There is good news coming from Pakistan’s foreign investment front—Foreign Direct Investment (FDI) jumped 23.5 percent to $112.3 million in August, an increase of 24pc, and the International Centre for Settlement of Investment Disputes (ICSID) has granted Pakistan a stay on the enforcement of a penalty awarded against Pakistan in the Reko Diq mining lease dispute.
The stay order is a blessing—had Pakistan not applied for annulment of the Award, it would have had to pay an extraordinary amount of $5.97 billion to the Australian company Tethyan Copper Company (TCC); this is one of the largest amounts for a penalty ever enforced by ICSID. It is nearly the same amount as the bailout package for Pakistan from the International Monetary Fund. Accepting the Award would have reversed any relief Pakistan received from the IMF, would have starved the economy, and would surely have had a detrimental effect on Pakistan’s future foreign investment.
An ICSID Award is infamously difficult to reverse—it cannot be appealed in any domestic court or jurisdiction, as the ICSID convention stipulates that every ICSID jurisdiction must without deliberation enforce any ICSID Award. Annulment is an exceptional recourse to safeguard against the violation of fundamental legal principles relating to the process, and there are five very limited grounds for annulment. With the context, this stay is indeed a victory as it gives Pakistan more time to consider its legal case for annulment and to explore more diplomatic channels to mitigate the damages of the Award.
Yet this is just a temporary relief—the bigger challenge currently constitutes of proving that corruption in the promise of a lease to mine copper and gold deposits at the Reko Diq mine takes this case out of the jurisdiction of investment arbitration, and in domestic law, while at the same time maintaining our credibility to other foreign investors. For its quick action to seek annulment, the Pakistani legal team must be praised, and it is hoped they employ the same tact in pursuing the bigger case that now lies ahead.