of rule-48” of the 2002 BM Rules,364

and the Claimant had “failed to conduct and complete exploration in the

exploration license/granted area.”365

251) There can be no mistaking the Licensing Authority’s view on the Feasibility Study

submitted by TCCP alongside its Mining Lease Application. It fundamentally disagreed

with the validity of an application that was substantiated by a feasibility study which only

related to a tiny minority of the area and deposits that would be contained within the

mining lease. Given that the 2002 BM Rules state that the Licensing Authority “shall

not” grant a mining lease if a feasibility study had not shown that the mine within that

lease “can be profitably developed and operated” and if proposed plans for development

of those mines did not “ensure the efficient, beneficial and timely use of the mineral

resources”,366 it cannot seriously be maintained that the Licensing Authority’s decision

was ill-founded under those Rules. Rather, the Licensing Authority exercised its powers

under the 2002 BM Rules and came to the conclusion that an application for a mining

lease over 99.473 square kilometres, which was supported by a feasibility study covering

only approximately six percent of that area, did not meet the requirements for a grant of a

mining lease.

252) It is an undisputed fact that the Feasibility Study confined itself to the H14 and H15

deposits. The Claimant contends that it had made an expansion pre-feasibility study for

some of the other deposits. Of course, TCCP never submitted this expansion pre-

feasibility study as part of its Mining Lease Application. Nor is this expansion pre-

feasibility study mentioned in the submitted Feasibility Study. The Claimant and TCCP

developed this expansion pre-feasibility study covertly and did not share it with their joint

venture partner. The expansion pre-feasibility was not disclosed by TCCP in its 19

364 Ibid, ¶ 2 and 8, CE-7365 Ibid, ¶ 3, CE-7366 Rule 48(3)(a)(i)-(ii), 2002 BM Rules, Ex RE-1


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October 2011 response to the Licensing Authority.367 Rather, TCCP vaguely stated that it

“proposes to carry on further exploration operations in the mining lease area after the

mining lease is granted. This work may include the Expansion Feasibility Study and

resource estimation and up-gradation of existing ore bodies.” Indeed, the first time the

Claimant ever provided details of this covert expansion study was during these

proceedings.

253) The 2002 BM Rules do not permit a company to hold mining leases over mineral deposits

so that it may decide to exploit them in the future after further exploration. It is plain that

the purpose of a Mining Lease is not to serve as an extended exploration licence.

Nevertheless, TCCP sought a Mining Lease over the entire 99 square kilometres

irrespective of its failure to provide a feasibility study in respect of the entirety of that

area. Moreover, it is worth noting that TCCP was not entitled to any further extensions of

its exploration licence. It was despite its two prior extensions for exploration work that

TCCP was unable to provide feasibility studies for the mines it purported to develop.

254) The Claimant justifies this by stating that the other deposits were not economical at the

time and would be developed as part of a bigger project. This is the underlying theme of

its refusal to submit a feasibility of all the deposits in the proposed mining lease area.

This argument does not have any substance and is devoid of all logic. A feasibility study

is the instrument through which a party can decide whether or not a particular mine

development will be economical. However, the Claimant has assumed that the other

deposits are uneconomical without conducting any feasibility studies over them. This is

made clear in Rule 35 2002 BM Rules:

“A person may apply for the grant of a mineral deposit retentionlicence if the person is the holder of an exploration licence inrelation to the area of land and the mineral or group of minerals towhich the application relates and –

(a) A potentially economic discovery of mineral deposit hasbeen made in the exploration area;

367 TCCP’s Interim Response to Licensing Authority Notice (the “Notice”), 19 October 2011 ¶ 3.43, CE-8.Even if it had been, it would not have been sufficient, as Rule 48(3) of the 2002 BM Rules requires thesubmission of a “feasibility study” rather than a pre-feasibility study.


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(b) The applicant has completed a full feasibility study todetermine whether the mineral deposit can bedeveloped and produced on a profitable basis;

(c) The applicant wishes to retain the exploration area or apart thereof for future development of the mineraldeposit discovered as, for good economic or technicalreasons, development could not then be reasonablyundertaken on a profitable basis; and

(d) Exploration operations and relevant studies have beenundertaken to the maximum extent feasible in thecircumstances.”

255) The Claimant obviously knew of this rule. However, the reasons why it did not apply for

a mineral deposit retention licence are plain. First, it did not conduct any feasibility work

over the other discovered and potentially economic deposits to determine whether they

could be profitably developed.. Second, a mineral deposit retention licence can only be

granted for a total period of three years – two initial years, with the option to renew the

licence for one extra year. This means the Claimant would have to develop the 12

remaining mineral deposits within a period of three years if it sought a mineral deposit

retention licence over them. Third, the Claimant admits that it did not adequately explore

the 12 remaining deposits and it would utilise the mining lease to explore the deposits.

256) It is no secret that a single mining company would not be able to develop the at least12

remaining discovered and identified mineral deposits in the Reko Diq area in three years.

It is plain the Claimant intended (and through this arbitration, still intends) to hold

Balochistan and its mineral resources hostage, on today’s terms, for however long such a

massive exploitation project would take. Also, as was laid bare by the terms it sought

under the draft Mineral Agreement, its true intent was to sell these rights to mine to third

parties and profit from that sale.368

257) However, the manifest inadequacy of the Feasibility Study, which in itself could have

justified the refusal under Rule 48, is not the only theme emerging clearly and repeatedly

from the Licensing Authority’s notice to TCCP. In addition, a second theme is that the

368 Letter from Chief Executive Officer, TCC to Secretary, Ministry of Petroleum and Natural Resources, 18August 2008, at p..6-7 ¶ 12, CE-227.


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application was refused on the basis that it was not in the interest of the development of

the mineral resources of Balochistan, or in the public interests of Balochistan more

generally, and more specifically the lack of a smelter facility as required by Rule

48(3)(vii). Thus, on this theme, the Licensing Authority expressed its concerns, inter

alia, that:

a) despite previously expressed concerns about the need for the project to having

smelting, refining and other downstream capacities to add local value to the

project, the “feasibility report is silent about the processing, smelting and refining

of the metals / minerals to be extracted from the mining area” that was the subject

of the Mining Lease Application;369

b) in light of all the concerns in the notice, including the predominant concerns

relating to the inadequacy of the Feasibility Study, the application was “not

satisfactory” and “complete” and therefore “also not in the interest of [the]

Government and people of Balochistan”;370 and

c) due to the inadequate exploration activities “during the last 17 years, the

Government of Balochistan and the local inhabitants of the area ha[ve] been

deprived of the fruitful results”.371

258) As with the Feasibility Study, the Licensing Authority was clear and unequivocal in its

view that the grant of the requested mining lease was not in the interest of the

development of the mineral resources of Balochistan, or in the public interests of

Balochistan more generally. However, the fact that it failed to meet the rudimentary

requirement of establishing a smelter as required by the Rules was in itself sufficient as a

ground for refusal. The Claimant’s Mining Lease Application made no such provision for

a smelting and refining facility. The Claimant had repeatedly refused to establish such a

refinery because it was not profitable for it to do so – it simply wished to take all the

mineral in concentrate form, leaving the people of Pakistan to import gold and copper at

369 Notice of Intended Reasons for Refusal of Mining Lease Application, 21 September 2011, ¶ 9 CE-7.370 Ibid, ¶10 CE-7.371 Ibid, ¶ 4 CE-7.


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LME prices without benefiting from their own reserves. Given that the 2002 BM Rules

state that the Licensing Authority “shall not” grant a mining lease unless the application

makes provision for value-addition, this ground alone was sufficient to deny the mining

lease. The Claimant knew that this provision was designed provide value-addition in the

form of a smelter and refinery. In this case, it is undisputed and indisputable that there

was no such smelter and refinery envisaged in the Mining Lease Application and

therefore the failure to meet the Rules was palpable.

259) Further, the 2002 BM Rules required the Licensing Authority to be satisfied that “it is in

the interest of the development of the mineral resources of Balochistan to grant the

lease”.372 Again, it is elementary that the interests of the province need to be determined

by Licensing Authority; the Claimant’s opinion about what those interests should be is

irrelevant.373 Nor can the Claimant complain that the Licensing Authority’s

determination in this respect came as a surprise. Indeed, the very same issues – in

particular, those relating to smelting, refining and downstream processing, and to the

need to add value – had been raised explicitly in the earlier discussions relating to the

proposed Mineral Agreement. Further, it should have been obvious to it that making

provision for a pipeline of 682 kilometres without even discussing the proposal with the

Governments, let alone, obtaining consent for such an unprecedented project – not only in

Pakistan but in the world- was bound to fail.

260) While the above themes dominate the Licensing Authority’s decision, they were not the

only bases on which TCCP’s application for a Mining Lease was rejected. First, the

Licensing Authority observed that the application had been filed by TCCP on its own

behalf, and not on behalf of the Joint Venture under the CHEJVA, and without

complying with the pre-conditions of pursuing a sole mining lease application under

Article 11.4.2. The Licensing Authority had made the Claimant’s participation in the

assignment of the Exploration Licence EL-5 and subsequent renewals conditional on

372 Rule 48(3)(a)(vi), 2002 BM Rules, Ex RE-1.373 Indeed, this was the very discretion that each of the Government of Balochistan, TCCP and the World Bank

had previously noted as being a pivotal part of the 2002 BM Rules, as noted above.


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observing all the obligations in the CHEJVA. The Claimant had submitted an

Undertaking to do so in 2006.

261) TCCP’s Mining Lease Application was submitted without acquiring (and paying for) the

transfer of its Joint Venture partner’s interest in the Exploration Licence EL-5 and other

Joint Venture Property under Article 11.6 of the CHEJVA.

262) The Licensing Authority found “the applicant … was not [the] allottee of [the]

exploration licence and thus legally [the] applicant is not competent to make [the]

application for [the] grant of the Mining Lease”.374 Nor, concluded the Licensing

Authority, was this problem rectified by TCCP seeking to discuss the potential

acquisition of its joint venture partner’s interest after the Mining Lease Application had

been made.375 TCCP’s lack of standing to apply for the mining lease was a procedural

bar to the grant of its Mining Lease Application, no less significant than the substantive

bars discussed above. Indeed, it was one of the key reasons rendering the Mining Lease

Application “incomplete”.376

263) Furthermore, Article 48(3)(b) obliges the Licensing Authority to reject a mining lease

application when the applicant is in default at the time of making the application. The

Claimant had failed to abide by its express undertaking pursuant to Rule 29(3)(c)(iii) to

conduct feasibility studies for all discovered deposits in 435 square kilometre exploration

area of its Exploration Licence EL-5.377

264) In any case, it is clear that the 2002 BM Rules contained objective criteria against which

the Licensing Authority had to judge the contents of application, and also a subjective

374 Notice of Intended Reasons for Refusal of Mining Lease Application, 21 September 2011, ¶ 5 CE-7.375 Ibid, ¶ 6, CE-7.376 Ibid, ¶ 6, CE-7. Further, the Licensing Authority also recorded other concerns about the application, in

particular the non-local incorporation of BHP and (albeit incorrectly) TCCP, and the incorrect basis onwhich the exploration licence had been renewed: Ibid, ¶ 1 and 7(v), CE-7.

377 Application for the renewal of a second exploration licence dated 2 November 2007, Ex RE-15. TheClaimant stated: “With EL-5 to expire in February, 2008 the Applicant will be able to commence activitiesfor drawing up the Feasibility Study in the first renewal period but will not be able to complete the samegiven the time that will be needed to carry out the Feasibility Study to tie the development of all thedeposits, which are spread over a large area of EL-5 (some of which are still being reviewed throughfurther drilling work) together into one mining project.”


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criterion on the basis of which the Licensing Authority had to satisfy itself that the

development of mine is in the interest of Balochistan and its people, is “satisfactory” and

makes “efficient, beneficial and timely” of the mined resources. The Claimant, as noted

above, fail on both the counts. The objective test required the Licensing Authority to

ascertain whether the submission of the Feasibility Study for the proposed mining area

catered for the profitable development of the mineral resources in the proposed mining

area (i.e. all 14 deposits) and whether it contained proposals for value-addition. The

Claimant admittedly provided a feasibility study for only two deposits covering less than

six square kilometres. With regard to the remaining 12 deposits, there was neither an

assessment of feasibility nor any explanation of how the 12 deposits could be profitably

developed. Neither did it provide for any value-addition in the form of the smelter and

refinery. Thus the Claimant’s feasibility fell well short of the objective requirement under

Rule 48 of BM Rules. In light of the failure to meet the objective criteria, the subjective

criterion could not be met as the Licensing Authority could not, based on the feasibility

of only two deposits and without value-addition proposals, reach an informed conclusion

that a mining lease for the development of the 99.4 square kilometres containing the

remaining 12 deposits could possibly be made in the interest of the people of Balochistan.

Furthermore, there were the threshold barriers of lack of standing as an exploration holder

and of being in default.

265) As its focus on the inadequacies of the Feasibility Study and the public interests of

Balochistan indicate, the Licensing Authority’s decision was based squarely on Rule

48(3) of the 2002 BM Rules. The Claimant and TCCP may have disliked the decision of

the Licensing Authority. But that dissent is of no consequence. The Licensing Authority

was obliged to exercise its duty under the 2002 BM Rules, and it did so. The result of

that process was the production of reasons that fully justified – and, pursuant to the

mandatory language of Rule 48(3), required – the refusal of TCCP’s Mining Lease

Application.


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C) TCCP AVAILED ITSELF OF SEVERAL STAGES OF REVIEW OF THELICENSING AUTHORITY’S DECISION

266) Having received the Licensing Authority’s notice of intended reasons for refusal of the

mining lease application, TCCP was not without recourse. Rather, it availed itself of two

available stages of review of the Licensing Authority’s decision.

267) The first stage of review permitted TCCP to make representations about the reasons

contained in the Licensing Authority’s notice.378 It duly did so, filing its representations

on 19 October 2011,379 and simultaneously signalling that it was trying to build a case to

present to this Tribunal.380 On several counts, that response manifestly failed to address

sufficiently the key predominant themes in the notice.

a) First, TCCP fundamentally failed to address the issue that, while its Mining Lease

Application related to an area of almost 100 square kilometres, its Feasibility

Study related to an area of less than six square kilometres. In its representations at

the time, TCCP asserted that nothing in the CHEJVA obliged it to submit a

mining lease application which was accompanied by a feasibility study for the

entirely of the area sought to be reserved as a Mining Area.381 However, obviously

realising since that date that the proper interpretation of Article 11 of the

CHEJVA requires a requested Mining Area to be the subject of a feasibility study,

the Claimant in its Memorial chooses not to reiterate this weak argument. Instead

it makes the general complaint that Balochistan “never expressed any concerns or

reservations” about the scope of its feasibility work.382 This, of course, misses the

point that the Licensing Authority was fulfilling its duty under Rule 48 of the

2002 BM Rules on the basis of the suitability of the application before it.

378 Rule 48(4)(a), 2002 BM Rules, Ex RE-1. The Claimant suggests that the 30 day period allowed to it wasinsufficient: Claimant’s Memorial ¶ 320-323. However, this complaint rings hollow in circumstanceswhere the Claimant also refers pejoratively to the notice being only “two-page[s]” and thus of limitedlength to digest (Claimant’s Memorial, ¶318), and was in any event able to submit in response a dense 22page response (TCCP Interim Response to Licensing Authority Notice, 19 October 2011, CE-8).

379 TCCP Interim Response to Licensing Authority Notice, 19 October 2011, CE-8.380 See the precipitous reference to the BIT: ibid, ¶ 2.15, CE-8.381 Ibid, ¶ 3.18 and 3.36, CE-8.382 Claimant’s Memorial, ¶ 325.


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Manifestly, therefore, the Claimant and TCCP failed to address the Licensing

Authority’s concern that its Mining Lease Application related to an area of land

that was more than 16 times larger than the area of land over which it had

prepared a feasibility study.

b) Second, TCCP fundamentally failed to address the issue that the Mining Lease

Application was not in the interest of the development of the mineral resources of

Balochistan, or in the public interests of Balochistan more generally. Specifically,

in relation to the lack of smelting and refining capacities in its application, TCCP

asserted in its representations at the time, as the Claimant does not, that it “has no

obligation under the [CHEJVA] to smelt the copper-gold concentrates that are

produced”.383 In doing so, it blatantly disregards the clear requirements in the

2002 BM Rules that a mining lease be granted on the basis that the mining project

will have value-addition for Balochistan (Rule 48(3)(a)(vii)). Again this illustrates

that TCCP failed to address sufficiently this second predominant theme in the

notice rendered by the Licensing Authority.

c) The Claimant fails to address the concerns in relation to its standing and default

but deliberately misunderstands the issue.

268) These arguments are also disingenuous in view of the express Undertaking given by the

Claimant to the Licensing Authority in 2006 when it first sought the Assignment of

BHP’s interest in Exploration Licence EL-5. These included the promise to uphold all the

conditions of the previous licences, observe the 2002 BM Rules (and any amendments

thereto) and the obligations in the CHEJVA. The Licensing Authority explicitly set out in

that letter that any mineral title could even be recalled or cancelled for breach of any of

these obligations.384 The Claimant expressly accepted these terms in its Undertaking.385

383 TCCP Interim Response to Licensing Authority Notice, 19 October 2011 ¶ 1.3(d), CE-8; Claimant’sMemorial ¶ 325.

384 Letter from DG Mines to BDA and BHP 8 April 2006, Ex RE-25.385 Claimant’s Undertaking dated 10 April 2006 accepting the DG’s terms and conditions as set out in the letter

of 8 April 2006 and providing an undertaking to the same, CE-206


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269) As a result of these failures, TCCP’s response stands as little more than a long and

aggressive assertion of the points it had already made in its Mining Lease Application. It

also illustrates the inability of TCCP to address the concerns that Balochistan had

repeatedly raised with it about the project it wished to undertake. For instance, TCCP’s

blunt assertion that it had “no obligation under contract or the BM Rules to smelt the

copper-gold concentrates that are produced”386 fundamentally misunderstood the

importance of the public interest and value-addition requirements under the 2002 BM

Rules. Similarly, TCCP’s assertion that the limited scope of the Feasibility Study was

“approved” by Balochistan at a meeting for the Operating Committee on 26 October

2007 is misplaced. As explained above, the minutes of that meeting provide no

confirmation that such a limitation was agreed (the discussion focusing on what was an

economical prospect for a mine).387

270) Further, TCCP’s response to the problem of its standing to make the Mining Lease

Application also manifestly failed to address the Licensing Authority’s concerns. It

insisted that, as it was the only Participating Party (under clause 11 of the CHEJVA) in

the Mining Lease Application , it did not need to make that application in the name of the

Joint Venture. As a matter of procedure, however, the Licensing Authority was clear that

a mining lease could only be granted, subject to the fulfilment of the criteria in Rule 48,

to the holder of an exploration licence – which in this case was the Joint Venture. Thus,

while the CHEJVA did indeed provide for “sole risk” mining ventures, this was “subject

to obtaining all routine Government approvals and meeting the contractual pre-

conditions”.388 The CHEJVA at no point stated that the application under the 2002 BM

Rules for a mining lease could be made by any entity other than the holder of the current

exploration licence. It was for the Claimant to obtain all routine approvals to ensure it had

the standing to apply if the BDA was a Non-participating Party. This is expressly set out

in Article 11.4.2. Of course, in this case, the issue of obtaining the approval did not even

arise because the Claimant had not even attempted to satisfy the contractual pre-

386 TCCP Interim Response to Licensing Authority Notice, 19 October 2011, para. 1.3(d), CE-8.387 Minutes of Operating Committee, 26 October 2007, p.2-3, CE-64.388 Article 11.4.2, CHEJVA. TCCP Interim Response to Licensing Authority Notice, 19 October 2011, para.

3.31, CE-8.


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conditions to obtaining such approval that is attaining the transfer of its joint venture

partner’s rights in the Joint Venture Property pertaining to its proposed mining project

under Articles 11.4, 11.5 and 11.6 of the CHEJVA.

271) On the basis of TCCP’s failure to address the concerns of the Licensing Authority, the

first stage of review of the Licensing Authority’s reasons for refusing the Mining Lease

Application concluded with a confirmation by the Licensing Authority of its decision.389

272) The second stage of review of the decision of the Licensing Authority permitted TCCP to

file an administrative appeal against its decision pursuant to Rule 70 of the 2002 BM

Rules. TCCP duly did so, filing its administrative appeal on 28 November 2011, on the

very same day it filed its Request for Arbitration.390 After pleadings by TCCP and the

Licensing Authority,391 the presiding authority, the Secretary of the MMDD, dismissed

the appeal.

273) The appeal decision of the Secretary of the MMDD identified the familiar problems in

TCCP’s Mining Lease Application. The appeal decision recorded that the Feasibility

Study submitted by TCCP was for a tiny minority of the area which was the subject of its

Mining Lease Application, and only assessed the feasibility of developing two of the total

of 14 mines in the requested Mining Area.392 Noting that “the Licensing Authority is duty

bound to get the provisions of the BMR 2002 enforced”393 (including those relating to the

purpose and requirements of the feasibility study accompanying a mining lease

389 Letter from Director-General of the MMDD to TCCP, 15 November 2011, CE-11. The Claimantcomplains that this letter is short. However, given that it was a confirmation of the previous reasons givenby the Licensing Authority in its notice, and given TCCP’s manifest failure to assuage the LicensingAuthority’s concerns over the feasibility study and the lack of public interest in TCCP’s application, itcould hardly be expected that a long and detailed response was either necessary or appropriate.

390 TCCP Administrative Appeal under Rule 70 of the 2002 BM Rules, 28 November 2011, CE-36.391 The Claimant appears to complain that the hearing was expedited in a manner that was inconvenient to it:

Claimant’s Memorial ¶ 338-340. However, this was, of course, the result of the Claimant’s own actions.Having started proceedings against Balochistan under the CHEJVA in the International Chamber ofCommerce, TCCP left the Respondent’s Supreme Court with no choice by to order the expedition of theadministrative appeal so as to ensure that Balochistan would be in a position to nominate its arbitratorwithin the timeframe stipulate by the International Chamber of Commerce: Order of the Supreme Court ofPakistan, 29 February 2012, CE-131.

392 Ibid, p.6, CE-137.393 Ibid, p.6, CE-137.


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application), the Secretary of the MMDD held that the Licensing Authority had made its

decision in accordance with those regulations394 and that there was no basis on which to

interfere with its decision.395

274) In this way, TCCP availed itself fully of the avenues of recourse open to it under the 2002

BM Rules. It made representations to the Licensing Authority in relation to the reasons

that were specific in its notice of intended reasons for refusal of mining lease

application396 pursuant to Rule 48(4) of the 2002 BM Rules, and also appealed those

reasons to the appellant authority under Rule 70 of the 2002 BM Rules. Accordingly, in

addition to abiding closely by the relevant regulations when determining the Mining

Lease Application, the MMDD also assiduously followed those regulations in TCCP’s

exercise of the avenues of review open to it.

275) The Claimant complains that the hearing was expedited in a manner that was

inconvenient to it.397 However, this was, of course, the result of the Claimant’s own

actions. Having started proceedings against Balochistan under the CHEJVA in the

International Chamber of Commerce (“ICC”), TCCP left the Respondent’s Supreme

Court with no choice but to order the expedition of the administrative appeal by a few day

so as to give Balochistan an opportunity to nominate its arbitrator within the timeframe

stipulated by the ICC.398 The Claimant knew that the appeal would have to be heard

earlier and it is disingenuous to raise this issue now under the pretext of procedural

impropriety.

276) Further, the Claimant availed itself of yet another opportunity when the order of rejection

of its application and appeal were submitted before the Supreme Court. The Claimant’s

counsel did not raise any objection or reservation in respect of the process of the

application or appeal. The Claimant did not raise any objection about due process or that

TCCP’s rights were prejudiced in any way whatsoever during the administrative appeal.

394 Ibid, p.6, CE-137.395 Ibid, p.6, CE-137.396 Notice of Intended Reasons for Refusal of Mining Lease Application, 21 September 2011, CE-7.397 Claimant’s Memorial, ¶ 338-340.398 Order of the Supreme Court of Pakistan, 29 February 2012, CE-131.


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III.9 NEITHER THE RESPONDENT NOR BALOCHISTAN “OUSTED” THECLAIMANT FROM THE REKO-DIQ PROJECT

277) The Claimant, having failed to establish that the Licensing Authority’s refusal of TCCP’s

Mining Lease Application was in violation of the 2002 BM Rules and/or the CHEJVA,

seeks to create the fiction in Section II.D of its Memorial that Balochistan sought to

“oust” it and TCCP from the project at Reko Diq. The stream of accusations about

Balochistan, its Chief Minister, its MMDD, Dr Mubarakmand and others occupies pages

of the Claimant’s Memorial. However, these baseless submissions can be dismissed

wholesale.

278) As a preliminary matter, it is worth noting the irrelevance of the Claimant’s “ouster”

theory. This theory, even if true, does not give the Claimant more rights that it had under

the CHEJVA or rectify its own violations of the CHEJVA or failures to meet the

conditions precedent required for its purported rights to arise. Likewise, the theory does

not transform a correct decision of the Licensing Authority to refuse the Mining Lease

Application into a wrong one under Rule 48(3) of the 2002 BM Rules. Put simply, the

theory cannot change the fact that TCCP’s application clearly failed to satisfy several of

the conditions in Rule 48(3). TCCP’s lack of standing, its default under the 2002 BM

Rules, the incompleteness of the Feasibility Study, and the absence of value-addition in

the form of a smelter, all obliged the Licensing Authority to refuse the Mining Lease

Application.

279) More importantly, the Claimant and TCCP did not have any rights in the project from

which they could be ousted. The Claimant fails to appreciate that the Reko Diq area

never belonged to it. The Claimant at best had an interest in a joint venture holding an

Exploration Licence EL-5 which expired on 19 February 2011. The mere submission of

an application for a mining lease does not give the Claimant any rights. This would be

akin to a job applicant claiming that he or she had an entitlement to a job by virtue of

applying for it. The Respondent has explained in detail in this Objections, Counter-

Memorial and Counter-Claim that the Claimant and TCCP did not have a right to mine

Reko Diq pursuant to the CHEJVA or the 2002 BM Rules.


127

280) As discussed above, the Claimant’s awareness of its lack of automatic entitlement to a

mining lease is reflected in its desire to negotiate a Mineral Agreement with the

Government. The obvious consequence of the breakdown in the negotiation of the

Mineral Agreement were that the Claimant had no rights in a future mining project from

which it could be ousted. It thus had to rely on the limited and conditional rights it

possessed under the CHEJVA.

281) The Claimant knew that both the Respondent and the Government of Balochistan needed

value-addition to be properly addressed in the Claimant’s project up to the final refinery

stage.399 In complete insensitivity to the Governments’ requirements for a smelter and a

refinery, TCC determined that building a smelter and refinery for the Reko Diq project

was “unprofitable and therefore unviable” and therefore it should not be tabled as part of

the negotiations.400 Governments, unlike mining companies, are not driven by

maximising profit, but by ensuring public welfare. Clearly, a smelter and refinery was an

important part of that policy objective. Hence, the Government of Balochistan decided to

create a project under the auspices of the Balochistan Copper & Gold Project

(“BCGP”)401 – a fact about which the Claimant and TCCP were briefed (including on the

point that the project was not intended to replace their proposed project, but rather to fill

the gap created by the rejection of smelting and refining as part of their project).402

282) Put simply, as a result of the Claimant’s and TCCP’s unreasonable and unworkable

demands during the negotiation of its proposed Mineral Agreement – including, as noted

above, significant reductions in corporate tax, customs duties, sales tax, excise duties,

other import taxes, taxes on profit on foreign debt, dividend withholding rates, certain

399 Steering Committee Meeting Note (attached Working Paper) dated 13 January 2009 notes that the“concerns of certain members of the Steering Committee regarding value addition would be suitablyaddressed.” CE-69. See also Note of meeting dated 6 March 2009 attaching a working paper makes it plainthat discussions are to be held on value-addition up to final refinery stage, CE-71.

400 CE-76 TCC Paper on smelting: “TCC has determined that building a smelter and refinery as part of theReko Diq Project (1) is not economically justified; (2) the additional capital costs would make the Reko Diqproject unprofitable and therefore unviable; and (3) is no necessary in order to ensure that TCC and theGOB are properly paid for the metal content of the concentrate that is produced.”

401 See Mubarakmand Statement, paragraphs 43-44.402 See: Claimant’s Meeting Note, 4 March 2010, CE-84; Claimant’s Meeting Note, 1 April 2010, CE-85;

Claimant’s Meeting Note, 2 June 2010, CE-90; Claimant’s Meeting Note, 2 June 2010, CE-91.


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profits exemptions and capital gains tax403 and the rejection of the Government’s call for

a smelter and refinery– the negotiation of the Mineral Agreement collapsed and

Balochistan began to take steps to support a proposal developed by the Planning

Commission of Pakistan, which after numerous revisions sensibly provided a budget for

obtaining ore to feed the smelter.

283) As regards the Claimant’s individual accusations concerning the alleged ouster:

a) First, the Claimant submits that the Government of Balochistan and the Planning

Commission prepared and revised a proposal for the Reko Diq Copper and Gold

Project which they did not share with the Claimant or TCCP, even when they

were aware that the latter entities wished for and expected to receive a mining

project in the Reko Diq region.404 However, the first draft of this proposal was

prepared in May 2009, and the final draft in December 2009 – more than six

months and more than 13 months, respectively, after the last meaningful

communication establishing the divergence of positions on issues such as taxation

in the negotiations of TCCP’s proposed Mineral Agreement in October 2008.405

In such a context, there could be no sensible reason why the Respondent or its

agencies would inform the Claimant or TCCP – with whom, as the Claimant

acknowledges, they had had diminishing contact406 – of the content of these draft

proposals. There was no reason pursuant to either CHEJVA or the 2002 BM

Rules why the Respondent would do so. They were internal governmental

documents, existing until December 2009 in draft form only, which at that stage

constituted only proposals.407 The Respondent had no obligation to reveal

wholesale its internal institutional thinking on a topic to the Claimant or TCCP.

Certainly the Claimant would be dismissive if the Respondent suggested that it or

403 See Letter from TCCP to Ministry of Petroleum and Natural Resources, 24 October 2008, p.1, CE-230.404 See, e.g., Claimant’s Memorial, ¶ 206, 213, 216 and 218.405 Letter from TCCP to Ministry of Petroleum and Natural Resources, 24 October 2008, CE-230.406 Claimant’s Memorial, ¶204.407 The final PC-1 proposal was submitted to the ECNEC in July 2010. The ECNEC decision in relation to the

proposal was rendered in December 2010 on the condition that Balochistan check the implementationagainst any pending litigation. See Mubarakmand Statement, paragraphs 13-17.


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TCCP had been required to submit all of its internal corporate thinking to the

Respondent for review and comment.

b) Second, the Claimant alleges in its Memorial that Balochistan “took over TCC’s

project” in the Reko Diq, primarily in a meeting of the Balochistan Cabinet at the

end of 2009.408 The Claimant makes this submission in an attempt to bolster its

theory that Balochistan “ousted” TCCP from the Reko Diq project. This is little

more than misdirection from the Claimant. Most obviously, the submission

continues to subscribe to the fiction that TCCP had, or had a right to have, a

mining project in the Reko Diq area. As explained previously, this is not

supported either on the basis of the CHEJVA or the 2002 BM Rules.409 As noted

by the Claimant’s own witness, this discussion was in reference to its decision

“not to go ahead with the proposed Mineral and Shareholders Agreements”.410 In

addition, the relevant decision by the Balochistan Cabinet was taken more than 15

months since the irremediable divergence of positions in the negotiations of

TCCP’s proposed Mineral Agreement in October 2008.411 However, in the

absence of the ability of TCCP to propose terms of a Mineral Agreement that

were mutually acceptable, the decision of the Cabinet reflected not an “ousting” of

TCCP (from a project it never had) but rather a sensible policy decision. To

408 See Claimant’s Memorial, Section II.D.2 ¶ 225.409 This view is also supported by the manuscript note on the document explaining the situation at Reko Diq,

on which the Claimant relies heavily. While the Claimant cites this document to establish its own work onthe exploration of the area, the manuscript notes at the bottom of it draw a stark comparison between thesituation at the Reko Diq site and the situation at another site where mining had already commenced,namely, the Saindak site. In relation to the latter site, the Secretary of the MMDD in manuscript insistedthat the agreement regulating the mining of that site be consulted before any progress be taken pursuant tothe recommendations in the document. No such note was recorded for the Reko Diq site, therebyconfirming the view that TCCP simply had no mining rights which were the subject of any agreement thatrequired consultation or revision. See Mr. Tariq Asad v. Federation Government etc. CMA No. 4909/2011in CP No. 68/2011, Application under Order 23 Rule 6 of the Supreme Court Rules for Urgent Hearing andto Place the Documents on Record, in the Supreme Court of Pakistan, undated, p.20, CE-31.

410 Boggs Statement, paragraph 96. Incidentally, the Claimant made no objection when the Government ofBalochistan took over the management of the CHEJVA from the BDA – the Minutes of the operatingCommittee meeting of 25 August 2010 record the Claimant’s proposal that the CHEJVA be amended tomake provision for the replacement of the BDA. This fact alone scuttles the Claimant’s “take over” theory,and undermines the Claimant’s assertion that the Government of Balochistan (rather than the BDA) hadbeen its Joint Venture partner up until that point.

411 Letter from TCCP to MPNR, 24 October 2008, CE-230.


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interpret the evidence on record in any other fashion would be to read volumes

into the words “take over” that appear only sporadically in the record.412

c) Third, it has emerged that the Chief Secretary of the Province continued to meet

and receive the Claimant’s delegation. The Claimant itself minuted these meetings

for their own internal record, but never shared these minutes with the Government

of Balochistan. The Respondent found out about these minutes in the present

arbitrations when they were supplied as supporting evidence. The said minutes

provide an irrefutable evidence of good faith on the part of Government of

Balochistan. The suggestions attributed to the Chief Secretary in the said minutes

clearly demonstrate, alongside the participation of the Government of Balochistan

in the Operating Committee meetings in 2010 and 2011, that he had no intention

of proceeding to cancel the agreement.

d) Fourth, the Claimant submits that it received “assurances” after the decision of the

Balochistan Cabinet in respect of its continued involvement in the Reko Diq

project.413 The evidence substantiating this submission is of the weakest variety.

It was generated by TCCP itself, is not signed or hand-dated, and is certainly not

notarised as to its authenticity and contemporaneity.414 The evidence emerging on

the public record, by contrast, was significantly weaker than the giving of

“assurances”. Publicly, members of the federal government of the Respondent

only went so far as to say that their support for TCCP was “in principle”, subject

to “further discussion” and related to “cooperation” and “coordination”.415 This

can hardly be regarded as the sort of “assurance” that the Claimant needs in order

to make good its legal argument in this case or its allegation of being “ousted”. In

412 CE-31; Letter from TCCP to Chief Minister of Balochistan, 31 May 2010, p.2, CE-89.413 Claimant’s Memorial¶ 230 and 235414 See, in particular, those on which the Claimant relies in its Memorial at ¶ 230-235: Notes of Meeting, 4

March 2010, CE-84; Notes of Meeting, 2 June 2010, CE-90; Notes of Second Meeting, 02 June 2010, CE-91; Notes of Third Meeting, 02 June 2010, CE-92.

415 See: Government of Pakistan Press Release, 14 July 2010, p.1, CE-95; S. Chaudhry, “Barricks, Tethyan toinvest $3.2bn in copper, gold project”, Daily News, 16 July 2010, CE-246.


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any event, any such assurance would have been illegal and in contradiction with

Rule 9 of the 2002 BM Rules.

284) There can be no allegation that the Respondent or the Government of Balochistan has any

grudge against the Claimant. Such accusations are baseless and, indeed, are contradicted

by the Claimant’s own records and minutes of meetings with officials of the Respondent

or the Government of Balochistan. The theory that it was intentionally “ousted” from the

project it wished to complete at Reko Diq is thus baseless and must be rejected.


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IV.

JURISDICTION AND ADMISSIBILITY

IV.1 THE TRIBUNAL DOES NOT HAVE JURISDICTION OVER THECLAIMANT'S CLAIMS

285) The Claimant’s claim that the Respondent has violated the terms of the BIT does not even

get past the jurisdictional barrier.

286) This Tribunal can only exercise jurisdiction over a dispute arising out of an “investment”

that qualifies as such under both Article 1(1)(a) of the BIT and Article 25(1) of the ICSID

Convention. The Claimant must establish that it has made an investment under this

“double keyhole” test.416 It is no accident that the Claimant makes barely a one and half

page submission on how it meets the definition of “investment” in Article 1(1)(a)417 of the

BIT and Article 25(1) of the ICSID Convention, given the multiple insurmountable

obstacles it faces to establish jurisdiction.

287) The question of jurisdiction is a critical one. It goes to the core of state sovereignty and

independence. It is a general principle of international law that international courts and

tribunals can418 exercise jurisdiction over a State only with its consent.419 A State remains

416 Christoph Schreuer, The ICSID Convention, A Commentary, 2nd Ed., 2009, at Article 25 nos. 122 et seq.RLA-23.

417 Paragraphs 381-382, Claimant’s Memorial.418 Christoph Schreuer, Consent to Arbitration, UNCTAD COURSE ON DISPUTE SETTLEMENT,

INTERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT DISPUTES, Module 2.3,UNCTAD/EDM/Misc.232/Add.2 (United Nations 2003) (“Schreuer, Consent to Arbitration”), RLA-24 p.1 (“Arbitration is always based on a consent agreement between the parties.”); Id., p. 5 (“Arbitration isalways based on an agreement between the parties.”)

419 Wintershall Aktiengesellschaft v. Argentine Republic, ICSID Case No. ARB/04/14, Award dated December8, 2008 (“Wintershall”), RLA-25 paragraph 160.3 (“Besides, it is a general principle of international lawthat international courts and tribunals can exercise jurisdiction over a State only with its consent. Theprinciple is often described as a corollary to the sovereignty and independence of the State.”) RLA-26,Daimler Financial Services AG v. Argentine Republic, ICSID Case No. ARB/05/1, Award dated August 22,2012, (“Daimler”), paragraph 174 (recognizing the “fundamental principle of public international lawaccording to which international courts and tribunals can only exercise jurisdiction over a State on thebasis of its consent”). See also RLA-27, Christopher F. Dugan, Don Wallace, Jr., Noah D. Rubins andBorzu Sabahi, INVESTOR-STATE ARBITRATION (Oxford University Press 2008), p. 219 (“The consentof the parties is the basis of the jurisdiction of all international arbitration tribunals. The requirement ofconsent to arbitral jurisdiction in the context of investor-state arbitration is also a corollary of the principlethat ‘there is no power superior to the states which can force a judge upon them.”).


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at liberty as to whether or not, and if so, to what extent it wishes to give consent to

arbitration.420

288) The Daimler tribunal421 affirmed the principle that consent is the foundation of the State’s

treaty commitments and explained that treaties “encapsulate voluntarily accepted

restraints upon the universally recognized principle of state sovereignty,” which must be

interpreted and applied rigorously to ensure that the State’s choice is respected and

enforced.422

289) That tribunal stated:

“[T]he very essence of treaties is precisely to protect the respectivesovereign international policy decisions of the State parties bymeans of the formality inherent in the legal nature of suchinstruments.

…It is for States to decide how best to protect and promoteinvestment. The texts of the treaties they conclude are the definitiveguide as to how they have chosen to do so.”423

290) The Daimler tribunal makes plain that the intention of the state parties who have carefully

negotiated and agreed the parameters of treaty protection, including the scope of

investments to be provided coverage, is of paramount importance.

291) In this case, the Claimant asserts that consent to ICSID arbitration comes from Pakistan’s

offer to arbitrate “disputes relating to an investment” (emphasis added) with an investor

in the BIT.

292) The Claimant must first prove that it has made an “investment” that qualifies for the

protection of the BIT before the question of jurisdiction under Article 25(1) of the ICSID

Convention arises. Although the Claimant bears the burden of proving that its so-called

investment meets the requirements of Article 1(1)(a) of the BIT, the Respondent will

demonstrate the impossibility of this proposition.

420 RLA-24, Schreuer, Consent to Arbitration, p. 5.421 RLA-26, Daimler, paragraph 162.422 Ibid, paragraphs 168-169.423 Ibid, paragraph 161.


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A) THERE IS NO QUALIFYING INVESTMENT UNDER THE BIT

i) THE CLAIMANT’S VAGUE ARTICULATION OF ITS ALLEGEDINVESTMENT

293) The Claimant’s vague articulation of this foremost and cardinal requirement to seek

shelter under the BIT is readily apparent from its Memorial. The Claimant asserts that:

“TCCA’s investment in Reko Diq included among other things allthe rights it possessed—under the CHEJVA, the BM Rules, itsExploration Licenses, its Surface Rights Lease and otherwise—andthe comprehensive plan to mine Reko Diq that its skill, money andlabor produced.”424

294) Despite this seemingly ample list of purported assets, the Claimant’s claim to “an

investment” that meets the criteria set out in Article 1 of the BIT cannot withstand

scrutiny. Article 1(1)(a)425 of the BIT is straightforward in requiring that:

a) There should be an asset owned or controlled by an investor of Australia; and

b) The asset in question should have been admitted subject to Pakistani law and

policies applicable from time to time.

295) The Preamble of the BIT sets out the clear objective of the treaty parties that only those

investments “made within the framework of the laws of that other Party” are to be

424 Paragraph 537, Claimant’s Memorial.425 Article 1.1 CE-04: For the purposes of the Agreement:

“(a) “investment” means every kind of asset, owned or controlled by investors of one Party andadmitted by the other Party subject to its law and investment policies applicable from time to time andincludes:(i) Tangible and intangible property, including rights such as mortgages, liens and other

pledges,(ii) Shares, stocks, bonds and debentures and any form of participation in a company,(iii) A loan or other claim to money or a claim to performance having economic value(iv) Intellectual and industrial property rights, including rights with respect to copyright, patents,

trademarks, trade names, industrial designs, trade secrets, know-how and goodwill,(v) Business concession and any other rights required to conduct economic activity and having

economic value conferred by law or under a contract, including rights to engage inagriculture, forestry, fisheries and animal husbandry, to search for, extract or exploit naturalresources and to manufacture, use and sell products, and

(vi) Activities associated with investments, such as the organisation and operation of businessfacilities, the acquisition, exercise and disposition of property rights including intellectualproperty rights, the raising of funds and the purchase and sale of foreign exchange”


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provided treaty coverage.426 The Preamble also makes it plain that “investment relations

should be promoted and economic-cooperation strengthened in accordance with the

internationally accepted principles of mutual respect of sovereignty, equality, mutual

benefit, non-discrimination and mutual confidence.”427

296) The first obstacle faced by the Claimant is its inability to show an “asset” that could

potentially meet the dual requirements of control or ownership by an Australian investor

and admission subject to Pakistani law and investment policies.

297) Article 1(a) provides that only an asset is capable of being “an investment”. “The

ordinary meaning of the word “asset” as it appears in many investment treaties, refers to

property rights.”428 This meaning is confirmed by the surrounding provisions, which refer

to various forms of property rights, and by the historical purpose of investment treaties to

protect “foreign property.”429 It is insufficient for the Claimant to rely on an assortment

of purported rights, which do not even exist, to create the notion of an amorphous

investment. The BIT requires the Claimant to prove that “an asset” admitted subject to

Pakistani law and investment policy is owned or controlled by an Australian investor430.

It must also show that its dispute arises from the Government’s violation of a treaty

provision in relation to that particular investment.431

298) The Claimant argues that the following satisfy the requirements of Article 1(1)(a) of the

BIT:

426 Preamble “ACKNOWLEDGING that investments of investors of one Party in the territory of the other Partywould be made within the framework of the laws of that other Party”, CE-04.

427 Preamble: “CONSIDERING that investment relations should be promoted and economic co-operationstrengthened in accordance with the internationally accepted principles of mutual respect for sovereignty,equality, mutual benefit, non-discrimination and mutual confidence”, CE-04.

428 Zachary Douglas, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS (Cambridge UniversityPress 2009), (“Douglas, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS”) RLA-28paragraphs 343, 357

429 Ibid, paragraph 353.430 Article 1, CE-04.431 Article 13, CE-04.


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a) “TCCA’s right to mine Reko Diq subject only to compliance with certain routine

requirements qualifies as an investment” under the CHEJVA;432

b) The putative tight to a mining lease under Article 48 of the 2002 BM Rules;

c) Exploration Licence EL-5;

d) Surface Rights Lease under an Order by the Board of Revenue of Balochistan; and

e) The “comprehensive plan to mine Reko Diq that its skill, money and labor

produced”.433 These include in particular “making capital investments in the Reko

Diq project exceeding US$ 240 million for exploration and feasibility

activities.”434

299) The Claimant creates the illusion of a list of purported rights to constitute investments

under the BIT. In reality, the source of all the Claimant’s purported rights, including

those, if any, arising under the 2002 BM Rules, the exploration licenses (held by the Joint

Venture, not Claimant or TCCP), the Surface Rights Lease and the comprehensive plan to

mine Reko Diq, is the CHEJVA. The Claimant engaged in Balochistan, and allegedly

incurred expenditure, pursuant to the terms of the CHEJVA. The heart of the Claimant’s

alleged claims against Pakistan arises from a single sub clause (Article 11.8.2) in that

contract.

432 Paragraph 507, Memorial: TCCA’s right to mine Reko Diq subject only to compliance with certain routinerequirements qualifies as an investment that is protected by the expropriation provision under Article 7(1).The definition of an “investment” under Article 1 of the Treaty is broad and specifically includes businessconcessions and any other rights required to conduct economic activity and having economic value by lawor under a contract, including rights . . . to search for, extract or exploit natural resources. CE-4, art.1(1).Article 1 further identifies as other examples of protected investments under the Treaty, “intangibleproperty including rights such as mortgages, liens and other pledges” and “activities associated withinvestments, such as . . . the acquisition, exercise and disposition of property rights including intellectualproperty rights.” Id.

433 Paragraph 537, Memorial.434 Paragraph 381, Memorial: TCC has made substantial “investments” covered by Article 1(1)(a) of the

Treaty by, among other things, making capital investments in the Reko Diq project exceeding US$ 240million for exploration and feasibility activities. The Government of Balochistan expressly agreed in Clause15.4.7 of the CHEJVA that “the transactions to which this Agreement relates constitute an investmentwithin the meaning of Article 25(1) of the ICSID Convention.” CE-1, cl. 15.4.7.


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ii) NONE OF THE CLAIMANT’S ALLEGED INVESTMENTS WERE MADE“IN ACCORDANCE WITH [PAKISTAN’S] LAWS AND INVESTMENTPOLICIES”

300) Unfortunately for the Claimant, the source of all of its alleged rights, the CHEJVA

Agreements, have been held to be illegal, void and non est in their entirety by the

Supreme Court of Pakistan. Article 1 of the BIT provides that investments must be made

subject to Pakistani law and investment policies. The Supreme Court’s declaration435 that

the CHEJVA Agreements are “illegal, void and non est” as a matter of Pakistani law

binds this Tribunal. The CHEJVA Agreements were governed by Pakistani law. The

2006 Novation Agreement,436 by which the Claimant made its purported investment, not

only sets out Pakistani law as the governing law but also gives the Courts of Pakistan

non-exclusive jurisdiction. The Supreme Court of Pakistan is the (highest) court of

competent jurisdiction to determine issues of Pakistani law. This Tribunal has no

authority to substitute its views on Pakistani law for those of the Pakistani Supreme

Court.

301) The Supreme Court’s finding of illegality is binding on this Tribunal. The position under

Pakistani law is a question of fact. The highest Court in Pakistan has ruled upon the

illegality of the purported investment. This Tribunal (or for that matter any arbitral

tribunal) cannot find that Pakistani law provides otherwise. The Mondev, Azinian and

AMTO tribunals recognise the principle that it is not appropriate for an international

arbitral tribunal to act as a court of appeal in respect of domestic judgments.437

302) In this case, the Tribunal is faced with a finding – not merely an allegation – of illegality,

by the Supreme Court. It must accept the Court’s judgment as dispositive of the illegality

of the Claimant’s investment and its conduct in relation to it.

435 The proceedings before the Supreme Court arose as a result of the following public interest petitions:Constitution Petition No.68 of 2010, Constitution Petition No.69 of 2010, Constitution Petition No.1 of2011, and Constitution Petition No.4 of 2011. Their history and background is described at paragraph [13-14] of the Respondent’s Answer to the Request for Arbitration.

436 CE-03, 2006 Novation Agreement, 1 April 2006.437 RLA-29 Azinian v. United Mexican States, ICSID Case No.ARB(AF)97/2, Award dated 1 November 1999,

paragraph 99; RLA-30 AMTO v Ukraine, SCC case No. 080/2005, Award dated March 26, 2008,paragraph 80; RLA-31 Mondev International Ltd. v. United States of America, ICSID Case No.ARB(AF)/99/2, Award dated 11 October 2002, paragraph 126.


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303) The Supreme Court judgment was handed down by a bench presided over by Chief

Justice Iftikhar Chaudhry who received the International Jurists Award 2012 and was

praised by Lord Phillips, President of the Supreme Court of the UK, for his “unique and

tremendous contribution in the field of administration of justice and for the tireless and

fearless endeavours towards administration of justice in Pakistan against all odds”.

304) There is neither a suggestion, nor a reasonable basis to infer, that the Supreme Court

proceedings were conducted in anything other than a fair, transparent and independent

manner. The Claimant’s predecessor (BHP), its parent companies (Barrick Gold and

Antofagasta), and the Claimant itself (TCCA) were all represented by Pakistan’s leading

senior counsel.438 The 150-page reasoned judgment speaks for itself. The record of the

Supreme Court proceedings – which started in 2007 – makes it plain that the principle of

due process was observed in letter and spirit. Mr Kanrani’s Statement describes the

proceedings.439 It considers the arguments raised by Claimant’s counsel in detail and

explains the proceedings leading to the Supreme Court’s decision.

305) In light of the Supreme Court’s judgment, the Tribunal lacks jurisdiction because the

CHEJVA Agreements never existed and are void. Hence there are no rights admitted

subject to Pakistani law capable of founding the Tribunal’s jurisdiction pursuant to

Article 1(1)(a). The Claimant’s rights under the CHEJVA Agreements constitute in

reality “the asset” it purports to be an investment under Article 1. As a matter of Pakistani

law, the CHEJVA Agreements are not only non-existent and void, but also illegal.440

306) Applying Pakistani law, the Supreme Court held that the CHEJVA is “illegal, void and

non est”:

438 The Claimant contended that it was not before the Supreme Court but instead its subsidiary TCCP was theentity before the Supreme Court. The Court took exception to this argument and held that: “We find force inthe submission of the learned counsel for GOB that the respondent company has been changing positionsand has not been forthcoming before this Court. For example, it was described as TCCA before theBalochistan High Court (as described in the impugned judgment at page 27 of CPSLA No. 796/2007, PartI) Thus, in the appeal, it is TCCA that would continue to be present before this Court. However, later it wasstated that it is not TCCA, but TCCP that is before this court without making any application for thechange of parties. … Such an evasive style of TCC could hardly mislead the Court or the InternationalTribunals.” (¶112 of the Supreme Court Judgment)

439 Kanrani Statement, particularly¶8 - ¶10, ¶17 - ¶29,440 See ¶36 of the Supreme Court Judgment (“…CHEJVA itself was a void agreement from its inception.”)


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“The said record [the entire record relating to CHEJVA] wasretrieved and filed through several applications. It made shockingdisclosures of extensive irregularities and corruption. TheGovernment examined the same and decided not to defend the saidacts and accordingly it decided to render full assistance to thisCourt from the record that was filed. Further, this Court hasalways emphasized that the government functionaries must performtheir functions in accordance with law...441

... It is clear that this Court has the jurisdiction to adjudge thevalidity of CHEJVA on the above grounds, including non-transparency, violation of law / rules, curtailment of thefundamental rights of the general public, etc...442

... The Chagai Hills Exploration Joint Venture Agreement dated23.07.1993 was held to have been executed contrary to theprovisions of the Mineral Development Act 1948, the MiningConcession Rules 1970 framed thereunder, the Contract Act 1872,the Transfer of Property Act 1882, etc. which was even otherwisenot valid, therefore the same was declared to be illegal, void andnon est. In pursuance of the above declaration, Addendum No 1dated 04.03.2000, Option Agreement dated 28.04.2000, AllianceAgreement dated 03.04.2002 and Novation Agreement dated01.04.2006, which were based upon, and emanated from, CHEJVAwere also held to be illegal and void. It was further held that thoseinstruments did not confer any right on BHP, MINCOR, TCC,TCCP, Antofagasta or Barrick Gold in respect of the matterscovered therein. It was lastly held that EL-5 was tantamount toexploration contrary to rules and regulations as the claim of TCCPwas based on CHEJVA, which document itself had been held to benon est. Therefore, before exploration it was incumbent upon it tohave sought rectification of its legal status.”443

307) The Supreme Court judgment also reveals the very serious irregularities committed by

TCC’s predecessor and illustrates the Claimant’s role in procuring some of the

illegalities. The Claimant was incorporated by Mincor, the company which tactfully

orchestrated the entire 2000 Addendum. The Respondent reasonably assumes that Mincor

knew that BHP’s and the BDA’s counsel had declared the CHEJVA to be void for

uncertainty, a fact the Respondent intends to verify during disclosure. Further, it is no

441 Pakistan Supreme Court Judgment, released on 10 May 2013 Ex RE-18, page 139.442 Ibid, page 144.443 Ibid, page 149.


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secret that the Claimant has sponsored numerous all-expenses-paid trips for various BDA

and Government of Balochistan officials. Again, the Respondent shall verify details of

such during the disclosure exercise in this case. The fact that the Claimant comes to this

Tribunal with unclean hands is in itself a bar to its claim.

308) The Claimant knew that it would only be a matter of time before the CHEJVA’s illegality

would become public. The Claimant first became involved in the CHEJVA in 2000 when

its predecessor Mincor concluded an Option Agreement with BHP dated 28 April 2000,

Article 5 of which is titled “Conditions Precedent.” Mincor wanted certain assurances

from BHP before the Mincor Option became binding. The first of such conditions was

that:

“BHP and the BDA have executed a binding and unconditionalAddendum to the CHEJVA, which provides for clarification thatBHP’s joint venture partner was the GOB acting through its agentthe BDA.”

309) Hence, the Claimant was no unsuspecting or innocent party. It was cognisant of the fact

that the CHEJVA did not bind the Government of Balochistan and attempted to use the

2000 Addendum to bolster its case.444 The Respondent will seek disclosure from the

Claimant of the record of documents relating to the circumstances of its involvement in

the Reko Diq area, including, the role of certain of its employees such as Mr Muslim

Lakhani, and their negotiations with Government officials.

310) The Supreme Court found that the CHEJVA was void and illegal on a number of grounds

including the fact that the officials involved in its conclusion violated their public duties

under Pakistani law by offering advantages and benefits to the Claimant’s predecessor

related to the CHEJVA.445 These findings are firmly in line with current international law

444 In Pakistan law is settled that an employee of the government or any of its organizations cannot, and doesnot automatically become an agent of the government. This is established Pakistan law, as detailed inWAPDA v ICE PAK International 2003 YLR 2494 RLA-32.

445 Ibid, ¶21, ¶23-¶24, ¶50 and ¶63. Further, it should be noted that the CHEJVA was not only drafted andexecuted contrary to the applicable rules but is void under Section 20 of the Pakistan Contract Act, asdetailed in ¶69 of the Supreme Court’s Judgment.


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and policy on anti-corruption.446 It is widely accepted that the prohibition of corruption

and corrupt practices is of such importance for the international legal order that it forms

part of what has been described as international or transnational public policy.447

311) The World Duty Free tribunal nullified a contract on the premise that bribe payments are

unacceptable under transnational public policy. The tribunal in World Duty Free

concluded that it was “convinced that bribery is contrary to the international public

policy of most, if not all, States or, to use another formula, to transnational public policy”

and that “claims based on contracts of corruption or on contracts obtained by corruption

[could not] be upheld by this Arbitral Tribunal.”448 Thus, the effect of illegality is also

procedural: “it prevents the plaintiff from enforcing the illegal transaction”.449 The

United Nations Convention against Corruption also empowers the Supreme Court to

consider corruption as a relevant factor for annulling a contract.450 Hence, international

law principles support the Supreme Court’s decision, and are far from contradicting it.

312) It is well-established that investments that violate host state law are not afforded treaty

protection and the Tribunal lacks jurisdiction over the subject matter (ratione materiae)

of such a claim. If the Claimant does not comply with domestic law, the Tribunal lacks

jurisdiction to adjudicate his claims (ratione personae).

313) In his dissent in Fraport v. Philippines (2007), Professor Cremades notes that an

investor’s illegal behaviour can have a range of consequences:

“Of course any illegal behaviour by an investor is likely to haveconsequences. Criminal conduct can and should be punishedwithin the domestic criminal justice system. Illegal conduct by the

446 RLA-33 Michael Hwang S.C. and Kevin Lim, Corruption in Arbitration, Law and Reality, paragraph 2;RLA-34 Abdulhay Sayed, Corruption in International Trade and Commercial Arbitration, page 290; seealso RLA-35 the Trans-lex principles, No.IV.7.2, and RLA-36 World Duty Free v. Republic of Kenya,ICSID Case No. ARB/00/7, Award dated 4 October 2006 (“World Duty Free”), paragraphs 148-157.

447 RLA-37 Lalive, Report to the 1986 ICCA Congress in New York on the subject of “Transnational (orTruly International) Public Policy and International Arbitration”, ICCA Congress Series, No 3, 1987, pp.257 to 318.


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investor might well excuse or limit any liability of the State Party inan arbitration pursuant to the BIT, depending on thecircumstances. It is also possible for the Contracting Parties to aBIT to exclude the jurisdiction of an arbitral tribunal forillegalities committed by the investor. Investor illegality is serious,and there are many means to address it”451 (emphasis added).

314) The final and binding judgment of the Supreme Court of Pakistan confirms that the

Claimant obtained the CHEJVA in violation of Pakistani laws.

315) Further, the Government of Balochistan could not have entered into a joint venture

agreement because the legislative instrument of the Mines Act 1948, under which the

1970 BM Rules were promulgated, did not allow for an agreement to be executed.

(Therefore, the 1970 BM Rules already occupied the subject of regulating the mines and

minerals in Balochistan. This concept of a legislation “occupying the field” is well

known in Pakistan, and under Pakistani law. Accordingly, if the Government entered

into the CHEJVA, which is denied, it would be illegal.452 This is because the executive

competence of the provincial government to enter into contracts in respect of the covered

subject is forfeited. In this regard, article 173 of the Constitution of Pakistan offers a

practical example.453

451 Fraport AG Frankfurt Airport Services Worldwide v .Republic of the Philippines ICSID Case No.ARB/03/25, Dissenting Opinion dated 16 August 2007, paragraph 14, p. 208. RLA-38.

452 New national Mining Corporation v. Government of Balochistan, PLD 1977 Quetta 15 RLA-39, theBalochistan High Court held at ¶6. “Thereafter the rules very elaborately provide for exigencies such asentertaining applications for Prospecting Licence, their acceptance, rejection and appeal by variousdepartments, such as Mineral Department and Appellate Committee but nowhere under the Rules, ChiefMinister has been delegated or given as power to interfere directly. Learned Advocate-General whenquestioned with regard to legality of the impugned order submitted that he was not in a position to supportthat order of the Chief Minister and he did concede that in the Mining Rules the Chief Minister cannotinterfere directly although he may come within the definition of Government being Chief Executive of theProvince and ho may pass some such orders. Not only to say that this argument was not only unconvincingbut it was very feebly advanced also.” Also see: Gowri Industries v. State of Karnataka ILR 1993 KAR3153 , 1993 (4) Kar LJ 604 RLA-40, Fateh Chand Himmatial & others v State of Maharashtra Etc. 1977AIR 1825, 1977 SCR (2) 828 RLA-41.

453 Ex RE-16, Article 173: “Power to acquire property and to make contracts, etc.

(1) The executive authority of the Federation and of a Province shall extend, subject to any Act of theappropriate Legislature, to the grant, sale, disposition or mortgage of any property vested in, and to thepurchase or acquisition of property on behalf of, the Federal Government or, as the case may be, theProvincial Government, and to the making of contracts.


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316) It is plain that the phrase “subject to any act of the appropriate legislature” in Article 173

means that, once in any given area “the field” is occupied by a legislative instrument,

then under Pakistan law executive powers cannot be invoked other than in accordance

with that particular instrument. The Mines Act of 1948, read with the applicable BM

Rules, fully regulate the disposal of minerals and creates a licensing regime. It leaves no

legal space for creating a joint venture for disposal of the said property. Any attempts by

the Claimant or its predecessor to execute a joint venture for such disposal would be an

attempt to override express provisions of Article 173 of the Constitution, which is illegal.

In contrast to the 1970 BM Rules, the 2002 BM Rules gave the Government of

Balochistan the authority to enter into a joint venture agreement in Rule 9.

317) The CHEJVA is also void as matter of Pakistani contract law. First, it is void on account

of a mistake of fact which renders contracts void under section 20 of the Contract Act,

1872. The Government of Balochistan was not a party to CHEJVA. It never appointed

the BDA or any of its officials to act as its agents for executing the CHEJVA. However, it

is evident that the Claimant presumed that the Government of Balochistan was party to

CHEJVA.454 There was a critical mistake of fact. Hence, the CHEJVA was void on

account of s. 20 of the Contract Act 1872, which says: “Where both the parties to an

(2) All property acquired for the purposes of the Federation or of a Province shall vest in the FederalGovernment or, as the case may be, in the Provincial Government.

(3) All contracts made in the exercise of the executive authority of the Federation or of a Province shall beexpressed to be made in the name of the President or, as the case may be, the Governor of the Province,and all such contracts and all assurances of property made in the exercise of that authority shall beexecuted on behalf of the President or Governor by such persons and in such manner as he may direct orauthorize.

(4) Neither the President, nor the Governor of a Province, shall be personally liable in respect of anycontract or assurance made or executed in the exercise of the executive authority of the Federation or, asthe case may be, the Province, nor shall any person making or executing any such contract or assurance onbehalf of any of them be personally liable in respect thereof.

(5) Transfer of land by the Federal Government or a Provincial Government shall be regulated by law.”

454 CE-3,“This Agreement made on 1st Aril, 2006 between: The Governor of Balochistan for and on behalf ofthe province of Balochistan, in the Islamic Republic of Pakistan (“GOB”) acting through its agent TheBalochistan Development Authority, a statutory corporation created by and existing under the BalochistanDevelopment Authority Act 1974 (“BDA”); AND BHP Minerals International Exploration Inc, acorporation incorporated in Delaware of Suite 500, 1360 Post Oak Blvd, Houston, Texas, USA (“BHPM”);AND Tethyan Copper Company Limited (ABN 24 093 519 692) a company incorporated in Australia, ofLevel 1, 1 Havelock Street, West Perth, Western Australia (“TCC”).”


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agreement are under a mistake as to a matter of fact essential to the agreement, the

agreement is void.”455

318) Second, it was void under section 23 of the Contract Act 1872, because the objective of

the CHEJVA was to override and thus defeat existing legislation. As is mentioned above,

the CHEJVA was executed with the express intent to override the rules and defeat: (i) the

1970 BM Rules; (ii) the 1948 Act; and (iii) Article 173 of the Constitution of Pakistan.

On the date of its execution, CHEJVA stood in violation and disregard of at least 50

provisions of the 1970 BM Rules. This fact is admitted by BHP who initially entered into

the CHEJVA. Contracts designed to defeat the provisions of law are deemed void under

section 23 of the Contract Act.1872.

iii) EVEN IF LEGAL, THE CLAIMANT’S ALLEGED INVESTMENTS DONOT CONSTITUTE “INVESTMENTS” FOR THE PURPOSES OF THEBIT

a) The Claimant’s assertion of a non-existent right to apply for a mining lease cannotconstitute an “investment”

319) The real premise upon which the Claimant bases its claims against the Respondent is the

purported right to apply for a mining lease in Article 11.8.2 of the CHEJVA.

320) Even in the absence of the Supreme Court’s decision declaring the CHEJVA to be illegal,

void and non est in its entirety, this alleged right is not capable of constituting an

“investment”. As discussed above, any right under Article 11.8.2 could only arise subject

to the fulfilment of conditions precedent in Articles 11.4.2 and 11.6. In this case, the

Claimant failed to fulfil the conditions precedent, which included acquiring its joint

venture partner’s interest, before any right to apply could arise. In this case, the Claimant

never fulfilled those conditions before the Exploration Licence EL-5 expired on 19

February 2011. Hence, even if a right could rise, in this case, it never did. A non-existent

right cannot qualify as an investment under the BIT.

b) The Claimant’s purported rights under the 2002 BM Rules

455 Ex RE-21, Section 20, Contract Act 1872.


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321) The Claimant had no standing to apply as an exploration licence holder under the 2002

BM Rules. Articles 47 and 48 of the 2002 BM Rules are two distinct provisions that

need to be considered in relation to the application of a mining lease. Article 47 states

that an application for a mining lease “may be made only by a body corporate formed by

or under a law for the time being in force in Pakistan.”456 Hence, only a company in

Pakistan can make an application for a mining lease under Article 47.

322) Article 48 sets out the process to be followed in relation to the “grant or refusal of a

mining lease” in circumstances “where the holder of an exploration licence or a mineral

deposit retention licence, makes an application for a mining lease” (emphasis added).457

It is clear that the provisions of Article 48 only apply to the holders of an exploration

licence. TCCP applied for a mining lease professing to be the holder of Exploration

Licence EL-5, but the mask soon came off.

323) The holder of Exploration Licence (EL-5), which was issued on 20 February 2008 and

expired on 19 February 2011, was the “M/S Tethyan Copper Co (Pvt) Limited – BDA

Chagai Hills Exploration Joint Venture”.458 It was thus granted to the contractual joint

venture established by the CHEJVA “on the terms and conditions contained in this office

letter No. DGMM/EL(5)/5011-22 dated 18-05-2002459 and assignment letter No.

DGMM/EL(5)/2555-65 dated 08-04-2006”. The Exploration Licence EL-5 was not held

by the Claimant or TCCP.

324) The Exploration Licence EL-5 was originally issued to “M/S BDA/BHP Chagai Hills

Joint Venture” on 18 May 2002460 for a period of three years commencing from 21

February 2002 to 20 February 2005. An application was made on behalf of the joint

venture for exploration licence EL-5 on 22 April 2002.

325) The original grant of the Exploration Licence EL-5 included the following conditions:

456 Ex RE-1, Article 47(1) of the 2002 BM Rules.457 Ex RE-1, Article 48(1) of the 2002 BM Rules.458 Exhibit CE-20, Letter of Directorate-General of Mines and Minerals dated 01 December 2007 renewing

EL-5 to M/S Tethyan Copper Co (Pvt) Limited – BDA Chagai Hills Exploration Joint Venture”.459 Letter of Director General to Chagai Hill Joint Venture, 18 May 2002, CE-16.460 Letter of Director General to Chagai Hill Joint Venture, 18 May 2002, CE-16.


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“9) That you shall notify the Licensing Authority of thediscovery of any mineral group of minerals included in the licence;or of any associated minerals within thirty days after suchdiscovery and shall indicate the potential commercial interest ofthe deposit.

10) That you shall…i) Give to the Licensing Authority notice of anychange in its name, registered address, directors, share capital,memorandum or articles of association of constitution or ofbeneficial ownership of more than five per cent of the issued sharecapital.”

[…]

11) That you shall abide by all the other conditions of NationalMineral Policy with Concession rules as approved/amended fromtime to time.”

326) The subsequent renewals of the Exploration Licence EL-5 and the assignment of BHP’s

interest to the Claimant were expressly made subject to the conditions in the initial grant

of the Exploration Licence EL-5. The first renewal of the Exploration Licence EL-5 was

granted to “M/S BDA/BHP Chagai Hill Joint Venture” from 21 February 2005 until 20

February 2008 on “the usual terms and conditions as contained in this office letter No.

DGMM/EL(5)501-22 dated 18-5-2002”461 (emphasis added) .

327) The Exploration Licence EL-5 was assigned to reflect the substitution of BHP by the

Claimant in the CHEJVA on 8 April 2006.462 This assignment was made “on the usual

terms and conditions as contained in Agreement between BDA/BHP Chagai Hills Joint

Venture & Tethyan Copper Company Limited” and also on the following terms and

conditions:

“3. M/S Tethyan Copper Company Limited (assignee) shall furnishan undertaking that they will observe and abide by all the termsand conditions as contained in this office letter No. DG(MM)-EL(5)/5011-22 dated 18-5-2002 and will also abide by all otherconditions of the National Mineral Policy read with BalochistanMineral Rules, 2002 as approved/amended from time to time.

[…]

461 Letter of Director General to Chagai Hill Joint Venture, 9 April 2005, CE-17.462 Letter of Director General to Chagai Hill Joint Venture, 8 April 2006, Ex RE-25.


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5.M/S Tethyan Copper Company Limited shall perform itsobligation under the agreement signed between M/S BDA/BHPChagai Hills Joint Venture &Tethyan Copper Company Limted

…Company Limited shall be terminated if they violate any of theterms and conditions as laid down above and in BalochistanMineral Rules 2002.”

328) The Mining Lease Application was made by TCCP in February 2011 for its sole benefit

and at its sole risk, as opposed to on the Joint Venture’s behalf, in accordance with Rules

10 and 47 of the 2002 BM Rules. The Licencing Authority addressed its communications

regarding the Mining Lease Application to TCCP.

329) Despite TCCP’s lack of standing to apply for the mining lease (as it was not the holder of

an Exploration Licence pursuant to Article 48 of the 2002 BM Rules), the Claimant now

challenges the Licensing Authority’s refusal to grant it a mining lease under that specific

provision.

330) The Licensing Authority’s Notice of Intended Reasons for Rejection pursuant to Rule

48(4)(a)463 was clear in saying:

“5.That the present application has been filed on behalf of M/STethyan Copper Company Pakistan (Pvt) Ltd and not on behalf ofco sharer, who was alleged to be co-associate in the workingproject under the Rule 48 of the Balochistan Minerals Rules 2002.Since the application alone was not allottee of exploration licenceand thus legally applicant is not competent to make application forgrant of Mining Lease.”

331) The Claimant’s alleged rights, if any, arise squarely and solely under the CHEJVA. The

2002 BM Rules do not recognise the Claimant or TCCP as an exploration licence holder.

It only recognises the unincorporated Joint Venture as an exploration licence holder. This

position was made plain to the Claimant and its subsidiary TCCP when the assignment of

the Exploration Licence EL-5 was permitted and was accepted by the Claimant. The

Claimant undertook to abide by the terms of the CHEJVA and consented that the

Licensing Authority could cancel all its rights to any mineral title should it breach the

463 CE-07, paragraph 5.


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CHEJVA or any other provision in the 2002 BM Rules.464 As far as the 2002 BM Rules

are concerned, the Joint Venture holds the licence, the Claimant’s purported rights, if any,

are under the terms of the CHEJVA.

d) The Claimant’s purported rights to the Surface Lease

332) Any right to a surface lease is dependent on holding a mineral title. The Claimant had no

entitlement to any mineral title pursuant to which it could claim the surface rights lease.

e) The Claimant’s plan to mine Reko Diq and related expenditure

333) The Claimant’s plan to mine Reko Diq and the expenditure it apparently incurred in its

pursuit of a mining lease cannot be defined as an asset. The Claimant’s expenditure on

feasibility studies were made pursuant to the terms of the CHEJVA.

334) The Claimant states that, between mid-2006 and the end of 2007, “TCC had invested over

US$ 45 million in expanded drilling and work on the Scoping Study for the Reko Diq

project, raising its total investment to over US$ 68 million”.465 The Claimant fails to

mention that this “Joint Venture Expenditure” was incurred pursuant to the CHEJVA

Agreements..

335) The expenditure on the scoping, feasibility and other studies comes under Joint Venture

Expenditure which is defined under Article 1.1 of the CHEJVA as follows:

“Joint Venture Expenditure” means all costs, expenses, liabilitiesand charges forming part of an approved programme and budgetor otherwise allowed or approved by the Operating Committee,incurred and actually paid or accrued (when not cash items) inconducting Joint Venture Activities…”

336) The product of that expenditure in the form of feasibility studies, mining information and

other assets constitute Joint Venture Property. Yet, the Claimant appropriates ownership

of what is actually Joint Venture Property by declaring:

“TCC’s rights to the content of the Feasibility Study and otherstudies it prepared as part of its exploration work are protected by

464 CE-206.465 Paragraph 165, Claimant’s Memorial at 32.


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the definition of an investment under Article 1 of the Treaty.Specifically, Article 1(1)(a)(i) and (iv) protects, among other assetsand rights, “intangible rights,” and “intellectual and industrialproperty rights.”

337) At the same time as claiming Joint Venture Property as its own, the Claimant accuses

Balochistan and the Respondent of appropriating “intellectual rights, commercially

sensitive propriety information, and industry secrets.”466 It does so without mentioning

that all such rights do not belong to TCCA or TCCP, but in fact constitute Joint Venture

Property pursuant to the terms of the CHEJVA.467 The Claimant was required to acquire

the BDA’s interest in such Joint Venture Property pursuant to Articles11.4 11.6 prior to

making its Mining Lease Application, but failed to do so.

338) As the Joint Venture under the CHEJVA did not create a separate legal entity, the

relationship between the parties is governed by the terms of the CHEJVA. The joint

venture is a legal relationship to which the law of contract applies. Hence, the question of

property and rights in relation to the Joint Venture Property and Expenditure is to be

decided by the ICC tribunal under Pakistani law.468

339) The Claimant muddies the water by arguing that its expenditure of funds pursuant to the

CHEJVA and its “comprehensive plan to mine Reko Diq” was an investment. The

Claimant did not perform any of the activities on its own. These exploration works and

activities were strictly undertaken by the Joint Venture pursuant to the terms of the

CHEJVA.

466 Paragraph 532, Memorial. (“In using the information and data from TCC’s exploration work forBalochistan’s own project, Pakistan and Balochistan have appropriated TCCA’s intellectual rights,commercially sensitive proprietary information, and industry secrets, and deprived TCCA of the value of itsinvestment.”)

467 As discussed below, all such exploration data belongs to the Government of Balochistan pursuant to Rule71 of the 2002 BM Rules.

468 CE-1, Article 16 of the CHEJVA.


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340) Article 7.1 required the Claimant to conduct at its own expenses an Exploration

Programme.469 Article 7.3 made it obligatory on the Claimant to fund any feasibility

study approved by the Operating Committee in the following terms:

“In the event that the Operating Committee decides to undertake aFeasibility Study, BHPM shall fund such Study provided alwaysthat the BDA shall continue to provide at own expense, thoseservices referred to in Clause 7.2.”

341) The Claimant’s expenditure and plans to pursue a mining lease application are not “an

asset”. In fact, it undertook to make this expenditure pursuant to Article 7 of the

CHEJVA in the knowledge that the BDA could unilaterally withdraw from the Joint

Venture pursuant to Article 13 at the any time.470

“13.2 Without prejudice to the rights of BHPM pursuant to Clause13.1 at any time after BHPM’s completion of the ExplorationProgramme, any Party may elect to withdraw from the JointVenture with effect from the end of any programme and budgetapproved pursuant to sub-clause 8.1(b) by giving notice to eachother Party not less than thirty (30) prior to the estimated date ofcompletion of the then current programme and budget.

13.2 Upon the effective date of a notice of withdrawal pursuant toClauses 13.1 or 13.2 the Percentage Interest of the withdrawingParty shall subject to Clause 13.4 cease to have any rights orobligations under this Agreement. If there is more than one non-withdrawing Party they shall succeed to the forfeiting PercentageInterests of the withdrawing Party in the proportion to which theirthen held Percentage Interest ear to one another.”

342) To suggest that the Claimant’s expenditure is an asset is a contradiction. The Claimant

made that expenditure on the express understanding that the BDA can withdraw from the

Joint Venture altogether. The Claimant could have also withdrawn from the Joint Venture

if it so wished. BHP left the Joint Venture after 13 years of exploration work and

expenditure. It gave the Claimant’s predecessor company, Mincor, “the right to explore,

develop and exploit the Licences and acquire interests within those Licences during the

469 Ibid, Article 7.1, CHEJVA.470 Ibid, Article 13, CHEJVA.


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First Period (subject to BHP’s Clawback Rights)”;471 and to “acquire all of BHP’s right,

title and interest in the H4 Zone (which will not be subject to BHP’s Clawback Right or

any other rights of BHP”472 for “a consideration of $100”.473

343) The Claimant’s Memorial makes it plain that the Feasibility Study only refers to a

prospective investment, as the project mentioned is a “contemplated” one, and there is no

real or existing investment yet in place. The Claimant states that:

“Because of the massive capital investment and operatingexpenditures over the life of the mine, the project contemplated bythe Feasibility Study is expected to create 11,500 jobs at theconstruction phase and employ 2,500 people full-time thereafter,most of whom would be local residents”.474

344) The subjective expectations, legitimate or otherwise, which the Claimant might have had

regarding the mining of the Reko Diq area cannot constitute an asset.

345) Thus, the expenses incurred in the exploration and feasibility activities can at best be

categorised as a pre-investment expenditure. This is also recognised in ICSID practice.

The Mihaly tribunal held that pre-investment expenditures do not constitute an

investment.475 The Mihaly decision is relevant to the present case, since the project in

that case was also a contemplated, rather than a realised, investment. The Claimant had

no contractual right in relation to its contemplated mining project. It sought to acquire

such rights by negotiating a mineral agreement, but was unsuccessful.

471 CE-12, Clause 3.1.1.1.472 Ibid, Clause 3.1.1.2.473 Ibid, Clause 2.2.1. Also see: Article from The Dawn, 08 April 2011 Ex RE-70.474 ¶259 of the Claimant’s Memorial475 Mihaly International Corporation v. The Government of Sri Lanka, ICSID Case No. ARB/00/2, Award

dated Mar 15, 2002, (“Mihaly v. Sri Lanka”) RLA-42, paragraphs 48-61.


152

346) In addition, the amount of money the Claimant alleges to have spent on the feasibility

study,476 which amount without prejudice is disputed,477 is irrelevant to whether or not

such expenditure constitutes an investment:

“the question whether an expenditure constitutes an investment ornot is hardly to be governed by whether or not the expenditure islarge or small. Ultimately, it is always a matter for the parties todetermine at what point in their negotiations they wish to engagethe provisions of the Convention by entering into an investment.Specifically, the Parties could have agreed that the formation of a [] Company was to be treated as the starting point of the admittedinvestment”.478

347) Similarly, the tribunal in F-W Oil Interests, Inc. v. Republic of Trinidad and Tobago held

that pre-contractual expenditure is not an investment.479 To reach this conclusion, the

tribunal relied heavily on the detailed definition of “investment” in the relevant bilateral

investment treaty, which, like the presently applicable BIT, only lists proprietary and

contractual rights:

“the Tribunal finds that the notion of an “investment” (“coveredinvestment”), the axis around which the operation of the BITrevolves, can only realistically be understood as referring tosomething in the nature of a legal right or entitlement. Thisappears clearly enough from the extensively itemized definition of“investment” in Article I(d) quoted above, each item in which iseither a form of property or is expressed as a “right”. It isadmittedly the case that the definition given in Article I(d) is on itsown terms not exhaustive; it is expressed merely to “include” theforms of investment itemised on the list. The common thread isnevertheless so strong that the Tribunal is unable to conclude thatthe intention can have been to bring within the scope of the term

476 Robert N. Hornick. “The Mihaly Arbitration, Pre-Investment Expenditure as a Basis for ICSIDJurisdiction” J. Int. Arb. 2003, 20(2) 189-197 RLA-43, page 191; Mihaly v. Sri Lanka RLA- 42, paragraph51.

477 The Respondent will seek disclosure of all of the Claimant’s dealing with SNC Lavalin, the entity whichcreated the Feasibility Study. SNC Lavalin and over a hundred of its affiliates have been recently debarredby the World Bank for 10 years, which is the longest debarment in World Bank history, for corruptpractices and in developing countries, such as Bangladesh and Cambodia. Ex RE-71; Also see: Ex RE-72.

478 Mihaly v. Sri Lanka RLA- 42, paragraph 51.479 F-W Oil Interests, Inc. v. Republic of Trinidad and Tobago, ICSID Case No. ARB/01/14, Award dated

March 3, 2001 RLA-44, paragraph 213


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claims other than those based on proprietary or contractualrights.”480

348) Article 1(v) of the BIT distinguishes between the different types of rights relating “to

[the] search for, extract or exploit natural resources.” The right to extract and or exploit

natural resources is an investment in its own right and must be distinguished from the

right to explore. The Claimant was attempting to acquire a new type of investment that is

the right to extract and exploit the mineral resources. The expenditure it made in relation

to acquiring this investment does not constitute an investment. The Claimant had a

contractual right to explore under the joint venture umbrella and it is undisputed that there

was no interference with this right whatsoever by the Government of Balochistan. The

Claimant never had a right to exploit. It had at best the right to apply for such a licence

subject to the routine legal processes and acquiring the transfer of the BDA’s interest.

Article 3 of the BIT expressly provides for the right of each treaty party to only admit

investments “in accordance with its laws and investment policies applicable from time to

time.” Hence, the BIT allows the State to admit investments and it has complete

discretion to grant a right to extract and exploit (i.e., a mining lease in this case) wholly in

accordance with its laws and investment policies applicable from time to time.

349) The Claimant was never stopped from exploring the area the subject of Exploration

Licence EL-5. In fact, the Licensing Authority’s conduct was exemplary given that it did

not exercise its rights to cancel the licence due to the Claimant failure complete its

exploration and prepare a feasibility study over the discovered deposits. It is the Claimant

that is in breach of its obligations under the CHEJVA and the 2002 BM Rules. It is the

Claimant who provided assurances to the Licensing Authority to explore all deposits in

the Exploration Area EL-5 as a condition of the licence’s renewal in 2008.

350) The Claimant disregards the scheme of the CHEJVA and deliberately misinterprets the

meaning of the word “routine” by arguing that the word implies mere compliance with

administrative procedures. The definition from the Oxford English Dictionary does not

support the Claimant’s attempt to define “routine” as merely administrative.

480 Ibid, paragraph 125.


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“Etymology: French routine, †routine acquisition of skills throughpractice (as opposed to academic study) (1559), regularlyfollowed, often unvarying procedure (1715)

A. n.

1.

a. A regularly followed procedure; an established or prescribedway of doing something; a more or less mechanical or unvaryingway of performing certain actions or duties. Often with theimplication of a lack of excitement or variety; cf. sense

b. As a mass noun: regular, unvarying, or mechanical performanceof actions or duties; established or prescribed practice or conduct.Often with the implication of a lack of excitement or variety; cf.sense

†2. A set form of words; spec. a set series of phrases, manner ofspeaking, etc., employed without proper consideration or originalthought. Obs.

3. A set sequence forming all or part of a performance by an actor,entertainer, etc., typically rehearsed in advance and performed onseveral occasions. Freq. with preceding distinguishing word orphrase. Also in extended use.

B. adj.

1. Performed as or forming part of a routine (in sense A. 1a);performed in a more or less identical way on repeated occasions,typically without the need for innovation; performed, given, orcarried out by rule or as a matter of course.

2. Of an ordinary or undistinguished type or quality; usual, typical;average, mundane; run of the mill; lacking excitement or variety,humdrum.”

351) Contrary to the Claimant’s suggestion that it enjoys extraordinary or special treatment,

the CHEJVA makes it clear that the Claimant would be subject to the ordinary, regular

and established procedures. Hence, the Claimant had no more and no less than the right

to apply for a mining lease provided for under the regular or usual procedures for mining

lease applications under the 2002 BM Rules.

352) Further, the Supreme Court Order allowed the Claimant to submit the Mining Lease

Application and for the Licensing Authority to make its decision pursuant to the 2002


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BM Rules. During proceedings, counsel for the Claimant told the Court that a mining

lease application needed to be filed in order to preserve its rights. The Court allowed the

application and ordered (with the consent of all the parties) that the Licensing Authority

be stayed from determining the application. Later, the Claimant’s counsel requested the

Supreme Court to vacate the stay order against the Licensing Authority so that its Mining

Lease Application could be determined. The Court allowed the Claimant’s request and

instructed the Licensing Authority to determine the Mining Lease Application in

accordance with the law.

B) THE QUESTION OF WHETHER THERE IS A QUALIFYING“INVESTMENT” UNDER THE ICSID CONVENTION DOES NOT EVENARISE

353) The Claimant must first satisfy the definition of investment of the BIT, the instrument in

which consent to ICSID arbitration is expressed.

354) The Claimant’s reliance on Article 15.4.7 of the CHEJVA to establish that, “[f]or

purposes of arbitration pursuant to the ICSID Convention, the Parties agree that the

transactions to which this Agreement relates constitute an investment within the meaning

of Article 25(1) of the ICSID Convention”481 is misplaced. It only reinforces the

Respondent’s proposition that the Claimant’s claim arises from the CHEJVA (to which

the Respondent is not even a party). The CHEJVA did have an ICSID arbitration clause

but the ICSID Secretariat refused jurisdiction. Hence, the Claimant must now take its

disputes pursuant to the CHEJVA Agreements to the ICC. The Claimant purports to

establish jurisdiction under the BIT in this arbitration. Hence, it must first meet the

requirements of being lawfully admitted under Pakistani law and investment policies

under Article 1(1)(a) of the BIT. The Claimant has failed to discharge that burden of

proof, as discussed above. Hence, the question of whether the Claimant’s purported

investment pursuant to Article 1 of the BIT satisfies the requirement of an investment

pursuant to Article 25(1) does not even arise for consideration.

481 CE-1 at Article 15.4.7. Also see: ¶63, Memorial.


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C) THE CLAIMANT’S CLAIM IS, IN REALITY, BASED ON AN ALLEGEDBREACH OF THE CHEJVA, NOT THE BIT

i) THE PRESENT DISPUTE IS A CONTRACTUAL DISPUTE

355) It is obvious that the fundamental character of the claims asserted in this arbitration is

contractual. The source of the Claimant’s so-called right to a mining lease rests on a

single contractual provision in the CHEJVA (Article 11.8.2). Its other alleged rights in

relation to its expenditure on feasibility studies and other mining information likewise

arise from the CHEJVA because all these constitute Joint Venture Property.

356) This is a classic joint venture contract dispute between two joint venture partners that can

only be determined by the tribunal designated by the parties to adjudicate their respective

contractual rights (to the extent it has any jurisdiction in the matter). In this case, the

matter is before the ICC Tribunal, which is the forum invoked by the Claimant to decide

all disputes relating to the CHEJVA prior to the registration of the ICSID claim.

357) The Claimant’s claims are not subject to the jurisdiction of this Tribunal. The BIT does

not afford jurisdiction over contractual claims. The Claimant’s attempt to transform its

contractual disputes into treaty violations does not withstand scrutiny. No matter how

Claimant tries to “dress up” its claims with unsupported and fanciful allegations of State

action, the essential basis of the claims as contractual disputes is obvious. The choice-of-

forum clause in the CHEJVA should be given effect by this Tribunal, and the defined

scope of the State’s consent to jurisdiction under the BIT should also be respected.

Accordingly, this Tribunal should dismiss the Claimant’s claims in their entirety for lack

of jurisdiction.

ii) THE BIT DOES NOT PROVIDE FOR JURISDICTION OVER PURELYCONTRACTUAL CLAIMS

358) Absent a clear statement to the contrary, BITs grant jurisdiction only over treaty claims,

not over “purely contract” matters.482 It is well-established that, unless otherwise

482 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13,Decision on Objections to Jurisdiction dated August 6, 2003 (“SGS v. Pakistan”), RLA-45, paragraph 161(finding that language in the applicable BIT created “no implication … that both BIT and purely contractclaims are intended to be covered”).


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provided, tribunals have “jurisdiction over treaty claims and cannot entertain purely

contractual claims which do not amount to claims for violations of the BIT.”483 In the

absence of a specific treaty provision, the State Parties to the BIT should not be presumed

to have submitted to international jurisdiction for purely contractual disputes.484

359) This rule is consistent with the generally accepted principle that investor-State arbitration

was not intended to “elevate […] a multitude of ordinary transactions with public

authorities into potential international disputes.” As the Malicorp v. Egypt tribunal

stated:

“Investment arbitration was not set up to provide a substitute forcontracting partners who refrain from following the ordinaryprocedure by which they have agreed to be bound, nor as a meansof appeal for those who have failed to obtain satisfaction (or fullsatisfaction) by using that procedure. In order for a breach ofcontract to serve as the basis for jurisdiction of a tribunal in aninvestment arbitration, such breach must at the same time, and forreasons inherent in the investment protection treaty itself, amountto a violation of that treaty, one that could not be resolved by usingthe ordinary procedure.”485

360) This approach does not detract from the special case presented by umbrella clauses,

which may expressly confer jurisdiction over disputes relating to obligations other than

those imposed by the treaty itself.486 But in this case, Pakistan is not a party to the

483 El Paso Energy International Co. v. Argentine Republic, ICSID Case No. ARB/03/15, Decision onJurisdiction dated April 27, 2006 (“El Paso Decision on Jurisdiction”), RLA-46, paragraph 65. See alsoPan American Energy LLC v. Argentine Republic, ICSID Case No. ARB/03/13, Decision on PreliminaryObjections dated July 27, 2006 (“Pan American”) RLA-47, paragraph 91; Gustav F. W. Hamester GmbH& Co. KG v. Republic of Ghana, ICSID Case No.ARB/07/24, Award dated June 18, 2010 (“Hamester”)RLA-48, paragraph 322 (“At the outset, the Tribunal makes clear that it only has jurisdiction over treatyclaims.”); Abaclat and Others v. Argentine Republic, ICSID Case No. ARB/07/15, Decision on Jurisdictionand Admissibility dated August 4, 2011 RLA-49, paragraph 316 (“It is in principle admitted that withrespect to a BIT claim an arbitral tribunal has no jurisdiction where the claim at stake is a pure contractclaim.”).

484 ICS Inspection v The Argentine Republic, PCA Case No. 2010-9, Award on Jurisdiction dated 10 February2012, RLA-50, paragraph 280 (consent to arbitration “shall not be presumed in the face of ambiguity”).

485 RLA Malicorp Limited. v. Arab Republic of Egypt, ICSID Case No. ARB/08/18, Award dated February 7,2011, RLA-51, paragraph 103(c).

486 Consorzio Groupement L.E.S.I.-DIPENTA (Italy) v. People’s Democratic Republic of Algeria, ICSID No.ARB/03/08, Award dated January 10, 2005 (“L.E.S.I.-DIPENTA”), RLA-52 Section on Law, ¶ 25(ii).


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CHEJVA so it would not have assisted the Claimant even if such a provision was present

in the BIT.

361) The mere fact that an entity is state-owned does not allow Claimant to assert claims

directly against the State or to hold the State responsible. Indeed, tribunals have been

particularly wary of expanding jurisdiction where the relevant contract is not with the

State itself, but rather with a State-owned entity.487 In this case, the need for caution is

increased because not only does the dispute arise from a contractual provision with a

state-entity but the purported rights that apparently constitute investments already form

the subject-matter of proceedings before the ICC arbitral tribunal, who were first seized.

iii) THE DISPUTES IN THIS CASE ARISE OUT OF AND RELATE TO THERIGHTS AND OBLIGATIONS UNDER THE CHEJVA AND NOT THEBIT

362) All of the claims asserted in this case are based on disputes regarding the interpretation of

rights and obligations under the CHEJVA Agreements. Despite Claimant’s attempt to

disguise them as treaty claims, it is clear that these do not relate to the actions of the

Respondent in breach of its obligations under the BIT.

363) The fundamental legal basis of a claim is an objective matter that must be determined by

the Tribunal. The Claimant’s categorising contract claims as treaty ones does not

magically transform the former’s true nature.

364) The treaty claim must be “self-standing”,488 and the tribunal must look beyond the

terminology employed by the claimant.489 As Judge Georges Abi-Saab has written:

“[W]here what is contended in the treaty claim is mainly that thecontract has been violated and that this violation constitutes in turn

487 Salini Construttori S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdictiondated July 16, 2001 (“Salini v. Morocco”), RLA-53, paragraph 61 (“The jurisdiction offer contained inArticle 8 does not, however, extend to breaches of a contract to which an entity other than the State is anamed party.”); Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/3, Decision onJurisdiction dated April 22, 2005 (“Impregilo”), RLA-54 paragraphs 213- 214 (citing Salini v Morocco)

488 TSA Spectrum de Argentina S.A. v. Argentine Republic, ICSID Case No. ARB/05/5, Concurring Opinion ofArbitrator Georges Abi-Saab dated December 19, 2008, (“TSA Spectrum Concurring Opinion”), RLA-55,paragraph 4.

489 Douglas, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS, pp. 263-264. RLA-28


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and by another name (figuring in the treaty) a treaty violation, sucha nominal trick does not suffice to transform the contract claim intoa treaty claim or to create a parallel treaty claim. To use theterminology of Vivendi II, “where ‘the fundamental basis of theclaim’” is the contract, however[ ] many more layers of claims onetops it with, it remains a contract claim, which has to be settledaccording to the terms of the contract and in the forum chosen inthat contract.”

365) In short, where alleged treaty breaches “necessarily pass by or posit a contract violation

as a fundamental element of or premise of its cause of action,” such claims are not self-

standing treaty claims.490

366) The Claimant advances no viable self-standing treaty claims, the entirety of its claims

necessarily posit that the alleged conduct was taken in violation of the CHEJVA. Bearing

in mind that the determination of jurisdiction is an objective matter, the Tribunal should

not accept a case that is “no more than a contractual claim …dressed up as a Treaty

case.”491

367) The Claimant relies on unsupported allegations, misrepresentations and imagined

sovereign conduct to disguise its contractual disputes as BIT claims. In order to so, it

relies on unconfirmed news reports.

368) However, on closer examination, these allegations do not stand up to scrutiny. The facts

show that both Governments acted properly within the confines of Pakistani law and in

good faith at all times.

490 TSA Spectrum Concurring Opinion, paragraph 4. RLA-55491 RSM Production Corporation et al. v. Grenada, ICSID Case No.ARB/10/6, Award dated December 10,

2010, RLA-56 paragraph 7.3.7 (making this statement in the context of an attempt to re-litigate acontractual claim contractual claim as a treaty claim).


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iv) CLAIMANT’S CLAIMS ARE SUBJECT TO THE EXCLUSIVEJURISDICTION CLAUSE IN THE CHEJVA REQUIRING SUBMISSIONTO THE ICC ARBITRAL TRIBUNAL (TO THE EXTENT THATTRIBUNAL HAS ANY JURISDICTION)

369) Where the basis of a claim is contractual, a tribunal must honour an exclusive choice-of-

jurisdiction clause in a contract.492 As Professor Douglas writes, “the integrity of the

contractual bargain must be preserved; one of the essential terms of that bargain cannot

be bypassed at the suit of one of the parties.”493 Thus, even if the dispute settlement

clause of a BIT granted jurisdiction over contract claims, which is not true in this case,

the forum-selection clauses and other provisions of the individual agreements have to be

respected.494

370) This distinction has also been adopted by tribunals in the context of treaty based

investment disputes. Tribunals have carefully analyzed the source of the rights giving rise

to the claim presented by the international investor in order to determine the nature of the

claim.495

371) A tribunal’s decision to honour the exclusive jurisdiction clause of a contract respects the

original bargain between the parties and the principle of pacta sunt servanda.496

492 Compañía de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case No.ARB/97/3, Decision on Annulment dated July 3, 2002 (“Vivendi Decision on Annulment”), RLA-57,paragraph 98 (“In a case where the essential basis of a claim brought before an international tribunal is abreach of contract, the tribunal will give effect to any valid choice of forum clause in the contract.”).

493 Douglas, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS, p. 364. RLA-28494 Where a claim essentially boils down to a dispute over a contract, previous tribunals have found that it

would be “inappropriate and premature” for an international arbitration to take the place of the dispute-resolution procedure prescribed under the relevant agreement. SGS Société Générale de Surveillance S.A. v.Republic of the Philippines, ICSID Case No. ARB/02/6RA, Decision of the Tribunal on Objections toJurisdiction dated January 29, 2004, (“SGS v Philippines”), RLA-58 paragraph 162; Bureau Veritas,Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, ICSID Case No.ARB/07/9, Decision on Objections to Jurisdiction dated May 29, 2009 (“BIVAC”), RLA-59, paragraphs121-123 (citing favorably the SGS tribunal’s reasoning, but noting that, in the instant case, Paraguay hadnot disputed the fact that the alleged amount was due).

495 Vivendi Decision on Annulment, RLA-57 paragraph 98 (“In a case where the essential basis of a claimbrought before an international tribunal is a breach of contract, the tribunal will give effect to any validchoice of forum clause in the contract.”).

496 TSA Spectrum Concurring Opinion, RLA-55, paragraph 6 (“A different solution would run roughshod overthe clear text of the contract reflecting the will of the parties, in total disregard of the principles of partyautonomy and pacta sunt servanda”); Turnbull, p. 304 (stating that a choice of forum clause “forms part of


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372) In addition, as the SGS v. Philippines tribunal made clear, it is reasonable to interpret a

BIT as preserving the freedom of parties to enter into such arrangements and to respect

such agreements, barring any express treaty provisions dictating otherwise:

“The present Tribunal agrees with the concern that the generalprovisions of BITs should not, unless clearly expressed to do so,override specific and exclusive dispute settlement arrangementsmade in the investment contract itself. On the view put forward bySGS it will have become impossible for investors validly to agree toan exclusive jurisdiction clause in their contracts; they will alwayshave the hidden capacity to bring contractual claims to BITarbitration, even in breach of the contract, and it is hard to believethat this result was contemplated by States in concluding genericinvestment protection agreements.”497

373) Accordingly, the Tribunal should respect and give effect to the contractual forum-

selection clauses.498 As Professor James Crawford argues:

“The principle pacta sunt servanda is not a one-way street. …Whatever answer may be given to the question whether an investorcan by contract in advance renounce the right to arbitrate treatyclaims, there cannot be any doubt that it can renounce the right toarbitrate contract claims in a just as well as any of the otherarticles, as the declaration of the will of the contracting parties,which expressed will must be respected as the supreme lawbetween parties, according to the immutable law of justice andequity: pacta servanda....”.

374) The Claimant cannot make use of ICSID jurisdiction to circumvent its contractual

obligations to bring any claims before the ICC Tribunal.

375) Article 15 of the CHEJVA provides as follows:

“15.4 Arbitration.

the contract just as well as any of the other articles, and which article has to be regarded the parties toexecute the contract, as well as the value thereof.

497 SGS v. Philippines, RLA-58 paragraph 134.498 SGS v. Pakistan, RLA-45, paragraph 161 (“We believe that Article 11.1 of the PSI Agreement is a valid

forum selection clause so far as concerns the Claimant’s contract claims which do not also amount to BITclaims, and it is a clause that this Tribunal should respect. We are not suggesting that the parties cannot,by special agreement, lodge in this Tribunal jurisdiction to pass upon and decide claims sounding solely inthe contract. Obviously the parties can. But we do not believe that they have done so in this case.”); JoyMining Machinery Limited v. Arab Republic of Egypt (ICSID Case No. ARB/03/11), Award on Jurisdictiondated August 6, 2004, RLA-60, paragraphs 89-90.


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15.4.1 Any dispute [ ] shall be submitted to the InternationalCentre for the Settlement of Industrial Disputes (the “Centre”)established by the Convention the Settlement of Industrial Disputesbetween States and Nationals of Other States in effect sinceOctober 14, 1965 (the “ICSID Convention”).

15.4.2 To the extent required by the ICSID Convention each of theParties agrees to submit to arbitration under the ICSIDConvention, but should sub-clause 15.4.8 operate, then the partiesagree to submit to an arbitration conducted pursuant to the ICCRules.

15.4.8 In case, for whatever reason, the Centre should not acceptjurisdiction or should reject the arbitration request, the disputeshall be finally settled under the Rules of Conciliation andArbitration of the International Chamber of Commerce (the “ICCRules”).” (emphasis added)

376) This clause is similar in wording to the exclusive jurisdiction clause at issue in SGS v.

Philippines, which also applied to “all” disputes, and directed that these disputes “shall”

be referred to the exclusive forum. As in that case, the Tribunal here should not exercise

jurisdiction over claims arising out of the CHEJVA because not only have the parties

already agreed on an appropriate forum but also the Claimant has voluntarily invoked the

dispute resolution mechanism of the CHEJVA. Moreover, the ICC arbitration was

instituted prior to this ICSID arbitration.

IV.2. THE CLAIMANT'S CLAIMS ARE INADMISSIBLE

A) THE CLAIMANT’S CLAIMS ARE INADMISSIBLE RATIONEMATERIAE BECAUSE ITS RIGHT TO APPLY FOR A MINING LEASENEVER CRYSTALLISED

377) The Claimant first declares its investment to be a so-called entitlement to mine Reko Diq

pursuant to the CHEJVA. The Claimant’s purported rights, including the so-called

entitlement to receive a mining lease (subject to compliance with routine Government

requirements) pursuant to Article 11.8.2, never in fact arose.

378) First, it is patently obvious that the CHEJVA did not bestow any rights to mine on the

Claimant. It created a joint venture pursuant to which the Claimant and the BDA


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undertook the exploration in the Reko Diq area subject to any mineral titles granted by

the Licensing Authority under the 1970 and 2002 BM Rules. The Claimant’s argument

that Article 11.8.2 gave it an entitlement to mine is contradicted on the face of the sub

clause itself. Article 11.8.2 speaks of the entitlement to convert a Prospecting Licence

into a Mining Lease “subject to routine Government requirements.” The very use of the

word “routine” makes it plain that no rights or entitlements greater than those available

under the routine Government processes are to be assumed.

379) Second, even if we accept the Claimant’s position for argument’s sake, two immediate

hurdles become apparent: (i) the object of the “entitlement” is not specified; and (ii) the

conditions precedent in Article 11 for this purported entitlement to arise were never

satisfied. Hence, the uncertain right to apply for a mining lease never in fact crystallised.

It cannot credibly be claimed that the Respondent interfered with this right (by rejecting

the mining lease application) if that right had not yet arisen at the date of the mining lease

application. Such a claim lacks foundation and is inadmissible.

380) The only “entitlement” to which the Claimant can point relates to the vague notion of a

“Mining Area”, which in itself is based on a feasibility study and therefore is not defined.

The areas of the prospecting (exploration) licenses are similarly not defined (Article 5.3),

nor are any of the deposits. If, for the sake of argument, the Claimant’s contention is

accepted, this Tribunal will in effect be granting the Claimant an unqualified entitlement

to mine an unspecified area under the CHEJVA. It is plain the Claimant’s interpretation is

untenable and logically flawed.

381) Further, Article 11 lays down conditions precedent to be met before any entitlement

arises. These conditions were never satisfied, so no entitlement arose.

382) It is obvious that the Claimant had no rights under the 2002 BM Rules as a holder of an

exploration licence (all rights under the 2002 BM Rules were held by the Joint Venture)..

The Claimant acknowledges this because the premise of its so-called entitlement to

convert the Exploration Licence EL-5 arises from Article 11.8.2 of the CHEJVA.


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383) The Exploration Licence (previously known as a prospecting licence499) is expressly

described as “Joint Venture Property” pursuant to Article 1.1 of the CHEJVA:

“the Prospecting Licences Mining Information and all otherproperty of whatsoever kind which is in existence and held by theJoint Venture at the Commencement Date and all otherProspecting Licences, Mining Information, Mining Leases andother property of whatsoever kind thereafter acquired or createdby or on behalf of the Parties for the purpose of implementing theobjects of this Agreement.”

384) The “joint venture” is defined as “the contractual joint venture created by the Parties

pursuant to this Agreement.”500 Article 3.1 of the CHEJVA makes it plain that the

parties:

“hereby establish a contractual joint venture the objects of whichare to explore for Mineral deposits in the Exploration Area and toconduct Feasibility Studies so as to evaluate the economic viabilityof the said Mineral deposits in the Exploration Area and all actsancillary thereto which the Operating Committee shall resolve tobe carried out.”

385) Furthermore, Article 4.3 of the CHEJVA states:

“Each Party shall hold a beneficial interest as tenant-in-common inthe Joint Venture Property according to its Percentage Interest.”

386) The Claimant relies on a single sub-clause Article 11.8.2 to assert its entitlement to

convert an exploration licence into a mining lease, although it fails consistently to

acknowledge that any such right was always subject to “compliance with routine

Government requirements”. The Claimant fails to mention that any such entitlement is

limited in scope by the remainder of Article 11 and only arises subject to the conditions

precedent set out therein.

387) Article 11.8.2 of the CHEJVA provides:

“Where the Joint Venture or, pursuant to sub-clause 11.3.2, aParticipating Party elects to develop a mine then, subject only to

499 An exploration licence was known as a prospecting licence under the 1970 BM Rules.500 CE-1, Article 1.1


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compliance with routine Government requirements, it shall beentitled to convert the relevant Prospecting Licence(s) held by itinto Mining Licences so as to give secure title over the requiredMining Area.”

388) Article 11 is titled “Decision as to Mine Development.” This article sets out the procedure

whereby the parties may jointly develop a mine. It also sets out the conditions for a party

to the joint venture to pursue a mining development without the participation of its joint

venture partner.501

389) The decision-making process starts with a party giving notice to require that the

Operating Committee consider “whether or not a Feasibility Study should be conducted

in respect of any area (a “Mining Area”) containing any Mineral deposit which has been

discovered in the Exploration Area.”502 The Operating Committee is to decide by a

simple majority vote “as to whether or not the Manager should proceed to conduct the

Feasibility Study in accordance with those parameters referred to in Clause 7.4”503

390) The Manager is required to serve a copy of the Feasibility Study on the other party within

14 days of its completion.504 Each party is required to advise the Manager whether it

intends to “participate in development of the said Mineral deposit as a Mining

Area.”(emphasis added)505 If a party gives notice of intention to participate in

development of the mineral deposit, it becomes a Participating Party.506 If a party refuses

to participate or fails to provide a notice to participate within the election period, it

becomes a Non-participating Party.507 Article 11.4.2 provides for the situation at hand

where the non-participating party is the BDA in the following terms:

“Where the BDA is a Non-participating Party, then subject both toBHPM obtaining all routine Government approvals required and

501 Ibid, Article 11.4.2, CHEJVA.502 CE-01 Article 11.1, CHEJVA.503 CE-01 Article 11.2, CHEJVA.504 CE-01 Article 11.3.1, CHEJVA.505 CE-01 Article 11.3.1, CHEJVA.506 CE-01 Article 113.2, CHEJVA.507 CE-01 Article 11.3.3, CHEJVA.


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to compliance with Clause 11.6, BHPM shall be entitled toundertake sole risk investment (or form a consortium to undertakesuch investment) in a mining development within any of therelevant Prospecting Licences.”

391) Article 11.4.2 expressly provides that if the BDA is a Non-participating Party, then the

other Participating Party’s entitlement to undertake the development of a mine at its sole

risk is “subject both” to it obtaining “all routine Government approvals required” and to

being in “compliance with Clause 11.6”. These two conditions precedent need to be

satisfied before any entitlement to undertake mine development can even arise. Article

11.6 sets out the process pursuant to which the Claimant should have sought the transfer

of the BDA’s interest in the Joint Venture Property including the exploration licence. The

Claimant was required within 120 days of the Election Date to engage in “good faith”

negotiations to agree a fair value and pay consideration for the transfer of the Non-

participating Party’s interest in “all the Joint Venture Property pertaining to the proposed

Mining Area (hereinafter called the “Non-participating Party’s Transfer Interest”)”.508

392) Article 11.6.1 sets out the formula for calculating the fair value for the Non-participating

Party’s Transfer Interest. Article 11.6.2 provides:

“Should the Parties unable to reach a mutually acceptable decisionpursuant to Clause 11.5 within one hundred and twenty (120) daysof the Election Date then at the motion of any Party, the question offair value for the Non-participating Party’s Transfer interest shallbe referred to an Expert appointed pursuant to Clause 15.2. Inreaching his decision the Expert shall be bound to have regard tothe parameters referred to sub-clause 11.6.1 but he shall also beentitled to have regard to all factors and evidence deemed by himto be pertinent to the matter.”

393) The Non-participating Party would then transfer all legal and beneficial interest in the

Non-participating Party’s Transfer Interest to the Participating Party. Article 11.6.3

provides that:

508 Article 11.5, CHEJVA: “Should a mining development proceed pursuant to Clause 11.4 then within onehundred and twenty (120) days of the Election Date the Participating Party and the Non-participatingParty shall in good faith negotiate and agree upon the fair value to be paid by the Participating Party tothe Non-participating Party as consideration for transfer of the Non-participating Party’s PercentageInterest in all the Joint Venture Property pertaining to the proposed Mining Area (hereinafter called the“Non-participating Party’s Transfer Interest”).”


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“Upon the Parties reaching agreement pursuant to Clause 11.5 orupon making of the Expert’s decision pursuant to Clause 15.2 inrelation to sub-clause 11.6.2, the Non-participating Party shall doall things reasonable and necessary to transfer all legal andbeneficial interest in the Non-participating Party’s TransferInterest to the Participating Party.”

394) The requirement that the non-participating party’s transfer of interest in the Joint Venture

Property occur before any entitlement for a participating party to pursue a mining lease

on its own can arise is clearly set out in the CHEJVA. The Claimant needed to acquire the

BDA’s interest in the Exploration Licence EL-5, the Feasibility Study and any other

relevant Joint Venture Property before it could claim any entitlement to even undertake a

mining venture on its own. This is obvious given that all such property is owned by the

unincorporated joint venture and the parties hold it as tenants-in-common; i.e. each

having beneficial interest in the undivided whole509. If a joint venture party wishes to

assert a right over the Joint Venture property then it must first acquire the other party’s

interest (or consent) before it can do so.

395) The Claimant admits that it did not obtain a transfer of the BDA’s interest in the Joint

Venture Property when TCCP went solo to apply for a mining lease as it was required

before any entitlement to undertake any mining project in the Exploration Area on its

own could arise subject to routine Government requirements.510 The Claimant says that it

first notified Balochistan on 3 March 2011 of its intention to acquire its interest in the

Joint Venture Property. It then says it followed up with a couple of letters before

abandoning attempts to negotiate altogether. In a sum total of three paragraphs, the

Claimant struggles to explain its obvious failure to meet the condition precedent of

obtaining the transfer of its joint partner’s interest before any entitlement under sub

clause 11.8.2 could even arise.511 In any event, the Claimant’s feeble attempts to comply

with Article 11 were made after the Mining Lease Application had been submitted to the

Licensing Authority. Paragraph ¶310 of the Memorial makes it plain that the Claimant

made its mining lease application on 15 February 2011. Yet, in ¶310, the Claimant admits

509 CHEJVA Article 4.3.510 Paragraphs 310-311, Memorial.511 Paragraphs 310-312, Memorial


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that it first contacted the Government on 3 March 2011 to negotiate the transfer of its

interest. Far from having obtaining a transfer of its joint partner’s interest at an agreed or

Expert-determined price, the Claimant had not even notified the Government of its

intention to engage in negotiations when it exercised its so-called entitlement to a mining

lease pursuant to sub clause 11.8.2.

396) If the Claimant found the BDA had failed to negotiate a price, then the matter ought to

have been referred to expert determination in accordance with article 11.6. The Claimant

wrote one letter attempting to do so some months after making its Mining Lease

Application. Yet, for reasons known best to the Claimant, it never followed through with

the process. But even if it had done so, this would have come too late. The entitlement to

make a sole application arises after the acquisition of the joint venture partner’s interest.

The fact that attempts were made after the fact does not cure the violation of the

CHEJVA as of February 2011. Hence, the Claimant’s purported entitlement to convert

the exploration licence into the mining lease had not arisen as at the date of the Mining

Lease Application (15 February 2011) or the expiry of the Exploration Licence EL-5 (19

February 2011) because the conditions precedent in Article 11.6 were never satisfied. The

Claimant’s claim in this arbitration, therefore, lacks foundation and is inadmissible.

397) The Claimant justifies its right to convert the Exploration Licence EL-5 into a mining

lease over 99.5 square kilometres (containing at least 14 known mineral deposits) by

relying on Article 11.8.2. If such an entitlement were to arise, it would not only have been

subject to all Government approvals, but would have required the Claimant to follow the

procedure for acquiring the BDA’s interest in the Joint Venture Property. Furthermore, it

would have entailed the Operating Committee first deciding that feasibility studies were

to be commissioned for all 14 deposits. Then, as Manager, the Claimant (acting on behalf

of the joint venture) would have commissioned (and paid for) feasibility studies for all 14

deposits contained in over the proposed mining area. The Claimant would need to have

sent all these feasibility studies to the BDA so that it could have elected to participate in

their development. It is only if the BDA refused to or failed to participate in the

development of all the 14 deposits, and the Claimant had acquired its interest in the Joint

Venture Property, including the Exploration Licence EL-5, the feasibility studies and


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other information, that an entitlement to undertake a Mining Lease Application would

have arisen (subject to routine Government requirements).

398) In flagrant disregard of its obligations under the CHEJVA, the Claimant denied the BDA

an opportunity to decide whether it wished to develop the mineral deposits over which

the Claimant unilaterally sought a lease. The Claimant did not commission feasibility

studies, which would have given the BDA an opportunity to exercise its contractual right

to participate in developing the mineral deposits. The Claimant denied the BDA that right

in breach of its obligations under Article 11.

399) In addition, the claim (even if capable of elevation to the status of a treaty claim, which is

denied) is inadmissible because it is premised on alleged breaches of the CHEJVA, which

are currently and correctly before the ICC for determination.

400) The Claimant’s assertion that the BDA or the Government of Balochistan owed it a duty

to either grant it a mining lease or protect its interests or rights in the Joint Venture is in

contraction with the express agreement in the CHEJVA that:

“…it being expressly understood that each Party is entering intothis Agreement solely for the purpose of protecting and developingits Percentage Interest.”512

401) The Claimant’s assertion that its other so-called rights under the 2002 BM Rules, the

exploration licence itself, the Surface Lease, its plan to mine Reko Diq and the

expenditure this has apparently entailed constitute “investments” is similarly ill-founded.

The Claimant has no rights independently of the CHEJVA Agreement. The CHEJVA

Agreements of course are invalid, non-existent and illegal. However, as discussed below,

even if the CHEJVA was valid, the Claimant’s purported rights i.e. the right to mine

pursuant to Article 11.8.2 are non-existent as the conditions precedent to give life to that

purported right have not been satisfied within the required time period (now lapsed).


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B) THE CLAIMANT'S CLAIMS ARE INADMISSIBLE RATIONAEPERSONAE

i) THE CLAIMANT’S “UNCLEAN HANDS” RENDER ITS CLAIMINADMISSIBLE

402) Even if the Tribunal should otherwise find it has jurisdiction over the Claimant's claims,

the fact that it comes to this Tribunal with “unclean hands” renders its claims

inadmissible. The Pakistani Supreme Court has found that its investment was illegal. The

Claimant’s role in procuring that illegality is evident from the record and has been

explained above.

403) It is now well-settled that “claims made by an investor with unclean hands in relation to

that investment will be rendered inadmissible.”513

404) Professor James Crawford observes that the “clean hands” principle has been invoked in

the context of the admissibility of claims before international courts and tribunals.514 In

this context, the tribunal in World Duty Free,515 citing Lord Mansfield in Holman v

Johnson, held that: “. . . if, from the plaintiff’s own stating or otherwise, the cause of

action appears to arise ex turpicausa (arise from a dishonorable cause, ed.), or the

transgression of a positive law of this country, there the court says he has no right to be

assisted.” 516

405) In the context of investment arbitration the doctrine of “clean hands” has also been

affirmed as a general principle regarding claims tainted by corruption517 and operates as a

513 Ruslan Mirzayev, International Investment Protection Regime and Criminal Investigations, RLA- 61 page100, Rahim Moloo and Alex Khachaturian, RLA-62, page 1501; Aleksandr Shapovalov, “Should aRequirement of “Clean Hands” be a Prerequisite to the Exercise of Diplomatic Protection? Human RightsImplications of the International Law Commission’s Debate”, RLA-63 page 843.

514 James Crawford, THE INTERNATIONAL LAW COMMISSION’S ARTICLES ON STATERESPONSIBILITY, RLA-64 page 162 (2002).

515 World Duty Free v. Kenya, RLA-36, paragraph 181.516 Holman v Johnson (1775) 1 Cowp.341, RLA-65 at 343.517 Richard Kreindler, Corruption in International Investment Arbitration: Jurisdiction and the Unclean Hands

Doctrine, RLA-66 page 317-319


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ground of inadmissibility.518 The “clean hands” doctrine operates as a procedural bar to

claims. This Tribunal should render them inadmissible.

ii) THE CLAIMANT HAS NO STANDING TO ENFORCE ITS PURPORTEDRIGHTS UNDER THE BIT

406) As a preliminary matter, it should be established that these so-called assets of course are

not “owned or controlled” by the Claimant. Whatever their nature, it is clear that they

belong to TCCP, a Pakistani incorporated company, to whom the Claimant transferred all

rights, assets and obligations pursuant to a Scheme of Arrangement approved and

sanctioned by the Islamabad High Court.

407) The Court granted this request in the following terms:519

“In view of the above and in compliance with the provision of theCompanies Ordinance, 1984 and Companies (Court) Rule 1997,this court doth order and directs:-

i. Sanctions and approves the Scheme of Arrangement forAmalgamation as set forth in Annexure hereto so as to make itbinding on [TCCP] and [TCCA] and their respective members andcreditors.

v. That all contracts, agreements, trusts, leases, conveyances,grants and instruments of transfer entered into by or subsisting infavour of [TCCA] upon being transferred to and vested in [TCCP]shall remain in full force and effect as if originally entered into byor granted in favour of [TCCP] instead of [TCCA] as the case maybe, and that [TCCP] may enforce all rights and shall perform allobligations and discharged all liabilities arising there underaccordingly.”

408) The Claimant does not hold any ownership or controlling interest in any of its so-called

assets. These were transferred in their entirety to TCCP, a Pakistani company. Of course,

it was TCCP that applied for and was refused the Mining Lease Application. Therefore,

518 Yearbook of the International Law Commission (1999) Documents of the fifty-first session, Volume II PartTwo, RLA-67, paragraph 411

519 Ex RE-61 at page 9-10


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even if this Tribunal finds that the CHEJVA Agreements are valid and give an

entitlement for grant of a mining lease, the fact remains that the Claimant had

relinquished all control and ownership in favour of TCCP through the scheme of

amalgamation.

409) Article 13(3)(c) of the BIT provides that “a company which is constituted or incorporated

under the law in force in the territory of one Party and in which before the dispute arises

the majority of the shares are owned by investors of the other Party shall, in accordance

with Article 25(2)(b) of the Convention, be treated for the purposes of the Convention as

a company of the Other Party.”

410) The BIT thus draws a bright line between investors and locally incorporated companies in

which they hold majority shares. The Claimant has no standing to bring a claim that

belongs to TCCP. It is TCCP that has the right to make any claim provided it can satisfy

the jurisdictional and admissibility hurdles.

V.

APPLICABLE LAW

411) Article 42(1) of the ICSID Convention, which is the source of the Tribunal’s authority to

apply rules of law to the present dispute, provides:

“The Tribunal shall decide a dispute in accordance with such rulesof law as may be agreed by the parties. In the absence of suchagreement, the Tribunal shall apply the law of the ContractingState party to the dispute (including its rules on the conflict oflaws) and such rules of international law as may be applicable.”520

412) In this case, Article 7 in Annex B of the BIT contains the treaty parties’ agreement on the

rules of law to be applied by the Tribunal in deciding the dispute as follows:

“The Arbitral Tribunal shall reach its award by majority votetaking into account the provisions of this Agreement, any

520 ICSID Convention, Article 42(1)


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agreement between the parties to the dispute and the relevantdomestic law of the Party that admitted the investment.”

413) The reference to the “rules of international law as may be applicable” in Article 42(1) of

the ICSID Convention which apply by default if the parties fail to make an express

agreement on the laws to be applied is notably missing from Annex B in the BIT. Instead,

the treaty parties’ direct the Tribunal to take account of the provisions of the treaty, any

underlying agreements between the parties and the relevant law of the host state.

414) Article 7 in Annex B of the BIT recognises that an arbitral tribunal has the power to apply

different rules of law to those different issues depending upon their proper

characterisation. In this regard, Zachary Douglas explains:

“A diverse range of legal relationships arises in an investmentdispute and this necessitates the application of several differentapplicable laws by an investment treaty tribunal. The investor isoften a corporate entity established under a municipal law of onecontracting state, whereas its investment is a bundle of rightsacquired pursuant to the municipal law of a different contractingstate. The acts of the state that is host to the investment mightattract its international responsibility upon a breach of theminimum standards of treatment in the investment treaty inaccordance with international law. If the investment treatytribunal has jurisdiction over contractual claims, and the investorhas a contract with an emanation of the host state, then itscontractual rights fall to be determined by the law governing thecontract”521 (emphasis added).

415) Professor Schreuer also states:

“Only after clarifying these preliminary issues under domestic lawis it possible to determine whether a breach of the internationalstandards has actually occurred.”522

416) This approach has been consistently followed in investment treaty arbitration.523 In this

case, the threshold questions to be determined by the Tribunal are the existence and scope

of its purported rights and the standing of the Claimant to invoke those rights.

521 Douglas, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS, RLA-28 p. 40522 Christoph Schreuer, The Relevance of Public International Law in International Commercial Arbitration:

Investment Disputes, INVESTMENT DISPUTES (forthcoming), available at www.univie.ac.at (last visitedon November 2, 2012), RLA-68, p. 21.


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417) The Claimant’s case is premised on an alleged right to a mining lease pursuant to sub-

clause 11.8.2 of the CHEJVA. That right only arises if it satisfies contractual pre-

conditions and obtains routine Government approvals.524 As discussed above, the

exclusive jurisdiction to determine the existence and scope of a contractual obligation, or

a party’s performance under a contract, is within the exclusive jurisdiction of the ICC

Tribunal (should it confirm it has jurisdiction in this matter). If this Tribunal finds

otherwise, then, to decide these issues it will need to apply the law governing the

contract. This principle is well articulated by Zachary Douglas as follows:

523 Yas Banifatemi, The Law Applicable in Investment Treaty Arbitration, in ARBITRATION UNDERINTERNATIONAL INVESTMENT AGREEMENTS: A GUIDE TO THE KEY ISSUES (OxfordUniversity Press 2010), RLA-69, p. 204 (“[R]ecognizing [the role of international law in investment treatyarbitration] in no way undermines that of the law of the host where it would be the proper law. Indeedcertain questions can be determined only pursuant to domestic law. The two systems of law may thus applydepending on each distinct issue to be determined on the merits. In terms of methodology, this is allowed[by] each of the second sentence of Article 42(1) [of the ICSID Convention], Article 33 of the UNCITRALArbitration Rules or Article 22(1) of the Arbitration Rules of the Stockholm Chamber of Commerce, whichenable arbitral tribunals, in the exercise of their discretion and pursuant to a choice of law inquiry, todecide what rule of law (international or domestic) is the most appropriate to thedetermination of eachspecific question.”) (internal citation omitted). See also Veteran Petroleum Limited (Cyprus) v. RussianFederation, PCA Case No. AA 228, Interim Award on Jurisdiction and Admissibility dated November 30,2009, RLA-70, paragraph 76. EnCana Corporation v. Republic of Ecuador, LCIA Case UN3481, Awarddated February 3, 2006, RLA-71, paragraph 184 (“However for there to have been an expropriation of aninvestment or return (in a situation involving legal rights or claims as distinct from the seizure of physicalassets) the rights affected must exist under the law which creates them, in this case, the law of Ecuador.”).This approach comports with the distinction made historically in dispute resolution where tribunals founddifferent rules of law to be applicable to the different issues in a case.; The United States of America onbehalf of Hoachoozo Palestine Land and Development Co. v. Republic of Turkey, in Fred K. Nielsen,AMERICAN-TURKISH CLAIMS SETTLEMENT UNDER THE AGREEMENT OF DECEMBER 24,1923 AND SUPPLEMENTAL AGREEMENTS BETWEEN THE UNITED STATES AND TURKEY (U.S.Government Printing Office 1927), pp. 259-260; RLA-72 and George W. Cook (U.S.A.) v. UnitedMexican States, Mexico-U.S. General Claims Commission, Opinion of the Commissioners, June 3, 1927, 4REPORTS OF INTERNATIONAL ARBITRAL AWARDS 213 (1951), RLA-73 at p.5, paragraph 7(explaining that “[w]hen questions are raised before an international tribunal … with respect to theapplication of the proper law in the determination of rights grounded on contractual obligations, it isnecessary to have clearly in mind the particular law applicable to the different aspects of the case. Thenature of such contractual rights or rights with respect to tangible property, real or personal, which aclaimant asserts have been invaded in a given case is determined by the local law that governs the legaleffects of the contract or other form of instrument creating such rights. But the responsibility of arespondent Government is determined solely by international law.”).

524 CHEJVA, Article 11.4.2, CE-01.


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“If an issue in dispute relates to the existence and scope of acontractual obligation, or a party’s performance under a contract,that issue is determined by the law governing the contract.”525

418) The ad hoc Annulment Committee in Vivendi v. Argentina took a similar view:

“In accordance with this general principle (which is undoubtedlydeclaratory of general international law), whether there has been abreach of the BIT and whether there has been a breach of contractare different questions. Each of these claims will be determined byreference to its own proper or applicable law — in the case of theBIT, by international law; in the case of the Concession Contract,by the proper law of the contract, in other words, the law ofTucuman.526”

419) The ad hoc Annulment Committee in MTD v. Chile also stated:

“[T]he lex causae in this case based on a breach of the BIT isinternational law. However it will often be necessary for BITtribunals to apply the law of the host State, and this necessity isreinforced for ICSID tribunals by Article 42(1) of the ICSIDConvention. Whether the applicable law here derived from the firstor second sentence of Article 42(1) does not matter: the Tribunalshould have applied Chilean law to those questions which werenecessary for its determination and of which Chilean law was thegoverning law.”527

420) The parties to the CHEJVA made an express choice of law in favour of Pakistani law

under Article 16, which provides:

“The Law applicable to this agreement is the law of Pakistan whichthe Parties acknowledge and agree includes the principles ofinternational law”.

421) This provision has not been amended by the 2000 Addendum. Article 11 of the 2006

Novation Agreement pursuant to which the Claimant alleged made its investment

provides:

525 Douglas, THE INTERNATIONAL LAW OF INVESTMENT CLAIMS, pp. 39-133, at 90-94 , RLA-28See also MTD Equity Sdn. Bhd. et al. v. Republic of Chile, ICSID Case No. ARB/01/7, Decision onAnnulment dated March 21, 2007 (“MTD Decision on Annulment”), RLA-74 paragraphs 59, 72, 75.

526 Vivendi Decision on Annulment, RLA-57, paragraph 96.527 MTD Decision on Annulment, RLA-74, paragraph 72.


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“This agreement is governed by the law in force in Pakistan, andthe parties submit to the non-exclusive jurisdiction of the courts ofPakistan”

422) Therefore, the existence and scope of the parties’ rights under the CHEJVA Agreements

must be determined in accordance with Pakistani law. Moreover, the 2006 Novation

Agreement is a separate contract, hence, even if the CHEJVA were deemed valid, the

2006 Novation Agreement would need to meet the threshold of legality and validity

separately. A court of competent jurisdiction, seized prior to the ICC and ICSID

Tribunals has already decided that the 2006 Novation Agreement is illegal, void and non

est.

423) Before the Tribunal can assess whether there has been a breach of the BIT, it must

determine whether the contractual rights or entitlements asserted by the Claimant have

been breached under the contract. In this case, the second issue does not arise because the

CHEJVA, 2000 Addendum and 2006 Novation Agreement are illegal, void and non est

under their applicable law. The Supreme Court’s judgment establishes the position under

Pakistani law, which is a question of fact in this case and cannot be disputed by the

Claimant.

424) Similarly, the Claimant contends that its “investment” included its purported rights under

the 2002 BM Rules. It is obvious that the existence and scope of these rights is solely a

question of Pakistani law. The Claimant also argues that the Licensing Authority’s

decision to refuse the Mining Lease Application violated the 2002 BM Rules and hence

triggers a treaty violation. Hence, this Tribunal must first apply Pakistani law to

determine whether the Licensing Authority violated the 2002 BM Rules. This issue arises

prior to and is separate from, the issue of whether the Government of Pakistan has

violated the BIT guarantees with respect to such rights should the conduct of the

Licensing Authority be attributable to it. In this case, the Licensing Authority’s decision

was held to be valid by the Appellate Authority. The Claimant has not shown how the

Licensing Authority’s decision was invalid under the 2002 BM Rules.

425) Furthermore, the Claimant’s transfer of all its rights and obligations to a Pakistani

company, TCCP, through a Scheme of Arrangement, which was approved and sanctioned


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by the Islamabad High Court’s judgment, is a matter of Pakistani law. To determine

whether the Claimant has any rights to enforce this obligation is also a question of

Pakistani law.

426) In summary, the Respondent submits that if this Tribunal decides to assume jurisdiction

over matters which are currently pending before the ICC Tribunal, Pakistani law must be

applied to determine the nature and scope of the Claimant’s rights and obligations under

the CHEJVA. Furthermore, the breach of the respective rights and obligations pursuant to

CHEJVA is to be determined by Pakistani law.

427) Similarly, the existence and scope of the Claimant’s purported rights under the 2002

Mining Rules must be determined by Pakistani law. The question of whether the

Licensing Authority’s refusal of the Mining Lease Application was wrongful is also one

of Pakistani law.

428) It is only once the Pakistani law issues have been determined that the BIT should be

applied to determine whether Pakistan satisfied its obligations under that treaty.


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VI.

ATTRIBUTION AND STATE RESPONSIBILITY

VI.1 INTRODUCTION

429) The Claimant alleges that the Government of Pakistan is liable for breaching its

obligations under the BIT. It argues that the purported breaches arise from both

Pakistan’s own conduct as well as that of its Province, Balochistan.528

430) In its Memorial, the Claimant typically refers to “Pakistan”, in general, without

specifying the exact Federal organ that committed the actions of which it complains. Nor

does it identify the precise conduct that meets the high threshold of constituting a treaty

violation. The Claimant has failed to prove any of these alleged violations.

431) The Claimant also alleges that Pakistan is responsible for the acts of the Government of

Balochistan by arguing that the latter’s acts are attributable to the former under

international law. In order to do so the Claimant relies on Article 4 of the Draft Articles

on Responsibility for States for Internationally Wrongful Acts of the International Law

Commission (the “ILC Articles”).529 The Claimant complains of two types of actions

throughout the Memorial: a contractual breach of the CHEJVA, and a breach of the 2002

BM Rules by the Licensing Authority. The Respondent now considers each of these acts

is in the context of the law of attribution.

VI.2 THE ALLEGED VIOLATIONS OF THE CHEJVA ARE NOT ATTRIBUTABLETO THE GOVERNMENT OF PAKISTAN

A) THE BDA IS NOT A STATE ORGAN

432) It is a fact that neither the Government of Balochistan nor the Government of Pakistan are

a party to the CHEJVA. The CHEJVA was concluded with the BDA, a provincial

autonomous legal body. It is a statutory entity that is legally distinct from the

528 Memorial, para 384529 Memorial, para 386, ILC Articles CA-1


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Governments of Balochistan and Pakistan. The BDA is not a state organ of Balochistan

under Pakistani law.530 The BDA is not empowered to act on behalf of the Government of

Balochistan, nor is competent to enter into agreements on behalf of the Government of

Balochistan. Hence, the question of whether its acts are attributable to Pakistan does not

even arise.

433) The decision of the Tribunal in Noble Ventures, Inc. v Romania is illustrative on the

demarcation of the scope of Article 4 of the ILC Articles. It emphasises that Article 4

applies to organs expressly entitled to act on behalf of the State:

“Art. 4 2001 ILC Draft lays down the well-established rule that theconduct of any State organ, being understood as including anyperson or entity which has that status in accordance with theinternal law of the State, shall be considered an act of that Stateunder international law. This rule concerns attribution of acts ofso- called de jure organs which have been expressly entitled to actfor the State within the limits of their competence. Since SOF andAPAPS were legal entities separate from the Respondent, it is notpossible to regard them as de jure organs.”531

434) The BDA does not have legal capacity to act for the State of Pakistan. The Supreme

Court of Pakistan has expressly stated that, in accordance with Pakistani law, the

CHEJVA only binds the BDA:

“It is clear that CHEJVA was made between BDA and BHP alonefor all practical purposes, and not between GOB through BDA andBHP”.532

435) The BDA cannot be construed as a state organ under the law of Pakistan and therefore its

acts fall outside the scope of Article 4 of the ILC Articles. The Claimant’s allegation that

breaches of the CHEJVA are attributable to the Government of Pakistan under Article 4

of the ILC Articles lacks merit.

530 Article 4(2) of the ILC makes it plain that the status of a state organ is to be determined under domesticlaw.

531 Noble Ventures, Inc. v Romania, Case No ARB/01/11, Award dated 12 October 2005, RLA-75, paragraph69.

532 Supreme Court Judgement, Ex RE-18, p. 84.


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B) THE ACTS OF THE BDA IN RELATION TO THE CHEJVA ARENOT ATTRIBUTABLE TO PAKISTAN UNDER ARTICLE 5 OF THEILC ARTICLES

436) The Claimant has not relied on Article 5 of the ILC Articles, which explains the

circumstances under which the acts of state entities which are not State organs can be

attributed to the State. In this case, the entity in question, the BDA, is a provincial state

entity, rather than a federal one. As explained above, it is not a State organ as a matter of

fact.

437) Article 5 of the ILC Articles provides:

“The conduct of a person or entity which is not an organ of theState under which is empowered by the law of that State toexercise elements of the governmental authority shall beconsidered an act of the State under international law, provided theperson or entity is acting in that capacity in the particularinstance533.”

438) Hence, in order for BDA’s acts to be attributable to the State of Pakistan, the Claimant

must prove that the following two requirements under Article 5 are met:

a) First, the BDA be empowered by the law of the State of Pakistan to exercise

elements of governmental authority; and

b) Second, it must be acting in that capacity in the particular instance.

439) The tribunal in Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of

Egypt highlights the difference between the legal mechanisms set out under Article IV

and Article 5:

“The discussion between the Parties primarily hinges upon whetherthe SCA is a State organ pursuant to Article 4 of ILC Articles or anentity that exercises governmental authority pursuant to Article 5of the ILC Articles. The distinction is of importance. Indeed, shouldthe SCA be a State organ, any of its acts would be attributable tothe Respondent. Should it be an entity pursuant to Article 5,Egypt’s liability will depend on whether the SCA did exerciseelements of governmental authority vis à vis the Claimants at the

533 Article 5 of the ILC Articles CA-1


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relevant time. [ … ] In order for an act to be attributed to a State,it must have a close link to the State. Such a link can result from thefact that the person performing the act is part of the State’s organicstructure (Article 4 of the ILC Articles), or exercises governmentalpowers specific to the State in relation with this act, even if it is aseparate entity (Article 5 of the ILC Articles) To determine whetheran entity is a State organ, one must first look to domestic law534”(emphasis added)

440) As discussed above, the BDA does not exercise governmental authority either on behalf

of Pakistan or Balochistan as a matter of Pakistani law.535 Further, in this particular case,

it was a partner in a commercial joint venture agreement, which was a commercial

transaction. Hence, the conditions in Article 5 for the attribution of the BDA’s acts to the

State of Pakistan in relation to the CHEJVA are not satisfied.

441) Even if the Government of Balochistan was a party to the CHEJVA, the Claimant has not

shown how the Federal Government’s acts have interfered with the CHEJVA. It is an

elementary principle of international law that different tests govern a State’s

responsibility for violations of contractual undertakings given to foreign nationals by the

State itself and those that arise in relation to contractual undertakings to which the State is

not a party.536

442) The Government of Pakistan is not a party to the CHEJVA. Hence, the latter principle

governs the issue at hand. Professor Mayer explains this in the following terms:

534 Jan de Nul N.V.and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No.ARB/04/13,Award dated November 6, 2008, RLA-76, paragraphs 155-160

535 The Balochistan Development Authority Act of 1974, Ex RE-42, Section 3(2): “The Authority shall be abody corporate having perpetual succession and a common seal with power, subject to the provisions ofthis Act, to acquire and hold property, both movable and immovable, and shall by the said name sue and besued.”. Also see: Chief Secretary’s Statement at ¶7-¶12

536 Wena Hotels LTD. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on annulment datedJanuary 28, 2002, RLA-77, paragraphs 30-31, 35 (finding, in the context of applicable law, that the lawgoverning a contract with a non-State party is a separate issue from the law governing the actions of a Statewith respect to that contract); Bernardo M. Cremades and David J. A. Cairns, Contract and Treaty Claimsand Choice of Forum in Foreign Investment Disputes, in ARBITRATING FOREIGN INVESTMENTDISPUTES (Kluwer Law International 2004), RLA-78, p. 329 (stating that “the Host State is always aparty to a treaty claim, but only a party to a contract claim when the Host State is in fact a party to acontract with the investor.”).


182

“As regards contracts concluded by the sovereign State as such(State contracts in the strict sense) the applicable principles arethose of contract or procedural law…; when the contract isconcluded by a separate entity, the applicable principles are thosefor extra-contractual liability.”

443) Article 12 of the Harvard Draft Convention on State Responsibility, which constitutes the

most comprehensive attempt at codifying this issue, also draws a sharp distinction

between a State’s violation of contracts entered into by the State’s “central government,”

and a State’s interference with contracts entered into by other persons or entities. It

provides the following:

“1. The violation through an arbitrary action of the State of acontract or concession to which the central government of thatState and an alien are parties is wrongful.

[…]

4. The annulment or modification by a State, to the detriment of analien, of any contract or concession to which the alien and aperson or body other than the central government of a State areparties is wrongful if it constitutes:

a) a clear and discriminatory departure from the proper law of thecontract or concession;

b) an unreasonable departure from the principles recognized by theprincipal legal systems of the world as applicable to such contractsor concessions; or

c) a violation by the State of a treaty.”

444) The Explanatory Note to this article clarifies what constitutes a contract with the central

government of a State: “concessions and contracts, including debts, of the central

government of the State”.

445) It expressly states that contracts and concessions of provinces, states, municipalities, and

other political subdivisions are not considered contracts with the central state and are to

be treated on the same basis as private obligations. The Explanatory Note to paragraph 4

of Article 12 further defines contracts to which the central government is not considered a

party as follows:


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“governmental action, whether by the central government of a Stateor by a subordinate entity, which terminates or modifies a contractbetween an alien and a private person or a governmental agencysubordinate to the central government of the State.” (emphasisadded)

446) Therefore, in view of the above, if a foreign investor’s contract is not with the central

government of the State of Pakistan – which is the case here – then the conduct

complained of must meet the traditional tests for internationally wrongful acts set out

under Article 12 in order to incur international responsibility. The Claimant has not

discharged its burden of proof in this regard.

447) Furthermore, in this case, even if we assume that the Government of Balochistan was a

party to the CHEJVA, it would have acted only in its commercial capacity. It is well-

established that if the State is not acting as a governmental authority, the breaches of

contract cannot amount to a breach of the treaty.

“the State or its emanation, may have behaved as an ordinarycontracting party having a difference of approach, in fact or inlaw, with the investor. In order that the alleged breach of contractmay constitute a violation of the BIT, it must be the result ofbehaviour going beyond that which an ordinary contracting partycould adopt. Only the State in the exercise of its sovereignauthority (“puissance publique”), and not as a contracting party,may breach the obligations assumed under the BIT.”

448) The CHEJVA was a commercial joint venture agreement pursuant to which either party

could transfer its interest to a governmental or a non-governmental partner. The BDA

could withdraw from the Joint Venture537 and above all the parties expressly agreed that

each party entered into the Joint Venture for the protection and development of its own

Percentage Interest. As Article 4.1, which captures this concept, states:

“it being expressly understood that each Party is entering into this Agreement solely forthe purpose of protecting and developing its Percentage Interest.”538

537CHEJVA, Article 13 CE-1538 Ibid, Article 4.1, CHEJVA CE-1


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VI.3 THE ALLEGED BREACHES OF THE 2002 BM RULES ARE NOTATTRIBUTABLE TO THE GOVERNMENT OF PAKISTAN

449) In connection with the claims in relation to acts of the Licensing Authority and the

Secretary of the MMDD, the Claimant must prove that: (i) the acts complained of are by

organs of the Government of Balochistan and are attributable to the Government of

Pakistan; and (ii) that these acts constitute a breach of the BIT.539

450) In this case, the attribution of acts to the Federal Government is to be governed by the

applicable law of the treaty.540 The BIT expressly provides that the Tribunal must apply

provisions of the treaty, the provisions of any agreement between the parties and the

domestic law of the host state.541 In this case, the BIT does not stipulate that Pakistan is

responsible for the acts of its provinces, whereas the domestic law of Pakistan makes it

absolutely clear that the Federal Government is not responsible for the conduct of its

provinces. Balochistan can sue and be sued in its own name.

451) The CHEJVA carefully prescribed the contracting parties’ agreed allocation of risk, from

which the Claimant now attempts to escape. The fact is the rights in that contract, if valid

at all, were limited at best. However, the Claimant cannot now sidestep that bargain and

ignore its own contractual arrangement by laying blame on the Licensing Authority for

“acts attributable to the Respondent State as sovereign”. The Claimant must establish

that the conduct of its contractual partner and the Licensing Authority was unjustified

both under the CHEJVA and the 2002 BM Rules, and that it violated the Respondent’s

obligations under the BIT. The Respondent submits that Claimant has failed to discharge

this burden, and indeed could never have hoped to do otherwise.

539 Article 2 of the ILC Articles, CA-1540 Annex B (Article 7), BIT CE-04


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VII.

LIABILITY

VII.1 SUMMARY OF CLAIMS

452) The Claimant asserts that:

”Pakistan, through its own conduct and that of its Province,Balochistan, breached the fair-and-equitable-treatment obligationunder Article 3(2) of the Treaty, the expropriation provision andArticle 7 of the Treaty, and the no-impairment obligation underArticle 3(3) of the Treaty.”542

453) The Government welcomes the opportunity to respond to the Claimant’s egregious and

untrue allegations.

VII.2 PAKISTAN DID NOT BREACH ARTICLE 3(2) (“FAIR-AND-EQUITABLE-TREATMENT” OR “FET”) OF THE BIT

454) It is no coincidence that the Claimant has not quoted the text of the treaty protections it

alleges that Pakistan has breached.

455) Article 3(2) of the Treaty is no ordinary “fair-and-equitable-treatment” provision. It

provides as follows:

“2. Each Party shall ensure fair and equitable treatment in its ownterritory to Investments.”

456) Article 3(2) is preceded by Article 3(1), which provides that:

“Each Party shall encourage and promote investments in itsterritory by investors of the other Party and shall, in accordancewith its laws and investment policies applicable from time to time,admit investments.” (emphasis added)

542 Para 384, Memorial


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457) The Claimant seizes upon a generally-worded statement that the State of Pakistan will

ensure that “Investments” receive fair and equitable treatment in its territory. The

Claimant alleges that Pakistan has breached this treaty obligation as follows:

“Pakistan breached the fair-and-equitable-treatment obligationunder Article 3(2) of the Treaty, which, after repeatedly assuringTCC that it had a right to receive a Mining Lease subject to“routine Government requirements.” Balochistan decided to oustTCC and pursue its own project at Reko Diq, and then implementedthat plan by arbitrarily denying TCC a Mining Lease, using thedata and information from TCC’s Feasibility Study for purposes ofBalochistan’s own project, and attacking the validity of theCHEJVA in the Pakistan Supreme Court.”543

458) The above statement encapsulates the entirety of the Claimant’s case on the breach of the

fair-and-equitable-treatment obligation in Article 3(2). Before addressing whether the

Claimant’s accusation meets the rigorous legal threshold of establishing a treaty

violation, the next section demonstrates the inaccuracy and contradiction in its case.

A) PAKISTAN’S SO-CALLED ASSURANCE THAT “TCC” HAD “A RIGHT TORECEIVE A MINING LEASE SUBJECT TO “ROUTINE GOVERNMENTREQUIREMENTS””

459) It is factually incorrect to say that Pakistan assured the Claimant and TCCP that “it had

the right to receive a Mining Lease subject to routine Government requirements”

(emphasis added). It is a fundamental fact that Pakistan has no power to interfere with its

province’s disposal of mineral titles. These remain entirely within the remit of the

Balochistan Licensing Authority. This is clearly stated in Pakistan’s Constitution and of

course the 2002 BM Rules, which the Claimant acknowledges is the relevant legislation

pursuant to which mineral titles are granted or refused.

460) The Claimant’s assertion is particularly striking because in this case both the Respondent

and Balochistan have repeatedly made it clear that all matters relating to mineral titles

would be dealt with in accordance with the regular procedures under the 2002 BM Rules.

This was so even though the Claimant had expressly asked for special assurances from

543 Paragraph 392, Memorial.


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both Governments in relation to a mining lease for the deposits contained in the area the

subject of the Exploration Licence EL-5 .

461) This occurred during the course of the negotiation of the draft Mineral Agreement, which

never came to fruition. The Governments adopted the firm stance that no special

assurances or concessions could be granted to the Claimant and that the 2002 BM Rules

would apply in their entirety without any exemption. Mr Khokhar’s witness statement

narrates the negotiations in relation to the Claimant’s proposed draft Mineral Agreement

over a 4-year period from July 2007 until July 2011.

462) Not only do these negotiations dispel any doubt that the Claimant had any assurance in

relation to receiving a mining lease, they also speak volumes about the Claimant’s

intentions in relation to the Reko Diq project and this arbitration. TCCP sought in its

Mining Lease Application from the Licensing Authority what it did not have under the

CHEJVA and could not obtain during the negotiations from a Mineral Agreement. The

Claimant then sought a specific performance decree from this Tribunal, which it has now

sensibly abandoned, ordering the Government to mine the Mining Lease Area on its own

terms.

B) THE CLAIMANT’S CLAIM TO AN ASSURANCE IS UNSUPPORTED BYEXPRESS STATEMENTS, CORRESPONDENCE, CONTRACTUALPROVISIONS, THE LAW AND EVEN ITS OWN LETTERS

463) It is evident from the above course of dealing, including contemporaneous internal

minutes and notes, that the intention of both Governments was to encourage the

Claimant, albeit always subject to the federal and provincial laws. There was no

assurance whatsoever in relation to the grant of any mining lease, let alone the specific

one that the Claimant ultimately sought over 99.453 square kilometres containing at least

14 mineral deposits. In fact, during the course of the dealings the Claimant never

identified its precise mining project’s location or capacity. In the circumstances, it is

ridiculous for the Claimant to suggest that it was assured of a right to “receive the Mining

Lease”. The Mining Lease of course refers to the 99.453 square kilometres covered by

Exploration Licence EL-5. The Mining Lease Application was the first time that the

Claimant revealed the precise area over which it sought a mining lease (through TCCP).


188

464) In this case, unlike in cases where a breach of the FET standard had occurred, there is no

express assurance (or even ambiguity) capable of generating “legitimate expectations”.

There were repeated, unequivocal, and express statements by both Governments that all

matters relating to mineral titles would always be subject to the 2002 BM Rules. This was

an unremarkable position, given that Rules 9(5) and (6) of the 2002 BM Rules prohibit

any provisions inconsistent with the 2002 BM Rules. Similarly, the underlying contract

the CHEJVA, made it plain that all applications for mineral titles would be subject to

compliance with “routine Government requirements.”

465) Equally disingenuous is the Claimant’s attempt to argue that the reference to routine

Government requirements is akin to administrative requirements. The Claimant has

expressly recognised that the application would be decided under Rule 48 of the 2002

BM Rules. As discussed above, TCCP was well-aware the 2002 BM Rules confer a broad

discretion upon the Licensing Authority and do not confer any security of title in favour

of a prospective mining lease applicant. Hence, the Claimant’s attempt to seek a mineral

agreement that would override the discretionary powers under Rule 48(3) of 2002 BM

Rules and the demand to amend Rules 9(5) and (6) which in fact prohibit such an

agreement.

466) The word “routine” does not mean merely administrative tasks but is meant to refer to

“regularly followed procedures”, as defined in the Oxford English Dictionary. In fact, the

use of the word “routine” in the CHEJVA emphasises that the Claimant would receive no

special or preferential treatment. Only the regular, usual or typical procedures under the

2002 BM Rules would apply, without any variation or change.

C) THE CLAIMANT UNDERSTOOD AND UNDERTOOK TO COMPLY WITHTHE 2002 BM RULES

467) The Claimant admits that it did not have an automatic right to a mining lease and that this

right was subject to the 2002 BM Rules544. The logical consequence of this would be to

limit this claim to the single issue of whether the Licensing Authority’s refusal was in

544 Transcript from ICSID Hearing, at p. 305 Ex RE-69


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accordance with the 2002 BM Rules. If the Licensing Authority acted within the ambit of

its 2002 BM Rules, then the matter comes to close.

468) The Claimant’s expectations, if any, must be confined to regular and routine rights under

the 2002 BM Rules, provided it had fulfilled its obligations under the CHEJVA and the

2002 BM Rules. However, in this case, even that limited expectation did not arise. TCCP

made the Mining Lease Application without acquiring and obtaining a transfer of its joint

venture partner’s interest in the Joint Venture Property. Moreover, the Claimant was in

default of the conditions of the extension of the second renewal of the exploration

licence.

469) As a condition of obtaining the Assignment of BHP’s interest in Exploration Licence EL-

5, the Claimant gave its Undertaking to the Licensing Authority that it would uphold the

terms of the CHEJVA and would be subject to future amendments in the 2002 BM

Rules.545 It thus acknowledged that all its rights could be cancelled by the Licensing

Authority if it breached any of the conditions in the Assignment of 2006 and the 2002

BM Rules.

470) Contrary to the Claimant’s assertions, the message was always clear that it was to meet

the requirements of the 2002 BM Rules and the terms of the CHEJVA and that its rights

could be cancelled at any time if it failed to do so. The Claimant also knew from a plain

reading of the 2002 BM Rules that the Licensing Authority had the discretion to reject the

Mining Lease Application for a range of reasons.

471) The Claimant states that the Licensing Authority’s refusal of its Mining Lease

Application was arbitrary. The fact that the decision was unfavourable to the Claimant’s

desire to usurp all the deposits over almost 100 square kilometres does not make a

reasoned and lawful decision arbitrary.

472) The Licensing Authority gave the Claimant numerous reasons in its Notice of Rejection

pursuant to Rule 48(4) of the 2002 BM Rules, even though it could simply have stopped

545 Letter from DG Mines to BDA/BHP 8 April 2006 granting the assignment of EL-5 on certain terms andconditions, Ex RE-25; Claimant’s letter dated 10 April 2006 accepting the DG’s terms and conditions asset out in the letter of 8 April 2006 and providing an undertaking to the same, CE-206


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at its finding that TCCP lacked standing to receive a mining lease under Rule 48 as it was

not the holder of an exploration licence.

473) The Claimant’s purported rights, if any, arise squarely and solely under the CHEJVA.

The 2002 BM Rules do not recognise the Claimant or TCCP as an exploration licence

holder. It only recognises the unincorporated Joint Venture. This position was made plain

to the Claimant and its subsidiary TCCP when the Assignment of the Exploration Licence

EL-5 was permitted and was accepted by the Claimant.

474) The Claimant has not shown that the Licensing Authority denied the Mining Lease

Application in contravention of the 2002 BM Rules.

D) CLAIMANT’S EXPECTATIONS TO OBTAIN A MINING LEASE OVER REKODIQ WERE NOT LEGITIMATE

475) The Claimant submits that it had “legitimate and reasonable” expectations to mine Reko

Diq. The Claimant cites the award in Duke Energy v. Ecuador, which states that the

protection of an investor’s legitimate expectations is closely tied to the maintenance of a

stable and predictable legal and business environment.

476) In the award invoked by the Claimant, the tribunal particularly emphasised that for the

purposes of establishing the FET standard the investor’s expectations are bound by strict

limitations:

“The stability of the legal and business environment is directlylinked to the investor's justified expectations. The Tribunalacknowledges that such expectations are an important element offair and equitable treatment. At the same time, it is mindful of theirlimitations. To be protected, the investor's expectations must belegitimate and reasonable at the time when the investor makes theinvestment. The assessment of the reasonableness or legitimacymust take into account all circumstances, including not only thefacts surrounding the investment, but also the political,socioeconomic, cultural and historical conditions prevailing in thehost State. In addition, such expectations must arise from theconditions that the State offered the investor and the latter must


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have relied upon them when deciding to invest.”546 (emphasisadded)

477) In the same line, the Annulment Committee in MTD v Chile547 held that:

“[t]he obligations of the host State towards foreign investors derivefrom the terms of the applicable investment treaty and not from anyset of expectations investors may have or claim to have”

478) It is absolutely plain that the Claimant explicitly understood that it would be bound by the

2002 BM Rules (and any future amendments thereto). Similarly, the CHEJVA makes

plain the limitations to the Claimant’s purported rights. Nothing in the Governments’

conduct could by any standards have led to any assurance to the contrary.

479) The Claimant relies heavily on the Notification of Relaxation in its Memorial.548 This

document, it submits, is the source of BHP’s “absolute right” under the CHEJVA to

convert its exploration licence into a mining lease subject only to “routine administrative

requirements”.549 Other than the obvious fact that the relaxations have been declared to

be illegal by the Supreme Court of Pakistan, it is also the case that they were of no effect

after the entry into force of the 2002 BM Rules. In addition, the Claimant provided an

express Undertaking to comply with the regular procedures under the 2002 BM Rules.

The Claimant’s submission is also flawed for other reasons.

480) First, contrary to the appearance of the Claimant’s Memorial, the above quotes550 are not

taken from the Notification of Relaxation. They are, rather, taken from the letter sent by

BHP to the Chairman of the BDA on 16 September 1993.551 On its face, the Notification

546 Duke Energy Electroquil Partners and Electroquil SA v. Republic of Ecuador, (ICSID Case No.ARB/04/19) (“Duke Energy v. Ecuador”), Award of 18 August 2008, RLA-79, paragraph 340.

547 MTD Decision on Annulment, RLA-74, paragraph 67548 Claimant’s Memorial, ¶ 69-72549 Claimant’s Memorial ¶ 72550 Claimant’s Memorial ¶ 72 states: “On 20 January 1994, following deliberations among various stakeholder

departments, the Provincial Government granted the relaxations the BDA had requested and thus grantedBHP, among other things, an “absolute right” to a mining lease subject only to “routine administrativerequirements” (the “Relaxation”).” (emphasis added)

551 Letter from BHP’s Senior Counsel Mr. Martin Harris to BDA, 16 September 1993, Attachment A, p.5, CE-187


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of Relaxation did not afford BHP a right, absolute or otherwise, to convert its exploration

lease under the CHEJVA into a mining lease.

481) Second, at no point did the Notification of Relaxation vitiate the provisions of the

CHEJVA itself. Article 17(a) of the CHEJVA recognises that the laws and regulations

applicable in Pakistan and Balochistan may change, and that the Joint Venture, which

was established under the CHEJVA, would need to apply to receive any benefits

thereunder. Article 17(b) further states that if new laws or provisions are adverse to the

CHEJVA, then the Parties will amend the CHEJVA accordingly. Thus, even if the

Claimant’s submission that the Notification of Relaxation gave BHP an “absolute right”

to a mining lease pursuant to the “relaxation” of the 1970 BM Rules is correct, such a

position could not remain the case after the entry into force of the 2002 BM Rules.

482) Third, the 2002 BM Rules do not save the relaxations granted under the old and now

repealed 1970 Rules.552 The 2002 BM Rules only save leases and licenses granted or

renewed under the 1970 Rules and not any relaxations. It is plain that after the

promulgation of the 2002 BM Rules, the relaxations are no longer applicable and all

obligations under the 2002 BM Rules stand resurrected.

483) Fourth, in any event, these relaxations did not benefit the Claimant. These were

specifically granted to BHP and lapsed with the introduction of the 2002 BM Rules. The

Claimant attempted to become a party to the CHEJVA (via the 2006 Novation

Agreement) in the knowledge that the grant, extension and maintenance of all mineral

titles would take place pursuant to the 2002 BM Rules. It took no issue with the 2002 BM

Rules, nor did it seek, nor could it have sought, any “relaxations” at the time as the 2002

BM Rules do not provide for such exemptions. In fact, it sought an Assignment of the

joint venture’s Exploration Licence EL-5 from the Licensing Authority on the basis of an

express Undertaking that it would comply with the 2002 BM Rules (as these may be

amended by time to time) and the terms of the CHEJVA.553 None of the requests for

extensions of the exploration licences under the 2002 BM Rules referred to the

552 Rule 125 of the 2002 BM Rules Ex RE-1553 Letter from DG Mines to BDA/BHP 8 April 2006 granting the Assignment of EL-5 on certain terms and

conditions Ex RE-25.


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“relaxations”. The Claimant did no more than unsuccessfully seek exemptions from the

2002 BM Rules when negotiating a draft Mineral Agreement (as discussed further

below).554

484) In the absence of any better argument, the Claimant seeks to rely on an illegal notification

that was issued: (1) six years before the 2002 Alliance Agreement and 12 years before the

2006 Novation Agreement; (2) to the benefit of another entity, namely, BHP; (3) under a

different law (the 1970 BM Rules instead of the 2002 BM Rules); and (4) contrary to its

own express Undertaking to the Licensing Authority in 2006 (which was granted as a

condition of being assigned its part of the Joint Venture’s Exploration Licence EL-5).

The fallacy of its submission is self-evident.

485) One recent award555 adopted the view of the tribunal in Lemire v. Ukraine556 and held that,

in order to establish a breach of the FET obligation, the State’s acts must violate “a

certain threshold of propriety”. One of the relevant factors that the tribunal considered to

that effect was “whether the State made specific representations to the investor”.

486) The Claimant has failed to prove that the Governments assured it on any occasion that it

had a right to mine. As has been established, none of the documents that the Claimant

relies on contains any promise that TCCP was entitled to mine. In addition, all the

evidence brought in by the Claimant in connection with the Governments’ actions upon

which it allegedly relied dates from the period between 2007 and 2010. Documents from

this period are irrelevant because for the purposes of the FET obligation “the [investor’s]

expectations to be taken into account are those existing at the time when the investor

554 In this vein, it is worth noting that the Supreme Court of Pakistan has clearly held that promissory estoppelcannot be invoked for directing the doing of the thing which was against the law neither any authority canbe held bound by such a representation. Therefore, even if the Claimant considers that the CHEJVA createslegitimate expectations, they will not bind the Government as being against established Pakistan law. SeeArmy Welfare Sugar Mills v Federation of Pakistan, 1992 SCMR 1652, RLA-80.

555 Bosh International, Inc and B&P Ltd Foreign Investments Enterprise v. Ukraine (ICSID CaseNo. ARB/08/11), Award dated 25 October 2012, RLA-81, paragraph 212.

556 Joseph Charles Lemire v. Ukraine (ICSID Case No ARB/06/18), Decision on Jurisdiction and Liabilitydated 14 January 2010, paragraph 284 RLA- 82.


194

made the decision to invest”557. The Claimant decided to “invest” (that the Claimant made

any investment is disputed by the Respondent) by entering into the 2006 Novation

Agreement and seeking an Assignment of the Exploration Licence EL-5. The conditions

of the Assignment, which was accepted by the Claimant in the Undertaking, made plain

that only the 2002 BM Rules and the 1995 Mineral Policy would apply. There was no

mention, or place for, the defunct regime under the 1970 BM Rules. The Claimant

accepted the Licensing Authority’s conditions in the Undertaking, hence waiving any

rights to any relaxations under the 1970 BM Rules even if we assume the fiction of these

being available. The Claimant also accepted in the Undertaking that the Licensing

Authority could cancel any mineral title if it found that any of the conditions in the

Assignment letter had been breached. Subsequent renewals of Exploration Licence EL-5

were made subject to the Assignment.

E) THE NEGOTIATION OF THE DRAFT MINERAL AGREEMENT

487) In July 2007, a delegation from the Claimant led by Mr Luksic, Chairman of Antofagasta,

met the Prime Minister of Pakistan.558

488) The delegation wished to pursue a Mineral Agreement with both the Governments of

Pakistan and Balochistan under Rule 9 of the 2002 BM Rules. While the grant of mineral

titles in Balochistan is entirely within the remit of the Licensing Authority, the other

elements required for making any mining project feasible, such as taxation, transport,

telecommunications and security are federal matters. Accordingly, Rule 9(2) and 9(4)

provide:

“(2) The Federal Government may, at the request of the[Balochistan] Government be a party and to the negotiation of, amineral agreement”

[...]

(4) Where the Federal Government is a party to a mineralagreement, the agreement may contain provisions with respect to

557 Duke Energy v. Ecuador, RLA-79, paragraph 340, referring to Occidental Exploration and ProductionCompany v. The Republic of Ecuador (Occidental v. Ecuador).

558 Khokhar Statement ¶ 36.


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any matter for which the Federal Government has executiveauthority under the Constitution.”559

489) The Prime Minister of Pakistan upheld the Government’s treaty commitment to

encourage and admit investments subject to Pakistan’s laws and investment policies (see

Article 3(1) of the BIT). Hence, a Steering Committee was swiftly established on 3

September 2007 with representatives from both the Governments of Pakistan and

Balochistan to consider the Claimant’s proposed draft Mineral Agreement in Reko Diq.560

Both Governments spent public funds, including travel and consultants’ costs, to discuss

the Claimant’s draft Mineral Agreement of July 2007 under the impression that it would

bring employment and other much-needed development benefits to Balochistan.

490) It swiftly transpired that the Claimant’s agenda was wholly self-centred. The Claimant’s

only motive was to seek blanket fiscal and legal exemptions for its multiple, undefined

“Mining Project(s)” anywhere in the are covered by Exploration Licence El-5 for an

“initial” term of 30 years.561

491) The Claimant remarkably made no reference to the provisions of the CHEJVA or its joint

venture partner, the BDA, in its draft Mineral Agreement. Instead, it sought these legal

and fiscal exemptions, including the “right to mine” only for TCCP.562 It set out the

following introduction to the draft Mineral Agreement:

“INTRODUCTION:

(A) Mineral Title Holder is the licensee of the Area. The MineralTitle Holder wishes to investigate and, if it considers appropriate,develop one or more Mining Projects in the Area.

(B) In order to facilitate the possible development of one or moresuch Mining Projects, the GOP, the GOB and the Mineral TitleHolder have decided to enter into this Agreement setting outvarious rights and obligations of each of the Parties in connectionthe development of such Mining Projects.

559 Rule 9, Ex RE-1.560 Steering Committee Notification dated 3 September 2007; Khokhar Statement, ¶ 36.561 Clause 2.1, Claimant’s Draft Mineral Agreement. CE-216.562 CE-216 page 5.


196

(C) This Agreement grants various rights and obligations to theMineral Title Holder for such Mining Projects. Under thisAgreement, the Mineral Title Holder confirms the expenditure ofcertain amounts in considering the development of its MiningProjects, agrees to pay certain levels of royalties, income tax andother taxes, and make various other commitments in respect of thedevelopment of such Mining Projects. In addition, under thisAgreement, the GOP and the GOB provide the Mineral TitleHolder certain assurance to the legal and fiscal framework inwhich the mineral Title Holder will operate and agree to providecertain infrastructure required to undertake such MiningProjects.” (emphasis added)

492) As Mr Khokhar notes, the Claimant never defined the elusive Mining Project(s)563 that it

proposed to carry out. The Governments’ negotiating team repeatedly sought this

information.564 The Claimant, of course, simply wanted the option to choose any mine in

the area covered by Exploration Licence EL-5, which amounts to almost 500 square

kilometres of mineral-rich territory, entirely for itself or to “sell” this as it pleased to third

parties565. It wished for both Governments to blindly agree to grant it exemptions from its

fiscal and legal framework, including the Licensing Authority’s discretion to grant or

refuse mining lease applications under the 2002 BM Rules.

493) The Claimant sought a guaranteed “right to mine” in relation to multiple, undefined

Mining Projects over the entirety of the Exploration Area. The draft Mineral Agreement

made the following demand566:

“if following the preparation of an Overall Development Plan forone or more Mining Projects, the Mineral Title Holder intends toundertake Mining Phases in respect of one or more such MiningProjects, on submission of an application there shall be granted,one or more Mining Leases (as indicated are required in such

563 Article 1.1, draft Mineral Agreement defined “Mining Project” as:“…any project by the Mineral Title Holder of one or more phases:

(a) To explore for Minerals in a part or whole of any Area; and/or(b) To mine, process, transport and sell any Minerals from one or Mineral deposits, thereby

discovered in such part or whole of the area in which exploration has taken place.” CE-216564 Khokhar Statement, ¶ 42.565 Clause 14.2 of the Claimant’s draft Mineral Agreement, CE-216.566 Clause 14.2.1. of the Claimant’s draft Mineral Agreement, CE-216.


197

Overall Development Plan), in relation to the areas of Mineraldeposits (as specified in such Overall Development Plan), to theMineral Title Holder or its nominee (as the Mineral Title Holdermay indicate); each such Mining Lease shall:

Grant the Mineral Title Holder or its nominee, as the case may beexclusive rights to extract, process, transport and sell for its ownaccount such areas of Mineral deposits; and

Be for a period of 30 (thirty) years; and

be renewable for a further period of 30 (thirty) years at the requestof the holder thereof,

but otherwise such Mining Lease shall be on the terms andconditions set out in the BMR.”(emphasis added)

494) The Claimant wanted the Government of Balochistan to guarantee it title to carry out its

proposed development plan fettering the Licensing Authority’s discretion to “grant or

refuse” mineral titles under the 2002 BM Rules. It sought this despite being well aware

that Rules 9(5) and (6) of the 2002 BM Rules unequivocally provide that:

“(5) Any provision contained in a mineral agreement which isinconsistent with any provision of these Rules or any other lawshall, to the extent of the inconsistency be of no force or effect.

(6) Nothing contained in a mineral agreement shall beconstrued as absolving any party thereto from complying with anyrequirement laid down by law or from applying for, and obtaining,any licence, approval, permission or other document required bylaw.”

495) The Claimant also wanted a sovereign guarantee from the Government of Pakistan for the

performance of the obligations in such an agreement. The Claimant was cognisant of the

division of powers between the federal and provincial departments. This is evident from

Schedule 4 to its draft Mineral Agreement (July 2007), which sets out the precise

exemptions it wanted from various provincial and federal laws for its desired “Mining

Project”.


198

496) The list of demands in Schedule 4 bordered on the exploitative and asked for a complete

“exemption from the [Labour law] provisions of the Mines Act, 1923”567. The Mines Act

of 1923 contained basic health, safety and remuneration safeguards for workers in mines

from which the Claimant sought to be excused in Balochistan. Some of the key

provisions in that legislation from which the Claimant sought exemption are:

“26. Children.— No child shall be employed in a mine, or beallowed to be present in any part of a mine which is below ground

22.A.— Weekly days of rest.— No person shall be allowed to workin mine on more than six days in any one week.

22.C. —Hours of work below ground.— A person employed belowground in a mine shall not be allowed to work for more than eighthours in any day.

25. A (1)Extra wages for overtime.— (1) Where in mine a personworks for more than eight hours in any day or works for more thanforty-eight hours in any week, whether abovground or belowground, he shall in respect of such overtime work be entitled towages at the rate of twice his ordinary rate of wages, the period ofovertime work being calculated on a daily basis or weekly basis,whichever is more favourable to him.”568

497) The Claimant was also obtuse to the precarious law and order situation in Balochistan. It

wanted “permission to the Company and its Contractors to import, transport, bear,

possess or store, arms and ammunitions, and obtain licenses as may be required for the

purposes of its Mining Project.”569 Moreover, it wanted an “assurance to the Mineral

Title Holder, its employees, officials and the Mining Project in general, that it shall be

provided with adequate protection by the GOB/GOP from all acts of terrorism and riots

by third parties, that may detrimental to its Mining Project.”570

498) The Claimant’s disconnect with the ground realities in Pakistan and disregard for the

country’s legal and regulatory system is obvious from its proposed draft Mineral

Agreement. Much can be said about the provisions of the draft Mineral Agreement, and

567 Para 9.1, Schedule 4, Claimant’s draft Mineral Agreement CE-216.568 Mines Act 1923, Ex RE-73569 Para 10.1, Schedule 4, “Arms and Ammunitions”, Claimant’s draft Mineral Agreement. CE-216570 Para 14.7, General, Draft Mineral Agreement. CE-216


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the Claimant’s conduct in relation to these negotiations. However, for the purposes of this

submission, the Government addresses the particular accusation made by the Claimant

that the Government of Pakistan gave it an assurance of a right to a mining lease.

499) The Governments’ teams conducted their First Review of the Project with their

Consultants (Ruhr Montan Group Gmbh) in December 2007.571 The international

consultants’ view of the Claimant’s draft Mineral Agreement is recorded in the note as

follows:

“At the outset the Consultants stressed upon GOP & GOB thatsuch companies don’t need to be lured in view of the copperprospects which are the fifth largest of the world and of enormous[]. Even in a turbulent country such as Liberia 40 Lols’ have beenreceived for the low grade iron ore.

…

The issue is that from a political point of view the electorate is inpossession of Mineral wealth and a very tangible benefit should beseen to accrue to the country. Export zones are to attract reluctantinvestors.”

500) These are internal minutes where frank discussions between the Governments and its

consultants are recorded. The Government reserves the right to seek from the Claimant

the entire record of its negotiations, including internal minutes, during the disclosure

process. Contrary to the Claimant’s allegations of duality, both Governments were

absolutely clear, both in their internal and public dealings, that the draft Mineral

Agreement posed a “Conflict with Balochistan Mining Rules (Licensing Procedures)”.

These internal minutes made it plain that any “exemptions from obligations of BMR-

[was] to be excluded.” The Claimant’s demands for exemptions from the 2002 BM Rules

were not acceptable to the Governments, hence, the decision was made to exclude those

provisions from the draft Mineral Agreement. Similarly, “Exemption from Labor Laws

cannot be granted by GOB”. And in relation to clause 14.2.5: “Mineral Titles- To be in

571 A First Review of Reko Diq Project Draft Mineral Agreement by Consultants with the GOP and GOBdated 3 and 4 December 2007, Ex RE-74; see also¶ 38 Khokhar Statement.


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accordance with BMR”. And “Exclusive Mineral Titles r/o an Overall development Plan-

Cannot be exempted by GOB.”572

501) In that first discussion on the draft Mineral Agreement, the Government of Balochistan

took “strong exception” that there was no mention of the 25% government owned stake

in the 1993 CHEJVA and the fact that “main features of JV are not incorporated in the

DMA.” The Government of Balochistan made it clear that “All actions should be on

behalf of JV.”573

502) A meeting was held between the Governments and the Claimant in Dubai on 18

December 2007.574. The purpose of the meeting was for the Claimant to make a

presentation on the draft Mineral Agreement. The gravity of the Claimant’s mistake in

relation to ignoring the CHEJVA became evident at that meeting. The Claimant provided

the explanation that “TCC Pakistan will be 75% of TCC of Australia & 25 % of BDA”575.

503) After that meeting, the Governments met their consultants to review the draft Mineral

Agreement and revert with comments. The presentation by the GOP Consultants on the

draft Mineral Agreement, held on 23 February 2008576, aptly puts regulatory issues to the

forefront in the following terms:

“a) REGULATORY ISSUES

TCC has proposed the sidestepping of the regulatory process and isseeking to self govern its own mining operations. GOP/GOBhowever should adhere to the laws of Pakistan in particular theNational Mineral Policy (NMP) & Balochistan Mineral Rules(BMR) as amended from time to time.”

572 Ibid.573 Ibid.574 This is recorded in a MPNR note dated 18 December 2007 Ex RE-75.575 Ibid576 Presentation by the GOP Consultants on the Draft Mineral Agreement for RekoDiq Copper-Gold Project on

23rd February 2008- Minutes, of Meeting, Ex RE-76.


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504) The Claimant essentially wanted to create a bespoke regime authored by itself and solely

designed to protect its desire for maximum profitability. It appeared to have scant regard

or respect for the law of the land in which it sought to mine. The Consultants also advised

that the Government of Balochistan should “abide by existing tax laws, thus negating the

requirement to re-write special conditions.” The meeting also discussed the role of the

BDA as 25% stakeholder “throughout the life of the Project.” The concerns in relation to

the lack of value-addition in the form of a smelter and refinery were also raised in that

meeting.

505) The Governments wrote to the TCCP on 7 August 2008 with a detailed counter-proposal

to its Mineral Agreement (“the Governments’ Revised DMA”).577 The Governments’

Revised DMA referred to the CHEJVA between the parties and spoke of joint

collaboration in relation to developing one or more Mining Projects.

506) The first article of this Revised DMA clearly provided at 1.6:

“The Parties agree that, under the terms and conditions of thisAgreement, the Licensee [TCCP] shall be subject to all obligationsunder the terms and conditions of the BMR in force at the time.”

507) There was no ambiguity in both Governments’ position that TCCP “shall be subject” to

all the provisions of the 2002 BM Rules. The Revised DMA was prepared in accordance

with the spirit of the CHEJVA and proposed that a Committee be constituted for the

Management and Development of the mining projects in Balochistan. It provided that:

“Subject to approval of the Committee and Clause 3.5, the licenseeshall prepare the feasibilities and declare the Mining Phase for anyof its Mining Projects.”578

508) Article 5.5 of the Governments’ Revised DMA also made it plain that the Licensee shall

install a smelter/refinery having minimum capacity of 50,000 tonnes per annum within

577 Revised Draft Mineral Agreement (containing the counter-proposals of the Governments of Pakistan andBalochistan) (“Revised DMA”) CE-226.

578 Clause 3.3, Revised DMA, CE-226.


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three years from the start of concentrate production at the project site or at any feasible

site in Pakistan.

509) The Governments’ Revised DMA was not a legally vetted document and was a draft

designed to promote further negotiations. However, the message from both Governments

was clear that all rights in relation to “mineral titles” shall be “subject to the BMR”.

510) The Claimant fully understood the Governments’ firm stance that no exemptions would

be granted in relation to the 2002 BM Rules. In a letter dated 18 August 2008,579 the

Claimant responded to the Governments’ Revised DMA in its characteristically

aggressive manner as follows (at Paragraph 4):

“Balochistan Mineral Rules

4.1 The GOP/GOB Counter-Proposal proposes that the MineralAgreement will at all times be subject to the BMR.

4.2. The BMR include a number of powers and discretions thatare inconsistent with creating the certainty and security of tenurerequired for investment and financing on the scale for Reko Diq.Our primary concern is that these problems are addressed in theMineral Agreement by agreement of the parties, but thisagreement would be negated by any changes to the BMR in thefuture. The legal certainty we are looking for can beaccomplished by either:

4.2.1 amendment to the BMR, and express statement within theMineral Agreement, to reflect that terms of the Mineral Agreementoverride any inconsistency with the BMR (as had beencontemplated in the initial TCCP Draft); or

4.2.2 amendment to the BMR of all rules requiring suchamendment so as to ensure compatibility with Mineral Agreement.”(emphasis added)

511) This letter on its own should dispel any doubt about the Claimant’s self-created

assurances that it was excused from meeting the regular criteria under the 2002 BM

Rules. It also strikes at the heart of the Claimant’s case. The Claimant recognised that the

2002 BM Rules “include a number of powers and discretions that are inconsistent with

579 Letter from Chief Executive Officer, TCC to Secretary, Ministry of Petroleum and Natural Resources 18August 2008, CE-227.


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creating the certainty and security of tenure required for investment and financing on the

scale for Reko Diq.” Hence, it acknowledged the Licensing Authority’s broad discretion

to “grant or refuse” mineral tiles and that its self-professed right to a mining lease was

uncertain and insecure. This contradicts the Claimant’s position in this arbitration that it

had a right to mine subject to routine “administrative” Government requirements.580

512) The Claimant’s letter also complains about the royalty at 5% in accordance with the 2002

BM Rules, lack of EPZ status, the introduction of the Management Committee which

according to the Claimant would have extensive approval rights on the development of

the mineral projects, and the fact that the entire mineral agreement would be subject to

the 2002 BM Rules.

513) The Claimant met with the Governments for further discussions in October 2008. Mr

Khokhar’s note captures the range of topics discussed at the meeting, including royalty,

tax and infrastructure (Rail).581 Mr Khokhar made a note that “certain vital information”

from the Scoping Study had been omitted the Claimant. He noted that:

“In the absence of scoping or pre-feasibility TCC wanted to lock inconcessions and also desired predictability in tax rates for 40 yearsthe impact of which could not be ascertained.”

514) He also made particular note of the BDA’s role in the joint venture and noted the

“conflict of interest” that might arise.582 The note said that “BDA was unlikely to get

profits for a decade for which maximum royalty for GOB should be sought. Any loan by

TCC to BDA may be interest bearing.” The Governments also reiterated the requirement

of a smelter and refinery. Mr Khokhar had made plain that the processing of copper

involved three principal stages.583 The first involved the production of concentrate from

ore. The second entailed the production of blister copper through smelting, and the third

was further refining of blister copper into gold, copper, silver among other metals. The

580 Ibid, at p 4, ¶ 4.2.581 Record Note on Reko Diq Project Negotiations on 15-17 and 22-23 October 2008, Ex RE-77, ¶ 41,

Khokhar Statement.582 Ibid.583 Ibid.


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Claimant’s CEO was noted as stating in response that “according to the evaluation made

by the company the economics of the project allows processing up to concentrate level

and any processing beyond the concentrate level would effect the economic viability of

the project.”584 The Claimant made it plain that it was not willing to accede to the

Government’s requirement for value-addition in the form of smelter and refinery because

it affected the “economics” of its project. But the central message regarding the 2002 BM

Rules was as follows:

“Any stability regarding change in law or one sided terminationcompensation clauses in the DMA were not acceptable to GOP.Instead of DMA overriding BMR it should be the other wayaround.”

515) The parties did not exchange further drafts. The more imminent focus of negotiations was

shifted to the Claimant’s request for obtaining exemptions from the prevailing tax regime

and to freeze these for the duration of the project. However, the distance between the

parties was palpable. The Government was yet to learn about the scale of the Claimant’s

so-called Mining Project. This came up again in a meeting to discuss railway tracks for

transporting concentrate to Gwadar. Mr Khokhar makes a note of this meeting held on 18

December 2008 with the Claimant where he notes it as being “mutually decided that M/S

TCC shall provide the exact data/figures of the load to be transported from the Project

downward and upward… It was finally agreed that M/s shall furnish the details of annual

concentrate production.” During this meeting, Mr Khokhar made it clear that the

Government had decided to “initiate the proposal for establishing a Copper Refining

Company in Pakistan to safeguard the economic interest associated with this mine.” Mr

Khokhar noted that the Claimant’s representative made no objection to this proposal and

stated that “their companies would be ready to install the Refinery subject to economic

viability”.

516) As Mr Khokhar notes in his statement, the Claimant never sent the Respondent or the

Government of Balochistan the details of the expected concentrate from its Mining

Project. Despite this the Governments in their spirit of promoting foreign investment,

584 Ibid.


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continued to proceed in good faith585. The Government even sought investors interested

in creating a dedicated railway company and a Copper Ore Refining Company.586

517) The Claimant has accused the Governments of bad faith. The record shows that this was

far from the case. Despite the deadlock in the negotiations, the Governments were clear

that they would not even consider proposals from other parties even though these were

more attractive.

518) The Second Steering Committee Minutes of 23 January 2009 noted the following:

“The Additional Chief Secretary, Government of Balochistan, whowas heading GOB delegation, explicitly stressed that proposal ofMCC must not be considered at the stage as this was load to legalimplications; however, if TCC shows its inability to develop theproject only then proposal of MCC may be considered byGOP/GOB. .. After detailed deliberations it was decided that:

GOP/GOB to continue with TCC, as entertaining of MCC proposalat this stage may lead to legal implications and effect credibility ofPakistan in the international Mineral Sector.”587

519) The Metallurgical Group of China (MCC) wished to submit a proposal in relation to the

Reko Diq area that would have offered significantly more attractive terms to the

Respondent and the Government of Balochistan. Yet, these internal minutes do not show

any conspiracy to oust the Claimant. In fact, both Governments were conscientious,

cautious and sincere in their consideration of the Claimant’s proposal. However, the

Governments recognised that the Claimant’s ultimate proposal may not be acceptable

given its unsustainable premises. There was nothing untoward in the Governments

considering alternatives for developing the mineral resources should the Claimant’s

proposal be unacceptable under the 2002 BM Rules.

520) As Mr Khokhar notes in his witness statement, the negotiations proceeded slowly in view

of the deadlock.588 The disclosure of additional documents relating to the conclusion of

585 Khokhar Statement, ¶42.586 Minutes of Second Meeting of Steering Committee in Reko Diq Copper-Gold Project, Balochistan, held on

23 January 2009, Ex RE-78. ¶ 43.587 Ibid.


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the CHEJVA also made it plain that the Governments could no longer defend the validity

of the agreement before the court. The Claimant never provided a copy of the Feasibility

Study to the Government of Pakistan.

521) The final meeting between the parties was held on 21 July 2011.589 The Government

mentioned the Jinchuan Group’s interest in developing a smelter. The Claimant’s

representative was noted as saying that “the company will have no objection to this

proposal. TCC are willing to negotiate an off-take agreement for the sale of concentrate

within Balochistan.”

522) The rest, of course, is history. The Licensing Authority issued its notice of reasons

pursuant to the 2002 BM Rules for the rejection of TCCP’s Mining Lease Application on

21 September 2011. This was followed by the Notice of Rejection of 15 November 2011,

and the Claimant immediately filed arbitration proceedings at ICSID and the ICC on 28

November 2011.

F) THERE WAS NO PLAN TO OUST THE CLAIMANT

523) The Claimant also creates the fiction of a competing mining project, which was (in the

Claimant’s mind) the “real reason” why the Claimant’s Mining Lease Application was

refused. The facts make it absolutely plain that the Planning Commission’s project was

entirely unrelated and that the Government acted properly at all times. Dr

Mubarakmand’s Statement speaks for itself in relation to the Balochistan Copper and

Gold Project (“BCGP”) (previously known as the Reko Diq Gold and Copper Project).

524) As a matter of law, the Licensing Authority’s decision stands squarely within the grounds

that oblige it to refuse the application pursuant to Rule 48(3). These include objective

grounds such as the lack of standing, the fact that the Claimant was in default under the

Rules, lack of feasibility studies for the mines, satisfactory proposals and the absence of

smelting and refining facilities. There are also subjective grounds permitting the

588 Khokhar Statement, ¶ 47.589 Review Meeting held in MPNR dated, 21 July 2011, Ex RE-79. See also MPNR meeting note dated 27

September 2010, Ex RE-80.


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Licensing Authority to subjectively decide whether or not a project is in the best interests

of the development of Balochistan’s mineral resources.

525) The Licensing Authority’s (alleged) ulterior motive, if any, is entirely irrelevant. The

Claimant must show that the Licensing Authority acted outside its powers under Rule

48(3) of the 2002 BM Rules. If it cannot do so, then the issue of a treaty breach does not

even arise, regardless of its motive.

G) THE CHEJVA CONFERS NO ‘RIGHT TO MINE’ ON THE CLAIMANT

526) In claiming that it had a right to mine “subject to routine Government requirements”, the

Claimant of course is tacitly referring to sub-clause 11.8.2 except that it has distorted the

contractual provision. The reason for its apprehension is obvious. There are numerous

problems with the Claimant’s reliance on Article 11.8.2 of the CHEJVA. The words of

Article 11.8.2 make it plain that there is no such right to mine, but only a right to apply

for a mining lease in certain circumstances and subject to certain preconditions. Further,

as is evident from the discussion above, no right to apply for a mining lease could arise

under Clause 11.8.2 in view of the Claimant’s failure to observe the conditions precedent

of, for example, acquiring the BDA’s share in Joint Venture Property before it was even

eligible to make an application.

527) The Claimant’s asserted right to undertake a possible mining venture pursuant to Article

11.8.2 never even arose, so it cannot credibly be sustained that the Licensing Authority’s

rejection of the Mining Lease Application under Article 48 of the 2002 BM Rules

constituted a breach of the FET provision in the BIT.

And even if the Claimant had satisfied all the conditions precedent and an entitlement to

mine under a sole risk venture did in fact arise under the CHEJVA, it is common ground

that any right to do so was conditional upon compliance with all “routine Government

approvals”. Indeed, TCCP’s Mining Lease Application, which enclosed the Feasibility

Study, made plain that all applications for mineral titles were to be in accordance with the

2002 BM Rules.


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H) THE CLAIMANT FAILS TO MEET THE HIGH STANDARD OFESTABLISHING A BREACH OF ARTICLE 3(2) OF THE BIT

528) If the Licensing Authority refused the Mining Lease Application in violation of the 2002

BM Rules then the next question would be whether this violation is sufficiently egregious

to amount to an internationally wrongful act by the Respondent.

529) According to the Claimant, the Licensing Authority’s refusal to grant it a Mining Lease

was “arbitrary”. The Claimant sustains that this refusal was part of a purported “plan”

Balochistan had to “oust TCCP” and pursue its own project at Reko Diq, using the data

and information from “TCC’s” Feasibility Study.590

530) The Claimant puts its case as follows. First, it claims that Pakistan and the Government

of Balochistan created in “TCC” a legitimate expectation that it would obtain a Mining

Lease. Second, it argues that the Licensing Authority denied its Application for a Mining

Lease on “arbitrary, discriminatory, and pretextual grounds”. Last, it alleges that it was

denied “basic due process rights” during the Mining Lease Application procedure and the

administrative appeal.

531) The Claimant submits that the conduct of which it complains is attributable to Pakistan

under the law of State responsibility and constitutes a breach of Pakistan’s FET

obligation under the Treaty.

532) The burden of the proof lies with the Claimant and it has utterly failed to meet the

demanding standard for proving a conspiracy. The award in Waste Management v.

Mexico, defines conspiracy as “a conscious combination of various agencies of

government without justification to defeat the purposes of an investment agreement”.591

This definition has been followed by the tribunal in Bayindir v. Pakistan, which expressly

590 Claimant’s Memorial, ¶392.591 Waste Management, Inc v United Mexican States (“Number 2”), ICSID Case No.ARB (AF)/00/3 Award

dated April 30, 2004 (“Waste Management”), RLA-83 paragraph 138


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held that “such a finding [of conspiracy] can in no circumstances derive solely from a

divergence of views on the interpretation of certain provisions of the Contract.”592

I) A BREACH OF THE FET PROVISION REQUIRES A VIOLATION OF THECUSTOMARY INTERNATIONAL LAW MINIMUM STANDARD OFTREATMENT TO BE DEMONSTRATED

533) The BIT between Australia and Pakistan does not provide a definition for “fair and

equitable treatment”. Article 3(2) of the BIT requires the signatory countries to treat

investment in a fair and equitable matter. Under international law, this requirement is

generally understood to impose “international minimum standard” that is separate from

domestic law, but that is indeed a minimum standard. In essence, a breach of this

provision may be found only, if based on the totality of the circumstances of the case, the

Government would have acted in such a matter that every reasonable and impartial man

or woman would recognise its insufficiency.

534) The Claimant’s portrayal of “fair and equitable treatment” could lead to liability for all

manner of state actions or inactions, encompassing conduct well beyond the intentions of

the Contracting States, and inappropriately limiting the exercise of sovereign regulatory

authority and discretion.593

592 Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No.ARB/03/29, Award dated August 27, 2009, RLA-84, paragraph 256.

593 UNCTAD Series on Issues in International Investment Agreements. FAIR AND EQUITABLETREATMENT (United Nations 2012), RLA-85 .See also RLA-59 J. Roman Picherack, The ExpandingScope of the Fair and Equitable Treatment Standard: Have Recent Tribunals Gone Too Far?, 9(4)JOURNAL OF WORLD INVESTMENT & TRADE 255 (2008) (“Picherack”), RLA-86 pp. 272, 291(“[c]ommentators have voiced considerable concern aboutthe broad-reaching interpretations given to thestandard by recent arbitral awards;” “the fair and equitabletreatment standard as recently interpreted andapplied may be close to approaching a standard of strictliability imposed on States where they fail to matchthe expectations of an investor and where they act ina manner that, though legitimate and in good faith,causes loss to an investor”); Gus Van Harten, INTERNATIONAL TREATY ARBITRATION ANDPUBLIC LAW (Oxford University Press 2007) (“VanHarten”), RLA-87 p. 89 (the recent arbitralinterpretations of the fair and equitable standard have been “nothing short of adventurous” and“transform[] the international law standard from a bulwark against flagrant mistreatment of foreignnationals into an all-encompassing guarantee of highly flexible notions of fairness, equity and dueprocess”); Graham Mayeda, Playing Fair: The Meaning of Fair and Equitable Treatment in BilateralInvestment Treaties, 41(2) JOURNAL OF WORLD TRADE 273 (2007) (“Mayeda”), RLA-88 p.274-275(noting that recent decisions have given a much broader meaning to the fair and equitable treatmentstandard than has traditionally been given to the international minimum standard, and that “thisinterpretation does not accord with the case-law or State practice, which suggest that fair and equitabletreatment should be equivalent to the minimum standard and provide protection for procedural fairness


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535) Indeed, Claimant’s own iterations of the standard in this case illustrate the point, as it

alleges a myriad of violations of “stability,” “transparency,” “legitimate expectations” ,

“procedural propriety”, “consistency” and “good faith.”

536) It is therefore crucial to first establish the precise scope of the FET obligation as provided

under the BIT.

537) Pursuant to Article 31(1) of the Vienna Convention on the Law of Treaties, a treaty is to

be interpreted “in the light of its object and purpose.” The object and purpose of the BIT

are contained in its preamble. The Parties have stated that among the objects of the

Treaty is the promotion of investment relations, in accordance with the “internationally

accepted principles of mutual respect for sovereignty, equality, mutual benefit, non-

discrimination and mutual confidence”.

538) Therefore, in the light of this wording, the provisions of the BIT should be interpreted

pursuant to the principles of international law. It follows that the FET obligation under

Article 3(2) should also be construed in accordance with the standards set by international

law.

539) This interpretation of the FET standard is consistent with the Notes and Comments to

Article 1 of the OECD Draft Convention. The Committee responsible for the Draft

indicated that the concept of fair and equitable treatment flowed from the “well-

established general principle of international law that a State is bound to respect and

protect the property of nationals of other States”.

“The phrase ‘fair and equitable treatment’, customary in relevantbilateral agreements, indicates the standard set by internationallaw for the treatment due by each State with regard to the propertyof foreign nationals. […] The standard required conforms in

and duly diligent consideration of the effects of a proposed government policy on foreign investors”);Dugan et al., INVESTOR-STATEARBITRATION, pp. 513 (noting that the Tecmed standard is “criticizedby some commentators as unrealistically stringent”) RLA-27 ; Roland Kläger, FAIR ANDEQUITABLETREATMENT IN INTERNATIONAL INVESTMENT LAW (Cambridge University Press 2011)(“Kläger”), RLA-89, p. 176.


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effect to the ‘minimum standard’ which forms part ofcustomary international law”594 (emphasis added)

540) Tribunals have constantly followed this interpretation. Neer v. Mexico provided what is

widely recognized as the authoritative articulation of the fair and equitable treatment

standard as “the functional equivalent” of the minimum standard of treatment under

customary international law:

“[T]he treatment of an alien, in order to constitute an internationaldelinquency, should amount to an outrage, to bad faith, to wilfulneglect of duty, or to an insufficiency of governmental action so farshort of international standards that every reasonable andimpartial man would readily recognize its insufficiency”595

541) The threshold set forth by the tribunal in this award is very high. Subsequent tribunals

have adopted a similar standard.596 The tribunal in Glamis Gold v. USA recently held that,

in order to find a breach of the fair and equitable treatment obligation:

“An act must be sufficiently egregious and shocking—a grossdenial of justice, manifest arbitrariness, blatant unfairness, acomplete lack of due process, evident discrimination, or a manifestlack of reasons—so as to fall below accepted internationalstandards and constitute a breach…”597

542) The minimum standard of treatment in customary international law remains central to any

analysis of the content of the fair and equitable treatment standard. The tribunal in Genin

v. Estonia stated:

“Acts that would violate this minimum standard would include actsshowing a wilful neglect of duty, an insufficiency of action fallingfar below international standards, or even subjective bad faith”.598

594 OECD Draft Convention on the Protection of Foreign Property (1967) p. 333 RLA-90595 L. F. H. Neer and Pauline Neer (U.S.A.) v. United Mexican States, General Claims Commission United

States and Mexico, Docket No. 136, Opinion dated October 15, 1926, 21 AMERICAN JOURNAL OFINTERNATIONAL LAW 555 (1927) RLA-91, p. 556.

596 Waste Management, RLA-83597 Glamis Gold, Ltd. v. United States of America, NAFTA (UNCITRAL), Award dated June 8, 2009, RLA-92

paragraph 22.598 Alex Genin et al. v. Republic of Estonia, ICSID Case No. ARB/99/2, Award dated June 25, 2001, RLA 93

paragraph 367


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543) In Lauder v. Czech Republic, the tribunal adopts with approval the interpretation given in

the United Nations Conference On Trade And Development599:

“Fair and equitable treatment is related to the traditional standardof due diligence and provides a ‘minimum international standardwhich forms part of customary international law’”.

544) In the recent El Paso v Argentina case, the tribunal held:

“[I]t is the view of the Tribunal that the position according towhich FET is equivalent to the international minimum standard ismore in line with the evolution of investment law and internationallaw and with the identical role assigned to FET and to theinternational minimum standard.”600

545) The cases cited clearly illustrate that the current and prevailing view remains that the

threshold for violating the fair and equitable treatment standard is a high one. A State’s

conduct must indeed be egregious in order to attract the reprobation of international law.

546) The Claimant has failed to ascertain in its Memorial that Respondent has committed any

actions that could amount to a violation of the international minimum standard.

J) THE CLAIMANT HAS FAILED TO PROVE PARTIALITY, ARBITRARINESSOR A LACK OF DUE PROCESS IN THE LICENSING AUTHORITY’SDECISION-MAKING PROCESS

547) The Claimant alleges: (i) that the Licensing Authority is not an impartial and independent

body; (ii) that its Mining Lease application was denied on arbitrary grounds; and (iii) that

it was denied basic due process rights.

548) The guarantee of procedural propriety or due process as part of the FET provision must

be examined in the light of the minimum standard of conduct set by international law.

This standard requires Claimant to show at least a “lack of due process leading to an

599 U.N. Conference On Trade & Development: Bilateral Investment Treaties In The Mid-1990s at 53, U.N.Doc.UNCTAD/ITE/IIT/7, U.N. Sales No. E.98.II.D.8 (1998) RLA-94

600 El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Award datedOctober 31, 2011, RLA-115, paragraph 336.


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outcome which offends judicial propriety,”601 if not “gross misconduct” or “manifest

injustice.”602

549) As the Eastern Sugar v. Czech Republic award noted:

“[A] BIT may … not be invoked each time the law is flawed or notfully and properly implemented by a state. Some attempt to balancethe interests of the various constituents within a country, somemeasure of inefficiency, a degree of trial and error, a modicum ofhuman imperfection must be overstepped before a party maycomplain of a violation of a BIT. Otherwise, every aspect of anylegislation of a host state or its implementation could be broughtbefore an international arbitral tribunal under the guise of aviolation of the BIT. This is obviously not what BITs are for.”603

550) The obligation of fair and equitable treatment does not convert any and every failure on

the part of the host State to comply strictly with the requirements of its laws or

regulations into a breach of international law.604

551) In Genin v. Estonia605, the investor’s license was revoked using procedures that were

acknowledged to be “contrary to generally accepted banking and regulatory practice.”606

The tribunal nonetheless held that the action did not “rise to the level of a violation of any

601 Waste Management, paragraph 98. RLA-83 International Thunderbird Gaming Corporation v The UnitedMexican States, NAFTA Award dated January 26, 2006 (“Thunderbird”), RLA-95 paragraph 200(applying this standard to administrative process).

602 Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award dated 18September 2009, RLA-96 paragraph 286.

603 Eastern Sugar B.V. v. Czech Republic, SCC Case No. 088/2004, Partial Award dated March 27, 2007(“Eastern Sugar”), RLA-97, paragraph 272. See also AES Award, paragraph 9.3.40 (“[I]t is not everyprocess failing or imperfection that will amount to a failure to provide fair and equitable treatment. Thestandard is not one of perfection.”); Thunderbird, RLA-95 , paragraph 200 (noting that the proceduralrequirements for administrative procedures are less demanding than for judicial ones)

604 GAMI Investments, Inc. v. United Mexican States, NAFTA/UNCITRAL, Final Award dated November 15,2004, RLA-98 paragraph 97 (“A failure to satisfy requirements of national law does not necessarily violateinternational law.”). See also Waste Management, RLA-83 paragraph 115 (finding that “even persistentnon-payment of debts” is not a violation of the treaty); Cargill, RLA-96 paragraph 287; Elettronica SiculaS.p.A. (ELSI) v. Italy, ICJ (United States of America v. Italy), Judgment dated 20 July, 1989, RLA-99,paragraph 124 (“Yet it must be borne in mind that the fact that an act of a public authority may have beenunlawful in municipal law does not necessarily mean that that act was unlawful in international law, as abreach of treaty or otherwise.”).

605 Genin, paragraph, RLA-93, 363.606 Ibid, 364.


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provision of the BIT,”607 because there was no evidence of discrimination, the action was

within the agency’s regulatory discretion, and the ultimate decision was justified608. For a

procedural irregularity to constitute a violation, it “would have to amount to bad faith, a

wilful disregard of due process of law or an extreme insufficiency of action.”609 That is,

the conduct complained of must be sufficiently grave as to be condemnable as a breach of

international law. The Unglaube v. Costa Rica tribunal recently restated this principle:

“The Tribunal understands that the workings of the courts andadministrative agencies of Costa Rica surely involve noticeabledifferences from those with which Claimants maybe morefamiliar. But, because governments are accorded a considerabledegree of deference regarding the regulation/administration ofmatters within their borders, such differences are not significant,insofar as this Tribunal is concerned, unless they involve orcondone arbitrariness, discriminatory behavior, lack of dueprocess or other characteristics that shock the conscience, areclearly “improper or discreditable” or which otherwise blatantlydefy logic or elemental fairness. The Tribunal finds no evidence,here, that these boundaries have been approached, much lesssurpassed.”610 (emphasis added)

552) On the facts, there is no evidence of partiality or arbitrariness in the decision-making of

the Licensing Authority. On the contrary, the Licensing Authority gave a reasoned

decision, in accordance with Rule 48 of the 2002 BM Rules, rejecting the patently flawed

Mining Lease Application.

553) The Licensing Authority’s Notice of Intent to Reject dated 21 September 2011 (the

“Notice”) set out the reasons for the refusal of TCCP’s Mining Lease Application.

TCCP’s letter of 19 October 2011611 responded to these reasons but failed to address the

concerns raised by the Notice. The Licensing Authority rejected the Mining Lease

Application on 15 November 2011. The Secretary of the MMDD, acting as an appellate

607 Ibid, paragraph 365.608 Ibid, paragraphs 363, 369-371.609 Ibid, 371.610 Marion Unglaube et al. v. Costa Rica, ICSID Case Nos. ARB/08/1 and ARB/09/20, Award dated May 16,

2012, RLA-100, paragraph 258.611 TCCP’s Interim Response to Licensing Authority Notice, 19 October 2011, CE-8.


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authority, rejected TCCP’s appeal against the Licensing Authority’s decision on 3 March

2012.612 TCCP challenged the Notice saying that it “provides no valid grounds on which

to deny the Mining Lease.” Rules 48(3)(a) and 48(3)(b) impose an obligation on the

Licensing Authority to reject a lease (“shall not grant”) if even one of the criteria set out

therein is not satisfied. TCCP’s Mining Lease Application failed to satisfy not one but

several of these criteria.

554) The flaws in TCCP’s Mining Lease Application, and the Licensing Authority’s reasoned

decision rejecting it, have been detailed above.

555) In summary:

a. Rule 48(1) provides for the grant or refusal of mining leases to “holders of

exploration licences”. EL-5 was granted in the name of the BDA-TCCP Chagai

Hill Joint Venture613. TCCP made an application on its own, without the

612 Decision on Appeal by the Secretary of the MMDD, CE-137.613 Exploration Licence EL-5’s Second Renewal was granted to M/S Tehtyan Copper Co (Pvt) Limited-BDA

Chagai Hills Exploration, Joint Venture on 01-12-2007 under Rule 29(2) of the Balochistan Mineral Rules2002 for 435.02 sq km CE-20. The term for the renewed EL-5 exploration licence was from 20-02-2008until 19-02-2011. The grant was expressly made subject to the terms and conditions of the LicensingAuthority’s letter dated 18-05-2002 and assignment letter dated 08-04-2006 Ex RE-25. The application forthis second renewal was made on behalf “BDA-TCC Chagai Hills Exploration Joint Venture for SecondRenewal of EL-5 dated 2 November 2007 Ex RE-15. pursuant to Rule 29 of the 2002 BM Rules by theCEO of Tethyan Copper Company (Hugh R. James) on the letterhead of Tethyan Copper Company PtyLimited (copied to the Chairman, BDA) in the following terms:

“Please find attached herewith the following documents in support of Chagai Hills ExplorationJoint Venture’s (CHEJV) application for a three (3) year second renewal of EL-5, ChagaiDistrict, Balochistan.” Name of Applicant on the form: Chagai Hills Exploration Joint Venturecomprising Balochistan Development Authority (25%) and Tethyan Copper Company Pty Limited(75%). In “Dates and Particulars of Registration” in the form: “Chagai Hills Exploration JointVenture being a joint venture of Balochistan Development Authority and Tethyan CopperCompany Pty Limited is not required to be registered. They are however parties to the ChagaiHills Exploration Joint Venture Agreement.” In the “Justification for Second Renewal for 3 years90% of the Existing EL-5 Area (Exhibit 1):“The Joint Venture, Tethyan Copper Company PtyLimited and Balochistan Development Authority (“the Applicant”) carried out detailedexploration…” [Exhibit I). “The Balochistan Development Authority is fully aware of the groundsand reasons on which the renewal is being sought and fully endorses the request.”

See also the admission in TCC’s letter dated 26 September 2006 to Director General Mines and Minerals(CE59): “The correct factual position is that all our rights and obligations relating to the H4 Prospect andthe Reko Diq area emanate from the Exploration License no. EL-5 granted to TCC and BDA (75% and25%)”.


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involvement of its joint venture partner. Hence, it was TCCP, not the Joint

Venture that made the application.

b. Despite seeking a mining lease over a “Mining Lease Area” of 99.473 square

kilometres, covering at least 13 deposits, TCCP enclosed a Feasibility Study

restricted to an area of approximately 4 square kilometres purportedly covering

two deposits, H14 and H15. No feasibility studies were provided for any of the

other 11 known deposits in the Mining Lease Area.

c. TCCP proposed that the copper would be processed into copper concentrate and

pumped through a 682-kilometre pipeline to the coast of Gwadar to be shipped to

smelters around the world. No consents or approvals were obtained for this

pipeline. Negotiations with the Governments of Balochistan and Pakistan on the

Mineral Agreement (which never came to fruition) made it clear that a smelting

and refining facility of 50,000 tons was required. The Claimant admits that the

Mining Lease Application “has not made proposals in respect of smelting or

refining.” TCCP’s proposal was to take away all the minerals from Pakistan to

smelters and refineries in third country. Pakistan currently imports 100,000 tonnes

of refined copper per annum at London Metal Exchange Prices. Under TCCP’s

proposal, it would not be able to access its own indigenous copper in refined form

at cheaper prices.614

556) Having provided this summary, the Respondent now provides the Tribunal with a

detailed account of the reasons in the Notice.

i) THE HOLDER OF THE EXPLORATION LICENCE EL-5 WAS THEJOINT VENTURE, HENCE TCCP WAS NOT ELIGIBLE UNDER BMRULE 48(1) TO OBTAIN A MINING LEASE

557) Rule 48(1) provides for the grant or refusal of a mining lease to holders of exploration

licences. The application for and grant of the second renewal of Exploration Licence EL-

5 was in the name of the Joint Venture, the unincorporated joint venture arising under the

CHEJVA. The CHEJVA makes any rights to apply for a mining lease under Article

11.8.2 “subject to compliance with routine government requirements”, i.e., the 2002 BM

614 TCCP’s Interim Response to Licensing Authority Notice, 19 October 2011, para. 3.49, CE-8.


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Rules. Hence, only the 2002 BM Rules govern the grant or refusal of the Mining Lease

Application. This was one of the bases on which the Licencing Authority rejected the

Mining Lease Application:

Reasons 5 and 6 from the Notice

“5. That the present application has been filed on behalf of M/STethyan Copper Company Pakistan (Pvt) Ltd and not on behalf ofco-sharer, who was alleged to be co-associate in the workingproject under the Rule 48 of the Balochistan Mineral Rule 2002.Since the applicant alone was not allottee of exploration licenceand thus legally applicant is not competent to make application forgrant of Mining Lease.

6. That the Mines Committee has noted the fact that applicationwas received on 18-02-2011 and the licence had expired on 19-02-2011 later on request was made to the Secretary, Mines &Minerals, Government of Balochistan on 3-03-2011 forparticipating in the mining lease. This fact indicates that theapplication was filed alone by the company and co-sharer was notmade party to it. In such circumstances, the application isincomplete and is in violation of rule 48 of the Balochistan MineralRules, 2002.”

558) The reference in reason 6 of the Notice is to the Claimant’s letter dated 3 March 2011 to

seek negotiations for acquiring its joint venture partner’s interest in the Joint Venture

Property pursuant to Article 11.4 of the CHEJVA. Article 11.4 of CHEJVA requires the

Claimant to acquire the transfer of the joint venture partner’s interest before it can

undertake a sole risk joint venture, subject to compliance with all required Government

approvals to enable it to do so. The complaint here is that the Claimant never met its

obligations under the CHEJVA to acquire that interest before it could make an

application. The Claimant had given an express Undertaking that it would meet all its

obligations under the CHEJVA and the Licensing Authority made this a condition for

approving the Assignment of BHP’s interest in the Exploration Licence EL-5 to the

Claimant in 2006.

559) The Licensing Authority also noted that in this case even the Exploration Holder for EL-

5, the Joint Venture, would have been unable to make an application for a mining lease

pursuant to Rule 47(1) because it is not incorporated as a company in Pakistan.


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Reason 1 from the Notice:

“That from the record, it appears that the Balochistan DevelopmentAuthority had signed a Chagai Hills Exploration Joint VentureAgreement with BHP thereafter M/S Tethyan Copper CompanyPakistan (Pvt) ltd for exploration, evaluation of Gold, Copper andAssociated Minerals during the period of license existing forexploration and prospecting of the area. The record reflects thatneither any company was registered and incorporated under theCompanies Act 1984 with the registrar of Firm’s nor in any otherlaw.”

560) The Joint Venture was an unincorporated joint venture; hence it was not incorporated as a

company in Pakistan. Only a “body corporate” in Pakistan can apply for a mining lease

pursuant to Rule 47(1) of the 2002 BM Rules. The Licensing Authority considers the

Joint Venture to be the holder of the Exploration Licence EL-5 making it eligible to apply

for a mining lease. However, it notes that the Joint Venture was never incorporated as

company and, hence, even the Joint Venture does not meet the requirements to make a

successful application pursuant to Rule 47(1).

ii) THE APPLICANT FOR THE MINING LEASE APPLICATION WAS INDEFAULT OF THE TERMS OF THE EL-5 SECOND RENEWAL

561) The Licencing Authority’s Notice also relied on the provision regarding default when

explaining this basis for rejecting the Mining Lease Application:

Reasons 2-4 and 7(v) from the Notice:

2. That the company did not make proper feasibility or explorationof the discovered deposits and achieve the targets required underthe rules.

3. That the second renewal application submitted by the applicanthad given declaration that the applicant will submit the completefeasibility of the entire lease/exploration area. The applicant hasutterly failed to submit the said feasibility report and meaningthereby that they have failed to conduct and complete explorationin the exploration license/granted area.

4. That on account of non-exploration and failure to explore thearea during the last 17 years, the Government of Balochistan andthe local inhabitants of the area has been deprived of fruitfulresults.


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7 (v) There is a default and violation committed under rule 29(2)(c) (iii) of the Balochistan Mineral Rules, 2002 as a failure toprovide the required information as contemplated under Rule 47 ofthe Balochistan Mineral Rules 2002.

562) It was a condition for the second renewal of the Exploration Licence EL-5 that feasibility

studies had to be developed for all discovered deposits in the exploration area (see Rule

29(2)(c)(iii) BM Rules).615 The Claimant did not provide such feasibility studies despite

having undertaken to do as part of the application for a second renewal of Exploration

Licence EL-5.616 Hence, the applicant was in default at the time of making the Mining

Lease Application. Rule 48(3)(b) provides that a mining lease “shall not be granted” if

the applicant is in default at the time of the application.

iii) THE FEASIBILITY STUDY SUBMITTED IN SUPPORT OF THEAPPLICATION FOR 99.453 SQ KM (KNOWN TO HAVE AT LEAST 13DEPOSITS) ONLY COVERED 4.5 SQ KILOMETRES (2 DEPOSITS)

563) The Licensing Authority also in its Notice referred to the fact it did not receive feasibility

studies in relation to the other deposits in the mining lease area (such as H4, H8, H13,

H35 and H79 etc).

Reasons 7, 8 and 10 from the Notice:

“7(i) That the Company has failed to comment or dilate upon restof discover deposits except H-14 and H15;

7(ii) The proposed development, operation and scheme of the minesin programme of the mining operation for the 11 other potentialresources is missing/omitted to be considered in the feasibilityreport;

7(iii) That the information given by the company in all respectkeeping in to consideration the Balochistan Mineral Rules 2002,

615 Rule 29(2)(c)(iii) reads: “An application for the renewal of a licence shall … (c) not be made … (iii ) in thecase of a second renewal, unless the applicant can satisfy the authority that such a renewal is necessary forthe completion of a full feasibility study of the discovered deposits and the proposed activities could nothave been reasonably completed during the period of the first renewal.”

616 The application for this second renewal was made on behalf “BDA-TCC Chagai Hills Exploration JointVenture for Second Renewal of EL-5 dated 2 November 2007 Ex RE-15 pursuant to Rule 29 of the 2002BM Rules by the CEO of Tethyan Copper Company (Hugh R. James) in a letter to the LicensingAuthority.


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the Company has failed to identify all the resources andachievement of all targets within stipulated time.

[…]

7(v) There is a default and violation committed under rule 29(2)(c )(iii) of the Balochistan Mineral Rules , 2002 as failure to providethe required information as contemplated under Rule 47 of theBalochistan Mineral Rules 2002.

8. That the submission of the application relating to H4, H8, H13,H35 and H79 etc is in violation of rule 48 of the BalochistanMinerals Rule 2002.

10. It is also not in the interest of the Government and people ofBalochistan that lease cannot be granted on a documents which isin complete and sketchy.”

564) Rule 48(3)(a) states a mining lease will not be granted unless:

• “the feasibility studies show that the mine can be profitably developed and

operated” (Rule 48(3)(a)(i));

• “the proposed plans for development and operation of the mine and

programme of the mining operations of the applicant will ensure the efficient,

beneficial and timely use of the mineral resources” (Rule 48(3)(a)(ii));

• “the proposals submitted with the application are satisfactory” (Rule

48(3)(a)(v)); and

• “It is in the interest of the development of the mineral resources of

Balochistan to grant the lease” (Rule 48(3)(a)(vi)).

565) The Licensing Authority had received a Feasibility Study as part of the Mining Lease

Agreement for only two of the known 13 deposits in the Mining Lease Area. It received

no feasibility studies for mines for the other deposits. The Licensing Authority would not

know how TCCP intended to develop the remainder of the deposits and if so in what

sequence so it could decide whether the grant of a lease over the entire Mining Lease

Area was an efficient, beneficial and timely use of the mineral resources. It therefore

could not grant the Mining Lease Application.


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iv) THE APPLICATION FAILED TO PROVIDE VALUE-ADDITION IN THEFORM OF A SMELTER AND REFINERY

The Licencing Authority also rejected the Mining Lease Application because it did not

provide value-addition in the form of a smelter and refinery.

Reasons 9 and 10 from the Notice:

“9. That the feasibility report is silent about the processingsmelting and refining of the metals/minerals to be extracted fromthe mining area.

10. It is also not in the interest of the Government and people ofBalochistan that lease cannot be granted on a documents which isin complete and sketchy.”

566) Rule 48(3)(a)(vii) provides for value-addition. It requires “a concrete proposal for value

addition for the Ore to be produced/exploited from the applicant’s mining lease within

the country is submitted, or if the facility is not available in the province, the Ore could

be taken out of the province with the prior approval of the Provincial Government.”

567) Rule 48(3)(a)(vi) requires that a mining lease shall not be granted if the application is not

in the interests of the development of the minerals in Balochistan.

568) That the Government of Balochistan required a smelter and refinery was always made

plain to the Claimant. The Mining Lease Application failed to address this issue at all.

569) The Claimant’s case ends here. The Licensing Authority’s (reasoned) decision is self-

standing pursuant to the 2002 BM Rules. The Claimant failed to meet both subjective and

objective criteria on which the decision was to be made. The Claimant’s suggestion that

the decision to refuse the mining lease was to pave the way for Balochistan’s own plans

to mine Reko Diq is baseless speculation and – even if true (which it isn’t) – fails to

undermine the legitimate grounds on which the Licensing Authority decided to reject the

Mining Lease Application.


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VII.3 PAKISTAN DID NOT BREACH ARTICLE 3(3) (“NON-IMPAIRMENT”)OF THE BIT

570) The Claimant does not quote Article 3(3) of the BIT, and for good reason. Article 3(3) of

the BIT provides:

“Each Party shall, subject to its laws, accord within its territoryprotection and security to investments and shall not impair themanagement, maintenance, use, enjoyment or disposal ofinvestments.” (Emphasis added)

571) It is plain from the text that any obligation “not to impair” is subject to Pakistani law. The

Claimant has failed to show a single breach of Pakistani law in relation to the

management, maintenance, use, enjoyment or disposal of its alleged investments. In fact,

it is the Claimant that has violated Pakistani law and its contractual obligations under the

CHEJVA Agreements.

572) The Claimant alleges that the Respondent prevented the Claimant from managing,

maintaining, using, enjoying, and disposing of its investment in Reko Diq, including all

the rights it allegedly possessed “under the CHEJVA, 2002 BM Rules, its Exploration

Licenses, it Surface Rights Lease and otherwise - and the comprehensive plan to mine

Reko Diq that its skill, money and labor produced.”617

573) Despite this rather tall allegation that the Respondent breached at least five purported

types of investment, the Claimant dedicates barely a paragraph to make its case.618 This

is not sufficient to satisfy the burden of proving a treaty violation.

574) The Claimant states: “For example, in the Feasibility Study TCC laid out its plans for a

mine at Reko Diq and the steps it would take to build it and make it successful.

Balochistan took various measures that have prevented TCC from carrying out those

plans.” (emphasis added)

575) The Claimant does not explain how its plans for a mine constitute an investment in the

first place. Even if its plans did constitute an investment, the Claimant fails to show how

617 Memorial, para 538.618 Memorial, para 538.


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the alleged “various measures” have impaired those plans in breach of Pakistani law. If

the Claimant is referring to the refusal to grant the Mining Lease Application, this was in

conformity with the Licensing Authority’s power under Rule 48 of the 2002 BM Rules. If

it is referring to its joint venture partner’s refusal to participate, this is too is compliant

with Article 11.3 of the CHEJVA.

576) The Claimant also argues that “Balochistan has tried to undermine the CHEJVA in the

Pakistan Supreme Court, it has broken the promises it made in the CHEJVA to support

TCC’s Mining Lease Application, it denied TCC a mining lease and have even denied

TCC effective access to the Reko Diq site by delaying and denying routine administrative

clearances.” It is unclear how these alleged measures impact upon any assets the

Claimant purports are investments under the BIT. Balochistan had a duty to the Court to

put forward the entire record relating to the CHEJVA and took the position that the

Supreme Court should decide the matter on the merits. This is a far cry from being a

breach of a non-impairment duty. In fact, Pakistani law permits a party to change or

modify its position in court upon the receipt of additional information or documentation.

The Claimant appears to be accusing Balochistan of performing its duty to assist the

Court when in fact Balochistan’s failure to do so would have placed it in contempt. The

circumstances leading to this are explained in the Kanrani Statement and in the Supreme

Court’s Judgment itself.

577) The Claimant cannot point to any promise in the CHEJVA that requires its joint venture

partner to support its Mining Lease Application. The CHEJVA expressly allows the BDA

not to participate, in which event the Claimant could make an application at its sole risk,

while having still to satisfy the required Government regulations and the conditions

precedent concerning the acquisition of the BDA’s interest (Article 11.6).619

578) As mentioned, above, the Licensing Authority’s decision to reject the Claimant’s Mining

Lease Application was made pursuant to the 2002 Mining Rules and does not constitute

an impairment. In any event, the Claimant had at best a right to apply for, not receive, a

mining lease. There was no interference with the Claimant’s purported right to apply and

619 CHEJVA, Article 11.4.2 CE-1.


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TCCP’s application was duly considered under the 2002 BM Rules. The Claimant’s

Exploration Licence EL-5 expired on 19 February 2011, and hence all alleged rights

pertaining to that area, including access, came to an end on that date.

579) In short, the Claimant’s allegations that Article 3(3) of the BIT has been violated have no

factual or legal basis. The Claimant has not shown how its purported investment has been

impaired, nor has it proven that the measures allegedly constituting such impairment were

in breach of Pakistani law.

VII.4 PAKISTAN DID NOT BREACH ARTICLE 7 (“EXPROPRIATION”) OFTHE BIT

580) Article 7 of the BIT provides that neither treaty party “shall nationalise, expropriate or

subject to measures having effect equivalent to nationalisation or expropriation

(hereinafter referred to as “expropriation”) the investments of investors of the other

Party” unless the conditions therein are complied with.

581) The Claimant alleges that the Respondent breached Article 7(1) of the BIT “when,

without paying any compensation, it (i) arbitrarily deprived TCCA of its right to mine

Reko Diq, and (ii) appropriated information and data from TCC’s exploration work

and studies for use in Balochistan’s own Reko Diq Copper & Gold Project”620 (emphasis

added).

582) The Claimant’s claim brings to mind the remarks of the Tribunal in the O & L v. Slovakia

case:

“The random ‘sprinkling’ throughout the pleadings of a strongterm with a well defined legal meaning such as ‘expropriation’ or‘creeping expropriation’ does not transform that term by itself intoan allegation of facts founding a treaty violation.”621

620 Memorial, para 505621 Jan Oostergetel and Theodora Laurentius v. Slovak Republic, Ad hoc/UNCITRAL, Final Award dated

April 23, 2012, RLA-101 paragraph 320


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583) The Claimant’s claim that its alleged investment – whether the purported “right to mine

Reko Diq” or “information and data from TCC’s exploration work and studies” – was

expropriated is unsupported and insupportable.

A) THE CLAIMANT NEVER HAD THE “RIGHT TO MINE REKO DIQ”

584) The Tradex tribunal defined expropriation as a “compulsory transfer of property

rights”.622 The first challenge is to actually determine the purported property rights, if

any, that were allegedly taken away. The determination of whether the Claimant has in

fact acquired these rights is subject to the law of Pakistan.

“The property rights that are the subject of protection under theinternational law of expropriation are created by the host Statelaw. Thus, it is for the host State law to define the nature and extentof property rights that a foreign investor can acquire.”623

585) It is a matter of fact under Pakistani law that the Claimant was not entitled to mine Reko

Diq, either under the CHEJVA, or under the 2002 BM Rules.

586) The Claimant mischaracterises the purported rights that have allegedly been expropriated.

The Claimant contends that it “has a right under both the CHEJVA and the BM Rules to

mine Reko Diq”.624 This is an inaccurate statement given that neither the CHEJVA nor

the 2002 BM Rules grant it any such right.

587) Leaving aside the illegality, voidness and non-existence of the CHEJVA, even the

Claimant’s so-called right to apply for a mining lease (which is subject to “routine

Government requirements” pursuant to Article 11.8.2 of the CHEJVA) does not arise on

the facts. The CHEJVA contains clear rules in relation to when a joint venture party can

apply for a mining lease in relation to an Exploration Area that belongs to the Joint

Venture. As explained above, the Claimant never complied with those rules.

622 Tradex Hellas SA v Albania (Award), ICSID case ARB/94/2, dated April 29, 1999, RLA-102 paragraph177.

623 Campbell, McLachlan QC, Laurence Shore, Matthew Weiniger, INTERNATIONAL INVESTMENTARBITRATION: SUBSTANTIVE PRINCIPLES, RLA-103, p.289, paragraph 8.65.

624 Memorial, para 41


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588) Articles 11.2 and 11.3 of the CHEJVA set out the process pursuant to which each joint

venture party could elect to participate in a mining venture in response to a feasibility

study commissioned by the joint venture.625 Article 11.4.2 of the CHEJVA provides that

“where the BDA is a Non-participating Party, then subject both to BHPM obtaining all

routine Government approvals required and to compliance with Clause 11.6, BHPM

shall be entitled to undertake sole risk investment (or form a consortium to undertake

such investment in a mining area).” The Claimant never sought, nor was granted, any

such Government approval.

589) Nor did the Claimant meet the condition precedent in Article 11.6 of acquiring its joint

venture partner’s “percentage interest pertaining to the proposed Mining Area” for a

price agreed through negotiations or expert-determination626.

590) Indeed, the Claimant acknowledged this failure in a letter to the Secretary Mines dated 29

April 2011:627

“Kindly note that under clause 11.6.2 of the Chagai HillsExploration Joint Venture Agreement dated July 29, 1993(CHEJVA) in case the parties are unable to reach a mutuallyacceptable decision pursuant to Clause 11.5 within one hundredand twenty (120) days of the Election Date (as such term in definedin CHEJVA) then any party can refer to an expert appointedpursuant to clause 15.2 the question of fair value of the Non-participating Party’s Transfer Interest (as such term is defined inCHEJVA).

625 CHEJVA, Article 11.1 CE-01. See Letter dated 29 December 2010 to Mr Raisani, Secretary Mines statingthat 90 day period election period under the CHEJVA expired under 8 November 2010, and that theExploration License EL-5 held by the Joint Venture expires on 19 February 2011, CE-109.

626 See: Letter from the Claimant to Raisani dated 8 February 2011, CE-113: “Please note that the explorationlicense EL-5 is expiring on or about February 19, 2011, and it is imperative that the Mining LeaseApplication in relation to the Mining Area (as defined in the CHEJVA) for the Mining Operations (asdefined in CHEJVA) of the Reko Diq project may be filed with the licensing authority ahead of theexploration of EL-5.” Further, “As per clause 10(3) (c)of CHEJVA, I as the Manager of the Joint Ventureconsider it appropriate to keep the Government of Balochistan in picture regarding this important step.Enclosed herewith please find draft of a proposed letter which the Mines and Mineral DevelopmentDepartment may wish to formally issue in fulfilment of clause 10.3(c) of CHEJVA.” This letter did notcontain any offer to purchase the transfer interest, and no other letter prior to the Mining Lease Applicationrectified the situation. However, after the Mining Lease Application, TCCP sent a letter on 3 March 2011with an offer. The matter was before the Supreme Court and no steps could be taken: Letter from SecretaryRaisani to TCCP dated 25 March 2011, CE-114.

627 See Claimant’s response to Raisani, Governor and BDA dated 29 April 2011 CE-115


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You will appreciate that through its letter dated March 3, 2011,Tethyan Copper Company Pty. Limited (“TCC”) had invited GOBto engage with it in agreeing the fair value of the Non-participatingParty’s Transfer interest as is contemplated by clause 11.5.3 ofCHEJVA.

Since the parties have been unable to reach a mutually acceptabledecision regarding fair value of the Non-participating Party’sTransfer Interest within the stipulated period of one hundred andtwenty (120) days from the Election Date, TCC is compelled tohereby serve on the GOB notice of its intent to submit the matter indispute to an independent Expert (as such term is defined inCHEJVA0. TCC accordingly proposes the name of Deutsche Bankas an Expert and request the consent of GOB to this appointment.In case both parties fail to agree upon the appointment of theExpert within thirty (30) days of the notice to submit the dispute toExpert, the President of the Institution of Mining and Metallurgyshall be asked to designate an Expert.”

591) The Claimant never referred the matter to expert determination as was contemplated by

Article 16 of the CHEJVA before it made the Mining Lease Application on 8 February

2011. Hence, it is plain that the purported right to apply for the Mining Lease Application

under Article 11.8.2 never arose, and the potential for this right to arise was coterminous

with the expiry of Exploration Licence EL-5 on 19 February 2011.

592) Furthermore, even if this pre-condition was satisfied, the Claimant’s Mining Lease

Application was for 99.473 square kilometers of the area covered by Exploration Licence

EL-5, whereas the Claimant’s election as a Participating Party was for the less than six

square kilometers covered by the Feasibility Study. Hence, the question of any

entitlement in relation to the remaining 93 or more square kilometers of the area covered

by the Exploration Licence EL-5 does not even arise under Article 11.8.2. That sub-

clause applies to a Participating Party’s or the Joint Venture’s election to “develop a

mine” in the Mining Area whose parameters are determined by the Feasibility Study.628

The Feasibility Study itself notes that the Claimant has the “right to apply for a mining

lease.”

628 CHEJVA, Article 11.7, 11.8.1 and 11.8.2, CE-01.


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593) Even if there was an entitlement to mine pursuant to Article 11.8.2, it is subject to

compliance with routine Government requirements for converting an exploration licence

into a mining lease. These routine requirements are set out in Rules 47 and 48 of the 2002

BM Rules.

594) The Claimant inaccurately argues that when the “holder of an exploration licence”

applies for a lease “the licensing authority shall grant the mining lease”629 under Article

48(1). In doing so, it misleads the Tribunal by leaving out the critical preceding words

“subject to the Rules, the licensing authority shall grant the mining lease”, and then fails

to mention that Article 48(3) sets out eight circumstances in which the Licensing

Authority “shall not grant” the mining lease – many of which, as explained above, were

not satisfied by the Mining Lease Application.

595) An important basis for rejection of the Mining Lease Application was that TCCP claimed

for itself title to the Exploration Licence EL-5, which was in fact applied for on behalf of

and granted in the name of the joint venture. As noted above, it is the Claimant that has

appropriated Joint Venture Property (which is defined in the CHEJVA to include the

Exploration Licence). Exploration Licence EL-5 was granted in the name of the BDA-

TCCP Chagai Hill Joint Venture. TCCP made an application for a mining lease on its

own, without seeking to acquire the transfer of the its joint venture partner’s share in the

Joint Venture Property (which included the Exploration Licence EL-5 and the Feasibility

Study).

596) The Claimant in effect recognised this position. In TCCP’s letter of 26 September 2006

to Director General Mines and Minerals,630 it states that:

“The correct factual position is that all our rights and obligationsrelating to the H4 Prospect and the Reko Diq area emanate fromthe Exploration License no. EL-5 granted to TCC and BDA (75%and 25%)”

629 Memorial, paragraph 509.630 Letter from TCCP to MMDD, 26 September 2006, CE-59.


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Rule 48(1) provides for the grant or refusal of a mining lease to holders of exploration

licences. The Licensing Authority made it plain in its Notice for Refusing TCCP’s

Mining Lease application that TCCP did not have standing to apply for a mining lease as

the holder of the Exploration Licence EL-5.631 Furthermore, the Claimant’s breach of its

obligations under the CHEJVA was a breach of its undertaking to the Licensing

Authority to uphold all the terms of the CHEJVA. The reference in reason 6 of the Notice

to refuse is to TCC’s letter dated 3 March 2011 to commence negotiations for acquiring

its joint venture partner’s interest in the Joint Venture Property pursuant to Article 11.4 of

the CHEJVA. It is clear that this approach was made almost a month after the Claimant

had exercised its so-called entitlement to apply for a mining lease under Article 11.8.2.

Article 11.4 of the CHEJVA required the Claimant to acquire the transfer of its joint

venture partner’s interest in the Joint Venture Property before it can undertake a sole risk

mining development.

597) As a condition for obtaining an assignment of BHP’s interest in the Exploration

Licence,632 the Claimant made an express Undertaking to the Licensing Authority that it

“will observe and abide by all the terms and conditions as contain in this office letter No.

DG(MM)-EL(5)/5011-22 dated 18-05-2002 and will also abide by all other conditions of

National Mineral Policy read with Balochistan Mineral Rules, 2002 as

approved/amended from time to time.” It also promised to “perform its obligation under

the agreement signed between M/S BDA/BHP Chagai Hills Joint Venture & Tethyan

Copper Company Limited.” Further, it agreed that “The Exploration License assigned to

the M/S Tethyan Copper Company Limited shall be terminated if they violate any of the

terms and conditions as laid down above and in Balochistan Minerals Rules 2002.”

598) It is in these circumstances, where the Claimant’s standing to apply for a mining lease

under the 2002 BM Rules has been rejected, and the existence of any contractual rights

are pending determination by the ICC Tribunal, that the Claimant asserts that its

purported “right to mine Mine Reko Diq” is a protected investment under the BIT.

631 See reasons 5 and 6 from the Notice, quoted above.

632 Letter from Directorate General of Mines and Minerals to the M/S BDA/BHP Chagai Hills Joint Venture:Conditions upon Grant of Assignment Ex RE-25


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599) There cannot be an expropriation unless the complainant demonstrates the existence of

proprietary rights in the first place. The Claimant did not receive a guarantee that it would

obtain a right to mine Reko Diq. Therefore, the Claimant’s right to apply for a mining

lease under the CHEJVA does not meet the threshold of an “investment”. This was

confirmed by the tribunal in Nagel v The Czech Republic633:

“the main question which the Arbitral Tribunal has to answer is notwhether the Czech Republic had any responsibility under theCooperation Agreement but whether Mr Nagel's contractual rightsunder the Cooperation Agreement were such as to constitute an"asset" and an "investment" and, if so, whether Mr Nagel wasdeprived of his asset and investment by the Government'sResolution No. 428 of 10 August 1994. As stated above, the basicundertaking in the Cooperation Agreement was that the partiesshould work together for the purpose of obtaining a GSM licence.

There was not, and could not be, a guarantee that a licence wouldin fact be obtained. That would depend on the Government, and theGovernment had made no undertaking in this regard. Mr Nagelcould do no more than hope that his cooperation with the State-owned Czech company SRA would increase his chances to becomeinvolved in the operation of GSM in the Czech Republic, but hecould not be certain of getting a licence. Although he may havebeen encouraged by various remarks from Ministers orGovernment officials or by the general interest they demonstratedin his plans, this was not sufficient, in the Arbitral Tribunal's view,to raise his prospects based on the Cooperation Agreement to thelevel of a "legitimate expectation" with a financial value”(emphasis added).

600) In 2002, British businessman, William Nagel, brought proceedings under the Czech

Republic-UK BIT alleging that the Czech authorities had backtracked on a commitment

to award him a GSM mobile phone licence pursuant to a cooperation agreement with a

Czech state entity. The parties to the cooperation agreement were to jointly seek to obtain

through a consortium the necessary permits to establish, own and operate a GSM network

in the Czech Republic. The Czech authorities went on to hold a public tender for two

mobile phone contracts, neither of which was awarded to Mr Nagel. This led to the claim

633 William Nagel v. The Czech Republic, SCC Case No.049/2002, Award dated September 9, 2003, RLA-104paragraph 325-326


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by Mr Nagel that the Czech Republic had deprived him of the rights he had obtained

through the cooperation agreement with the Czech state entity and he was therefore

entitled to receive compensation for violations of the UK-Czech Republic BIT, including

the fair and equitable treatment and compensation for expropriation guarantees.

601) The Tribunal started its analysis by determining whether Mr Nagel’s rights under the

cooperation were an “asset” and an “investment” under the treaty. It based its decision on

whether these rights created a legitimate expectation that had a financial value. In this

regard, the Tribunal found that these contingent rights under the cooperation agreement

were not such as to constitute an asset. The Tribunal set out the following helpful

guidance in determining whether such contingent rights can constitute an investment.

“299. ..an “investment” is defined as an “asset”. Moreover, theexamples in sub-paragraphs (i)-(v) assist in shedding light on themeaning of “asset” and “investment. The examples given all seemto relate to rights or claims which have a financial value…

Article 5 of the Treaty, which requires compensation to be paid incase of nationalisation or expropriation of an investment, alsoseems to be based on the assumption that an investment issomething which has a financial value. There seems to beunanimity among writers that the financial value needs to be real,i.e. flow from the terms of a contract etc., rather than justpotential (cf., besides the authorities cited supra, the example givenby F.A. Mann, British Treaties for the Promotion and Protection ofInvestments in: Further Studies in International Law, 1990, p.234et seq, at 237).

300. It follows then, when read in their context, the terms “asset”and “investment” in Article 1 shall be considered to refer to rightsand claims which have a financial value for the holder. Thiscreates a link with domestic law, since it is to a large the rules ofdomestic law that determine whether or not there is a financialvalue. In other words, value is not a quality deriving from naturalcauses but the effect of legal rules which create rights and giveprotection to them.

301. Article 1(1)(c) makes it clear that a claim can be accepted asan “asset” if it has a financial value. However, a claim cannormally have a financial value only if it appears to be well-founded or at the very least create legitimate expectation ofperformance in future.”


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602) The tribunal in that case reviewed the scope of the alleged rights and concluded that in

that case the agreement was a basis for further work and as it was “only of a preparatory

nature…it cannot find that the rights derived from it had a financial value.”

603) In this case, the Respondent puts the Claimant to strict proof of explaining how its rights

under a void, illegal and non est contract under its applicable law can be right attracting

any financial or economic value. Furthermore, if even the contract were valid, the fact

that these alleged rights did not arise on the facts.

604) The award in Generation Ukraine v Ukraine makes a similar finding. The claimant

contended that Kyiv City State Administration’s failure to grant a revised land lease

agreement amounted to an expropriation because it effectively put an end to its

construction project because it created an insurmountable obstacle for any construction

work to lawfully proceed. In this case the Tribunal thought it “important first to identify

the object of the alleged expropriation.”634

605) It went on to state that:

“the Claimant interprets Certificate B as giving effect to [ ] theClaimant’s ownership rights [ ] over the project in its entirety. []The truth of the matter is that, as of 31 October 1997, theClaimant had a very limited bundle of rights arising under theOrder on Land Allocation, Lease Agreements, FoundationAgreement and Construction Permit. Thus, if the Kyiv City StateAdministration’s omission on 31 October 1997 did constitute anexpropriation, it could only have deprived the Claimant of theselegal interests and them alone”635

606) In this case, the Claimant did not even have a limited bundle of rights in relation the

Mining Lease Application. Those purported limited rights did not exist.

634 Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, dated September 16, 2003, (“GenerationUkraine”) RLA-105, paragraph 20.7.

635 Ibid, paragraph 20.8


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B) THE LICENSING AUTHORITY’S EXERCISE OF REGULATORY POWERSOVER MINERAL RESOURCES DOES NOT AMOUNT TO ANEXPROPRIATION

607) The Licensing Authority refused TCCP’s application to the Mining Lease while

exercising its regulatory powers in relation to the grant or refusal of mineral titles in

Balochistan.

608) It is well established that the exercise of a state’s “police powers” under international law

will not give rise to a right to compensation. There is a strong line of decisions

confirming that bona fide regulatory measures are outside the scope of the expropriation

provisions found in investment treaties. Examples are to be found in the cases of Saluka

v. Czech Republic636, Genin v. Estonia637 and Methanex v. USA638. The tribunal in the

Saluka case held that:

“[i]t is now established in international law that States are notliable to pay compensation to a foreign investor when, in thenormal exercise of their regulatory powers, they adopt in a non-discriminatory manner bona fide regulations that are aimed at thegeneral welfare.”

609) The Methanex tribunal also recognised that unless specifically agreed otherwise, non-

discriminatory regulatory measures are excluded from the scope of expropriation, stating:

“… as a matter of general international law, a non-discriminatoryregulation for a public purpose, which is enacted in accordancewith due process and which affects, inter alios (sic), a foreigninvestor or investment is not deemed expropriatory andcompensable unless specific commitments had been given by theregulating government to the then putative foreign investor

636 Saluka Investments BV (The Netherlands) v. Czech Republic, PCA/UNCITRAL, Partial Award datedMarch 17, 2006. RLA-106. The tribunal held that Article 5 of the BIT, on expropriation, must beinterpreted in accordance with customary international law. The Saluka tribunal affirmed the regulatorypowers of a state in the context of the expropriation provision (Paragraph 255).

637 The ICSID tribunal in Genin, RLA-93 took a similarly robust view in relation to a state’s power to regulatethe financial services sector. The Tribunal found that, under the applicable standards of international law,the Republic of Estonia was acting, through its Central Bank, as a prudent and concerned supervisor in thebanking sector.

638 Methanex Corporation v United States of America, NAFTA Arbitral Tribunal, Final Award dated August 3,2005. RLA- 107


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contemplating investment that the government would refrain fromsuch regulation.”

610) This reasoning was also followed in the Saluka639 award, in which the tribunal stated that:

“…the principle that a State does not commit an expropriation andis thus not liable to pay compensation to a dispossessed alieninvestor when it adopts general regulations that are ‘commonlyaccepted as within the police power of States’ forms part ofcustomary international law today.”

611) The ICSID tribunal in Genin v Estonia640 took a similarly robust view in relation to a

state’s power to regulate the financial services sector. The claim concerned the

cancellation by the Central Bank of Estonia of an operating license held by Innovation

Bank, a financial institution incorporated under the laws of Estonia in which the

claimants were shareholders. The tribunal found that under the applicable standards of

international law the Republic of Estonia was acting, through its Central Bank, as a

prudent and concerned supervisor in the banking sector. The tribunal further accepted

Estonia’s explanation that the circumstances of political and economic transition

prevailing in the country at the time justified heightened scrutiny of the banking sector. It

noted that such regulation by a state reflects a clear and legitimate public purpose.

612) Article 3 of the 1967 OECD Draft Convention on the Protection of Foreign Property

states that “no Party shall take any measures depriving, directly or indirectly, of his

property a national of another Party..” , however subsequent notes make clear that “the

concept of “taking” is not intended to apply to normal and lawful regulatory measures

short of direct taking of property rights” (emphasis added). 641

613) In the instant case, the Licensing Authority did not cancel a mineral title. The Licensing

Authority refused TCCP’s Mining Lease Application because it failed to meet the criteria

required under Rule 48(3), which included that it be in the best interests for the

development of minerals in the province.

639 Saluka ,¶ 262 RLA-106640 Genin, RLA-93641 “Indirect Expropriation” and the “Right to Regulate” in International Investment Law” OECD WORKING

PAPERS ON INTERNATIONAL INVESTMENT, Number 2004/4, RLA-108, p. 8


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614) The Claimant has no evidence whatsoever that the refusal was not bona fide and not a

legitimate exercise of the state’s police powers. The Claimant relies on allegation,

conjecture and rumour (particularly in relation to the meeting memo of the Balochistan

cabinet meeting which took place some two years before the refusal of the mining lease

application).

615) The Claimant’s allegation that there was a compensable expropriation of its alleged

investment is without merit and must be dismissed.

C) THE CLAIM THAT THE GOVERNMENT OF PAKISTAN EXPROPRIATEDINFORMATION AND DATA IN RELATION TO THE EXPLORATION OFREKO DIQ FAILS AS A MATTER OF LAW AND FACT

616) The Claimant also asserts sole ownership to data and information arising from the

exploration of the area covered by Exploration Licence EL-5. This information and data

is Joint Venture Property pursuant to the CHEJVA.642 It is wrong for the Claimant to

assume ownership of Joint Venture Property without seeking a transfer of the legal and

beneficial rights belonging to its joint venture partner in that property. However, in this

case, pursuant to the Article 71 of the 2002 BM Rules, all such data and information

belongs exclusively to the Licensing Authority. The Claimant agreed to abide by all the

conditions and rules in the BM Rules when it first acquired the Assignment of BHP’s

share of the exploration licence in its name and this was reaffirmed in the most recent

renewal of Exploration Licence EL-5.

617) The Government has complete rights over all data produced during the exploration under

Rule 71 of the 2002 BM Rules. The Claimant expressly committed to be bound by all the

provisions of the 2002 BM Rules. This included Rule 71, which gives the Government

exclusive ownership and rights over exploration data:

“71. Rights over data- (1) Subject to sub-rule (2), the Governmentshall have the exclusive right to all data including geological,geophysical, geochemical, petrophysical, engineering, pit logs,maps, magnetic tapes, cores and production data, as well as allinterpretative and derivative data including reports, studies,analyses, interpretations, bulk sampling results, assaying results,

642 Article 1,1, CHEJVA, CE-1


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evaluations and other information in respect of exploration ormining operations.

(2) Subject to sub-rule (3) the holder of a mineral tile ormineral concession shall have the right to make use of the datareferred to in sub-rule (1), free of costs, for the purpose ofexploration or mining operations and to retain copies or samples ofmaterial or information constituting the data” (emphasis added).

618) Furthermore, the National Mineral Policy makes it plain that:643

“Proprietary Rights over Data

All geodata obtained by a licensee/lessee shall be a property of theLicensing Authority and shall be deposited at such offices and atsuch intervals as are specified in the Rules.”

619) The Claimant’s allegation that the Respondent’s used the exploration data and

information in relation to developing the Reko Gold & Copper Project is baseless. The

Claimant is put to strict proof in proving this assertion. In any event, the Claimant has no

right to the data under Article 71, as was previously acknowledged by the Claimant.

620) On 24 February 2007, the Minutes of Operating Committee Meeting644, attended and

signed by the Claimant, note that:

“Mr Hargreaves noted that GOB had expressed concern at the lackof submission of reports for the previous Tanjeel Feasibiity Study.He stated that the full suite of engineering reports, all of whichwere in draft form at the point of suspension, had been delivered toBDA in early 2006. He added that it could be misleading to submitthe draft reports to GOB since these would effectively becomepublic documents containing outdated information, there was riskof extracts of information causing further confusion” (emphasisadded).

621) In sum, the Claimant’s allegation that the Government of Balochistan expropriated data

and information in relation to the exploration of Reko Diq does not stand up either as a

matter of law or fact. The Government did not expropriate the data as contended by the

Claimant by using the information in the Reko Diq Gold and Copper Project. The data

643 National Mineral Policy, 8.18. CE-190644 CE-60


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and information in any event belongs to the Government of Balochistan t as a matter of

law pursuant to the 2002 BM Rules and the National Mineral Policy. These rights never

belonged to the Claimant. As a condition of its exploration licence, it accepted all the

conditions set out in the 2002 BM Rules, which included the Government of

Balochistan’s ownership of all exploration data and information created during the

exploration licence. Hence, the question of expropriation does not even arise.


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VIII

COUNTER-CLAIMS

VIII.1 SUMMARY OF COUNTER-CLAIMS

622) Respondent hereby asserts counter-claims against Claimant. These counter-claims

represent the flip side of the Respondent’s defences to the Claimant’s claims in this

arbitration, and arise out of the Claimant’s breaches of Pakistani law and the terms of the

CHEJVA.

623) These counter-claims are raised without prejudice to the Respondent’s objections to

jurisdiction and admissibility of this Counter-Memorial. For clarity’s sake, these counter-

claims will only be pursued if and to the extent that the Tribunal finds that the Claimant

made a qualifying “investment” and upholds the relevant premises of jurisdiction for the

purposes of the BIT. The Respondent also raises these counter-claims without prejudice

to its arguments in relation to its responsibility for and the attribution of acts (set out in

Section VI) which have allegedly violated the BIT.

624) In essence: (1) the Claimant’s alleged “investment” was not made “in accordance with

[Pakistan’s] laws and investment policies”;645 (2) the Claimant breached Articles 11, 15

and 24.6 of the CHEJVA by, inter alia, filing a Mining Lease Application without even

attempting to comply with the contractual pre-conditions to exercising such right to

apply, and by preparing a secret Expansion Pre-Feasibility Study; and (3) the Claimant

violated Rule 29(2)(c)(iii) of the 2002 BM Rules by failing to complete “a full feasibility

study of the discovered deposits” in the area covered by the Exploration Licence EL-5

despite expressly undertaking to do so as part of its application for a second renewal of

Exploration Licence EL-2005 on 3 November 2007.

645 Article 3(1) of the BIT.


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625) In the words of Professor Renteln:

“The counterclaim is a legal device designed to enhance judicialefficiency by coordinating the handling of multiple claims at once.Treating the counterclaim and claim simultaneously insuresconsistent results which would not be guaranteed if the claims werereviewed separately. A counterclaim may serve the purpose ofavoiding financial loss which can occur if there is a delay betweenthe adjudication of the original claim and the second claim.Admitting a counterclaim may also yield a more fair result byensuring that additional facts and legal obligations are notignored.”646

VIII.2 JURISDICTION

626) The ICSID Convention and Arbitration Rules expressly provide for the admissibility of

counter-claims. Article 46 of the ICSID Convention states:

“Except as the parties otherwise agree, the Tribunal shall, ifrequested by a party, determine any…counter-claims arisingdirectly out of the subject-matter of the dispute provided that theyare within the scope of the consent of the parties and are otherwisewithin the jurisdiction of the Centre.”

627) ICSID Arbitration Rule 40(1) similarly provides:

“Except as the parties otherwise agree, a party may present anincidental or additional claim or counter-claim arising directly outof the subject-matter of the dispute, provided that such ancillaryclaim is within the scope of the consent of the parties and isotherwise within the jurisdiction of the Centre.”

628) In the words of Christoph Schreuer:

“[t]he basic idea of Art. 46 is the consolidation of closely relatedclaims into one set of proceedings. Parallel or consecutiveproceedings relating to different aspects of the same dispute arenot only costly and inefficient but are also liable to lead toconflicting outcomes. The principles of economy and of finality

646 Encountering Counterclaims 15 Den. J. Int’l L. & Pol’y, 379 (1986) at p.380 RLA-109


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militate in favour of hearing and deciding all aspects of a disputein one set of proceedings.”647

629) Under ICSID Arbitration Rule 40(2), a counter-claim is timely if presented “no later than

in the Counter-Memorial”. The filing of this counter-claim as part of Respondent’s

Counter-Memorial is, therefore, timely.

630) The present counter-claim also satisfies all other ICSID jurisdictional prerequisites. As

explained below, the Respondent’s counter-claims (1) arise directly out of the subject-

matter of the dispute, (2) are within the scope of the consent of the parties, and (3) are

otherwise within the jurisdiction of the Centre.

A) RESPONDENT’S COUNTER-CLAIMS ARISE DIRECTLY OUT OF THESUBJECT-MATTER OF THE DISPUTE

631) Note B (a) to ICSID Arbitration Rule 40 explains when a counter-claim is deemed to

arise out of the same subject-matter as the main claim:

“The test to satisfy [whether a counter-claim arises directly out ofthe subject-matter of the dispute] is whether the factual connectionbetween the original and ancillary claim is so close as to requirethe adjudication of the latter in order to achieve the final settlementof the dispute, the object being to dispose of all grounds of disputearising out of the same subject-matter.”

632) In the present case, there can be no doubt that there is a close factual connection between

the claims and the counter-claims requiring their adjudication in the same set of

proceedings. The Respondent’s counter-claims are the flip side of the Respondent’s

defences to the Claimant’s claims, and arise principally from the same provisions of the

CHEJVA and the 2002 BM Rules. The final settlement of the dispute arising out of the

alleged breaches of these provisions cannot, therefore, be achieved without consideration

of the Respondent’s counter-claims.

647 Schreuer, The ICSID Convention: A Commentary, RLA-23, paragraph 732.


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B) RESPONDENT’S COUNTER-CLAIMS ARE WITHIN THE SCOPE OFCONSENT OF THE PARTIES

633) The Claimant’s consent to arbitrate Respondent’s counter-claims can be found in both the

BIT and the ICSID Convention.

634) Article 13(1) refers to disputes between an investor and the host states. Article 13(2) of

the BIT expressly envisages that “either party” may submit “the dispute” to ICSID

arbitration. Article 13(5) makes express reference to “counter-claim[s]” being asserted

by a Contracting Party to the BIT against an investor. It is therefore clear that the BIT

anticipates claims or counter-claims being advanced by a State party. By commencing

these proceedings pursuant to the arbitration agreement (and the conditions of the offer

contained therein) in Article 13 of the BIT, the Claimant therefore consented to counter-

claims being advanced by Respondent.

635) In addition, by resorting to ICSID arbitration, the Claimant consented to be bound by the

terms of the ICSID Convention and the ICSID Arbitration Rules, including Article 46 of

the ICSID Convention and ICSID Arbitration Rule 40, both quoted above. In the words

of Professor Reisman in Roussalis v Romania648:

“in my view…when the State Parties to a BIT contingently consent,inter alia, to ICSID jurisdiction, the consent component of Article46 of the Washington Convention is ipso facto imported into anyICSID arbitration which an investor then elects to pursue. It isimportant to bear in mind that such counterclaim jurisdiction is notonly a concession to the State Party: Article 46 works to the benefitof both respondent state and investor. In rejecting ICSIDjurisdiction over counterclaims, a neutral tribunal – which was, infact, selected by the claimant – perforce directs the respondentState to pursue its claims in its own courts where the very investorwho had sought a forum outside the state apparatus is nowconstrained to become the defendant. (And if an adverse judgmentensues, that erstwhile defendant might well transform to claimantagain, bringing another BIT claim.) Aside from duplication andinefficiency, the sorts of transaction costs which counter-claim andset-off procedures work to avoid, it is an ironic, if not absurd,outcome, at odds, in my view, with the objectives of internationalinvestment law.”

648 Roussalis v Romania, ICSID Case No. ARB/06/1, Award dated December 7, 2011 RLA-110.


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636) Similarly, Ibrahim Shihata and Antonio Parra have stated that:

“If a counterclaim of the State is closely connected with the disputeof the investor, it may be assumed that the counterclaim will fallwithin the scope of the mutual consent of the parties and thus beadmissible.”649

637) The present counter-claims therefore fall within the scope of consent of the parties.

C) RESPONDENT’S COUNTER-CLAIMS ARE OTHERWISE WITHIN THEJURISDICTION OF THE CENTRE

638) The Respondent’s counter-claims also clearly satisfy the jurisdictional prerequisites of

Article 25(1) of the ICSID Convention, which reads as follows:650

“The jurisdiction of the Centre shall extend to any legal disputearising directly out of an investment, between a Contracting State… and a national of another Contracting State, which the parties tothe dispute consent in writing to submit to the Centre. When theparties have given their consent, no party may withdraw its consentunilaterally.”

639) Article 25(1) prescribes five jurisdictional elements: (1) there must be a “legal dispute”

between the Parties; (2) the dispute must relate to an “investment”; (3) the dispute must

“arise directly” out of that investment; (4) the dispute must be between a Contracting

State to the ICSID Convention and a national of another Contracting State; and (5) the

Parties must have consented in writing to submit the dispute to the jurisdiction of this

Tribunal.

640) First, a “legal dispute” concerns “the existence or scope of a legal right or obligation, or

the nature or extent of the reparation to be made for breach of a legal obligation”.651

649 Ibrahim F.I. Shihata and Antonio R. Parra, THE EXPERIENCE OF THE INTERNATIONAL CENTRE FORSETTLEMENT OF INVESTMENT DISPUTES, 14 ICSID Review – Foreign Investment Law Journal, 299,320 (1999) RLA-111

650 Article 13 of the BIT envisages, more broadly, the submission of “a dispute…relating to an investment”. Itis well-established, however, that the terms of a BIT can narrow, but not expand, the jurisdiction providedby the ICSID Convention. Respondent, therefore, needs to satisfy the narrower jurisdictional test laid downin Article 25(1) of the ICSID Convention.

651 International Bank for Reconstruction and Development, Report of the Executive Directors on theConvention on the Settlement of Investment Disputes between States and Nationals of Other States, 18March 1965, RLA-112 at para. 27: “The ICSID Convention does not define the term “dispute”. However,


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The present counter-claims concern the Claimant’s breach of the BIT as a result of its

failure to comply with the BIT (and in particular the requirement that the investment be

“admitted by [the Respondent] subject to its laws”652), its breach of the underlying

investment agreement in this case (the CHEJVA), and its breach of the 2002 BM

Rules.653 This is sufficient to establish a “legal dispute” between the Parties.

641) Second, if (but only if) the Tribunal dismisses the Respondent’s objection to jurisdiction

and admissibility on this issue, then the dispute arises out of the Claimant’s “investment”.

This is, in effect, admitted by the Claimant, as the Respondent’s counter-claim concerns

the very same contractual instruments (the CHEJVA Agreements), and the very same

regulatory instrument (the 2002 BM Rules), which the Claimant argues (wrongly)

constitute its investment.

642) Third, the dispute “arises directly” out of that investment. The requirement of

“directness” in Article 25(1) of the ICSID Convention means that “the dispute must not

only be connected to an investment but must also be reasonably closely connected” to the

investment. The Respondent’s counter-claim arises directly out of the very same

contractual and regulatory instruments, which the Claimant argues (wrongly) constitute

its investment.

643) Fourth, the Respondent is a Contracting State to the ICSID Convention. The Claimant is

a national of another Contracting State to the ICSID Convention (namely, Australia). It

is therefore indisputable that the present counter-claims satisfy this fourth condition for

jurisdiction.

it is uncontroversial, as a matter of public international law, that a “dispute is a disagreement on a point oflaw or fact, a conflict of legal views or of interests between two persons”: The Mavrommatis PalestineConcessions, Judgment, 1924 P.C.I.J. (ser. A) No. 2 (August 30), RLA-113 p. 11.

652 Article 1(a) of the BIT.653 See Amco Asia Corporation v. Republic of Indonesia, ICSID Case No. ARB/81/1, RLA-119, paragraph 125

(“[I]t is correct to distinguish between rights and obligations that are applicable to legal or naturalpersons who are within the reach of a host State’s jurisdiction, as a matter of general law; and rights andobligations that are applicable to an investor as a consequence of an investment agreement entered intowith that host state. Legal disputes relating to the latter will fall under Article 25(1) of the Convention”)and SGS v Philippines, paragraph 69.3 RLA-114 (“[The Tribunal] has jurisdiction with respect to a claimarising under the…Agreement, even though it may not involve any breach of the substantive standards ofthe BIT”) confirm that an ICSID Tribunal has jurisdiction over claims arising out of an investmentagreement.”)


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644) Fifth, the Parties have consented in writing to submit this dispute to the jurisdiction of

this ICSID Tribunal. The Respondent provided its written consent in the form of Article

13 of the BIT. The Claimant provided its consent in paragraph 16 of its Request for

Arbitration.

645) Accordingly, subject to the Tribunal’s determination on whether or not the Claimant

made an “investment” and has standing for the purposes of the BIT, there can be no doubt

that the Respondent’s counter-claims satisfy the jurisdictional requirements under Article

25(1) of the ICSID Convention.

VIII.3 BASIS OF COUNTER-CLAIMS

646) The Respondent submits that the Claimant’s alleged investment was admitted otherwise

than in compliance with the Respondent’s laws, and that the Claimant breached the

CHEJVA and the 2002 BM Rules.

A) THE CLAIMANT’S ALLEGED INVESTMENT WAS ADMITTED INVIOLATION OF PAKISTANI LAW AND INVESTMENT POLICIES

647) Article 1(a) of the BIT states that ““investment” means every kind of asset owned or

controlled by investors of one Party and admitted by the other Party subject to its law

and investment policies applicable from time to time…” (emphasis added). Likewise,

the Preamble to the BIT acknowledges that “investments of investors of one Party in the

territory of the other Party would be made within the framework of the laws of that other

Party”. There can be no doubt that the Claimant’s investment (if one exists, which is

denied) is unlawful, and thus was not admitted in accordance with the law of the

Respondent and its investment policy.

648) The Respondent has provided extensive detail as to how the Claimant’s purported

investment was unlawful above. The issue of illegality has been determined conclusively

by the Supreme Court of Pakistan. The Respondent will not reiterate all of the Supreme

Court’s findings again. It notes, however, that this unlawfulness was known to BHP by

2000, when it received advise from leading Pakistani law firms to the effect that: (1) there


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were no meaningful negotiations for the 2000 Addendum; (2) the 2000 Addendum was

only to BHPs benefit; (3) BHP knew, at least by 1999, that the CHEJVA was void; and

therefore, (4) at the time of making its earlier submissions, the Government of

Balochistan was not aware of this advice given to the BDA to the effect that the CHEJVA

was most likely illegal and void.654 The Claimant proceeded to build upon the illegality

of the initial investment by executing the 2006 Novation Agreement. This agreement

was executed by “the Governor of Balochistan through the Balochistan Development

Authority for and on behalf of the Province of Balochistan”, and was reliant on the

existence of the CHEJVA for its operation. It was also reliant on the 2000 Addendum for

its operation, which earlier agreement was created to satisfy a condition precedent in

Article 5.1.1 in the 2000 Option Agreement, without which the 2000 Option Agreement

could not have been concluded. As Article 5.1.1 states:

“5.1.1 BHP and the BDA have executed, a binding andunconditional Addendum to the CHJ, which provides for:

(a) clarification of BHP’s joint venture partner as the GOB actingthrough its agent the BDA…”

649) Accordingly, while BHP entered into the original CHEJVA unlawfully, it is clear that the

Claimant’s 2006 Novation Agreement was predicated on that very same unlawfulness,

transmitted into that agreement via the 2000 Option Agreement and 2000 Addendum.

Indeed, the 2006 Novation Agreement, and the Claimant’s acquisition of its putative

rights under it, could not have existed without the 2000 Addendum (and, after it, the 2000

Option Agreement) being signed and attempting (in vain) to mitigate the unlawfulness of

the CHEJVA.

650) The Supreme Court having reached its conclusions, the unlawfulness of the Claimant’s

investment is, for the purpose of this arbitration and for this Tribunal, established as a

matter of fact under Pakistani law. The Tribunal cannot reopen and adjudicate afresh

those questions of Pakistani law. Therefore, even if (somehow) the Tribunal finds that the

654 See Opinion of Kabraji and Talibuddin, 3 September 1999, Ex RE-56; Opinion of Kabraji and Talibuddin,30 September 1999, Ex RE-57; cited in Judgment of the Supreme Court of Pakistan, released on 10 May2013, p.86-87, Ex RE-18.


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Claimant made an “investment” for the purposes of the BIT, it cannot be contested that

such “investment” was illegal under Pakistani law.

651) The Respondent reserves its right to take all steps to develop this submission further

during the course of the arbitration. The Respondent also reserves its rights to seek

disclosure in relation to the Claimant’s and Mincor’s role in procuring the illegal 2000

Addendum and 2006 Novation Agreement. Such information may of course be useful

both in relation to the merits of the counter-claims and to the assessment of damages

payable by the Claimant to the Respondent.

B) THE CLAIMANT BREACHED THE TERMS OF THE CHEJVA

652) In addition to the unlawfulness of the Claimant’s so-called investment, the Claimant also

breached the CHEJVA (assuming, arguendo, that agreement to be valid).

653) The Respondent has explained in detail the manner in which the Claimant failed to abide

by the procedures established in Article 11 of the CHEJVA. As noted above, Article 11

of the CHEJVA obliged BHP, or the Claimant as its successor, to offer the BDA an

opportunity to become a Participating Party in respect of all “Mineral deposits” covered

by any application for a mining lease. The Claimant manifestly did not do so, and the

Feasibility Study presented to the BDA (and to Balochistan and to the Licensing

Authority) did not cover, to quote from Article 11, all the “Mineral deposits” in the

“Mining Area” for which TCCP sought a lease. This mismatch between the feasibility

study and the mining lease application was forbidden by the operation of Article 11 of the

CHEJVA.

654) The Claimant’s decision to submit through TCCP an application for a mining lease which

was not supported by a feasibility study of coextensive scope means that, in effect, it

failed to provide its joint venture partner with an opportunity to participate in the

development of the mineral deposits which were covered by the application but not

covered by the feasibility study. This violated Article 11.3 of the CHEJVA, and thus

breached one of the most fundamental purposes of the joint venture arrangement

established by that agreement.


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655) Furthermore, the Claimant also failed to acquire the interest of the other party to the joint

venture established by the CHEJVA (i.e., the BDA) in the Joint Venture Property

forming the subject to the Claimant’s eventual Mining Lease Application. Article 11.4

required the Claimant through TCCP to acquire an interest in all relevant Joint Venture

Property if it was to undertake a sole risk mining development in the Exploration Area

without the participation of the BDA. As explained above, Article 11.6 then set out the

procedure by which, for the purpose of such an acquisition, the parties should negotiate a

fair compensation or refer the matter to expert determination. In violation of these

provisions of the CHEJVA, TCCP made a Mining Lease Application in February 2011.

The first communication by TCCP discussing the possibility of its acquiring the BDA’s

interest in the Joint Venture Property came several weeks later, on 3 March 2011.

656) The Claimant also breached other provisions of the CHEJVA. For instance, the Claimant

breached Article 15 by submitting its dispute to arbitration without exhausting the period

of negotiations set out in the CHEJVA. In addition, the Claimant breached Article 24.6

of the CHEJVA, namely, the obligation of “continuing co-operation and good faith”.

Article 24.6.1 provides that the Parties shall not engage in any activity in the Exploration

Area except as provided by the CHEJVA, while Article 24.6.2 provides that the Parties

“shall be just and faithful to one another and will not do or omit to be done anything”

which prejudices the interests of the Joint Venture. By submitting a Mining Lease

Application in relation to an area over which it had not acquired the BDA’s rights nor

prepared and submitted a feasibility study of equal scope, the Claimant manifestly failed

to abide by these obligations. The Claimant’s preparation of a secret Expansion Pre-

feasibility Study likewise breached Article 24.6.The Claimant admitted at the ICC

Hearing on Interim Measures of 04 December 2012 that the pre-feasibility Expansion

Study “has not been given to the government. We have it here. We did not include it in

the record.” 655

655 Transcript of Provisional Measures Hearing, 6 November 2012, Page 146, lines 10-14, Ex RE-69 (“MRDONOVAN: This pre-feasibility report has not been given to the government. We have it here. We did notinclude it in the record. We have it here.”).


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C) THE CLAIMANT BREACHED THE 2002 BM RULES

657) The Claimant also breached the 2002 BM Rules, in particular Article 29(2)(c)(iii), which

provides that:

“(2) An application for the renewal of a licence-

[…]

(c ) not be made-

[…]

(iii) in the case of a second renewal, unless the applicant cansatisfy the authority that such a renewal is necessary for thecompletion of a full feasibility study of the discovered depositsand that the proposed activities could not have been reasonablycompleted during the period of the first renewal” (emphasis added).

658) The Claimant sought (on behalf of the joint venture) a second renewal of Exploration

Licence EL-2005 “pursuant to Rule 29(2)” in an application dated 3 November 2007656.

This application was made for an exploration licence covering 435.05 square kilometres

and lasted for three years. The application admitted that there had previously been a

failure to complete a “full feasibility study” during the period of the first renewal of EL-5,

and that only “scoping studies for the pre-feasibility and feasibility studies was carried

out.”657 It then stated that the application for the second renewal of EL-5 was made on the

basis that a feasibility study would be conducted in relation to “the development of all

deposits, which are spread over a large area of EL-5”. This undertaking in the

application was evidently given to satisfy the requirements in Rule 29(2)(c)(iii) of the

2002 BM Rules, namely, that the applicant for the exploration licence must undertake “a

full feasibility study of the discovered deposits” in the Exploration Licence Area. Thus

TCCP stated:

“With EL-5 to expire in February, 2008 the Applicant will be ableto commence activities for drawing up the Feasibility Study in thefirst renewal period but will not be able to complete the same giventhe time that will be needed to carry out the Feasibility Study to tie

656 Application for Second Renewal, Ex RE-15.657 Application for Second Renewal, Appendix 1, Ex RE-15.


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the development of all the deposits, which are spread over a largearea of EL-5 (some of which are still being reviewed throughfurther drilling work) together into one mining project. Additionalwork is also need to better understand the deep structure aspossible interconnection of deposits significantly increases theresource size. This taken together with the ongoing challenges toEL-5 in the courts of Pakistan and the expected finalization of theMineral Agreement, the Applicant considers that it required arenewal for the full three year period over 90% of the existing EL-5area to be in a position to fully develop the discoveries.”658

659) At the end of the Exploration Licence EL-5 in February 2011, however, the Claimant had

completed a feasibility study purportedly over only H14 and H15 – just two of the

discovered deposits in the exploration area. Feasibility studies over the multiple

“discovered deposits”, which numbered at least 14 in the area covered by Exploration

Licence EL-5, were missing.

660) The breach of this very undertaking and of Rule 29(2)(c)(iii) was one of the reasons given

for the Licensing Authority’s refusal of TCCP’s Mining Lease Application. Rule 49(3)(b)

of the 2002 BM Rules provides that the Licensing Authority “shall not grant” the mining

lease application if “the application of the applicant in question is in default”. As a result

of its breach of its own undertaking and Rule 29(2)(c)(iii), the Claimant was clearly in

default of the terms of the Exploration Licence EL-5 when it made its Mining Lease

Application.

661) It is worth noting, however, that the Claimant’s undertakings in respect of its compliance

with the 2002 BM Rules was not limited to the above undertaking. It also gave such an

undertaking at the time of seeking an assignment of BHP’s interest in the joint venture’s

EL-5 when it undertook to observe all the provisions of the 2002 BM Rules and the

CHEJVA, and also consented that its mineral title may be cancelled as a result of any

breach. Thus, when seeking an assignment of BHP’s share in EL-5 pursuant to rule 64 of

658 Application for Second Renewal Ex RE-15


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the 2002 BM Rules,659 the Claimant was obliged to comply with the following conditions

established by the Directorate General of Mines and Minerals:

“3. M/S Tethyan Copper Company Limited (the assignee) shallfurnish an undertaking that they will observe and abide by all theterms and conditions as contained in this office letter No.DG(MM)-EL-(5)/5011-22 dated 18-05-2002 and will also abide byall other conditions of National Mineral Policy read withBalochistan Mineral Rules , 2002 as approved/amended from timeto time.

[…]

5. M/S Tethyan Copper Company Limited shall perform itsobligation under the agreement signed between M/S BDA/BHPChagai Hills Joint Venture & Tethyan Copper Company Limtied.

6. The Exploration License assigned to the M/S Tethyan CopperCompany Limited shall be terminated if they violate any of theterms and conditions as laid down above and in the BalochistanMineral Rules, 2002.”

662) Having received notification of these conditions, on 10 April 2006, the Claimant sent an

“Acceptance and Undertaking”660 stating:

“Thank you for your letter no. DG (MM)-EL (5)/2555-65 dated08th April 2006 (“Approval Letter”). We hereby convey ouracceptance of the terms and conditions contained therein.

As per the requirement of your Approval Letter, we herebyundertake that we shall observe and abide by all the terms andconditions as contained in your letter no. DG (MM)- EL(5)/2555-65 dated 08th April 2006 and will also abide by all otherapplicable conditions of the National Mineral Policy read with theBalochistan Mineral Rules, 2002 as approved/amended from timeto time.

We will also furnish regularly to you quarterly progress reports.”

663) The terms of the 2002 BM Rules are absolutely clear, and the Claimant has expressly

accepted them without reservation and undertaken to comply with them. It cannot now

659 Letter from Directorate General of Mines & Minerals no. DG (MM)-EL-(5)/2555-65 dated 08 April 2006Ex RE-25

660 Letter from the Claimant to the Director-General of the MMDD, 10 April 2006 CE-206.


251

argue that they do not apply. Rather, it must compensate the Respondent for the losses it

suffered as a result of the Claimant’s violations either by itself or through TCCP.

664) The extent of those losses is significant. The Respondent reserves the right to

particularise the heads of loss, and the scope of compensation payable, in its pleadings

during the damages phase of this arbitration. However, without prejudice to those future

pleadings, the Respondent notes that its compensable loss derives in part from the loss of

opportunity caused by the Claimant’s conduct. Had it not been for the illegality of the

CHEJVA and the subsequent contractual agreements (including the 2006 Novation

Agreement), the Respondent would have been able to enter into other (lawful)

arrangements with third parties. Instead, it was hamstrung by the CHEJVA and its

associated documents, and by the Claimant’s actions pursuant to those unlawful

contracts, which further inhibited the Respondent’s opportunity to develop the Reko Diq

area.

665) Indisputably, this caused a loss of opportunity to the Respondent and Balochistan,

namely, to develop the immense resources of the Reko Diq Area in an expeditious

manner and with a partner of its choosing. This hostage-taking of the area means that the

Respondent has been deprived of the benefits of an earlier expeditious exploitation of the

Reko Diq area. As the Respondent will particularise in the appropriate phase of this

arbitration, these profits derive from sources such as equity share in mining projects,

receipts of taxes and royalties, operation of a smelter and refinery in the region, and the

receipt of exploration data and studies pursuant to the 2002 BM Rules,661 and other

sources.

VIII.4 REQUEST FOR RELIEF ON THE COUNTER-CLAIM

666) For the above reasons, Respondent respectfully requests that the Tribunal order in respect

of the Respondent’s counter-claims that:

• the Claimant’s investment was unlawful and not admitted subject to the laws of

the Respondent;

661 Rule 71, 2002 BM Rules, Ex RE-1.


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• the Claimant breached Articles 11, 15 and 24.6 of the CHEJVA

• the Claimant violated Article 29(2)(c)(iii) of the 2002 BM Rules; and

• the Claimant must compensate the Respondent for the loss suffered by the latter as

a result of the former’s breaches of Pakistani law, the CHEJVA and 2002 BM

Rules on a basis and in a sum to be determined, together with interest, at a later

phase of this arbitration.


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IX

COSTS, REQUEST FOR RELIEF AND RESERVATION OF RIGHTS

667) The Tribunal has discretion pursuant to Article 61(2) of the ICSID Convention to direct

the losing party to reimburse the prevailing party for its lawyers’ fees and costs.

Claimant’s institution of these proceedings has caused Respondent to incur significant

fees and costs to defend claims that exceed the jurisdiction of this Tribunal, are vexatious

and wholly unmeritorious, and duplicate the parallel ICC proceedings. Accordingly,

Respondent requests that the Tribunal order Claimant to pay Respondent’s lawyers’ fees

and costs in full.

668) For the reasons set forth above, Respondent respectfully requests the Tribunal to:

• suspend these proceeding pending resolution of the ICC arbitration;

• bifurcate these proceedings to hear the jurisdictional objections before examining

the merits of the case;

• decline jurisdiction in the present case;

• to the extent that the Tribunal proceeds to examine the merits of the case, dismiss

the Claimant’s claims in their entirety;

• uphold the Respondent’s counter-claims and award damages in a sum to be

determined at a later stage in these proceedings; and

• order the Claimant to pay the totality of the Respondent’s costs relating to these

arbitration proceedings.

669) Finally, the Respondent hereby expressly reserves the right to submit such additional

defences, evidence, expert and witness testimony and claims as it may deem appropriate

to supplement or augment its Jurisdictional and Admissibility Objections, Counter-

Memorial and Counter-Claim and to respond to any evidence or allegations made by the

Claimant in the Arbitration, including presenting additional counterclaims, defences and


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jurisdictional objections and to request any additional relief or remedies in connection

with this dispute.

Respectfully submitted by:

_____________Ahmer Bilal Soofi Cherie Booth QCKayzad Kaikobad Matrix ChambersABS & Co London WC1R 5LN,12 Embassy Road United KingdomSector G-6/4, Islamabad, 44000Pakistan Mahnaz Malik

20 Essex StreetLondon WC2R 3ALUnited Kingdom

30 September 2013

Counsel for the Government of the Islamic Republic of Pakistan (Respondent)
