(CIVIL PETITION NO.796 OF 2007 AND CMA NO.4560 & 4561 OF 2009 AND CMA NO.116 OF 2011 & AMA NO. 403 & 406 OF 2012)
The matter involved the legality
of the Chagai Hills Exploration Joint Venture Agreement (CHEJVA) executed in
the year 1993 between BHP Minerals International Exploration INC a foreign
company and the Government of Balochistan for the purpose of conducting exploration
and development of mineral deposits of gold and copper in the agreed
Exploration Area, in District Chaghai of the Province of Balochistan Pakistan. The
Balochistan Development Authority (BDA) was to provide administrative support,
necessary consents, approvals, NOCs, security clearances etc and relaxation of
certain Rules of the Balochistan Mining Concession Rules, 1970. BHP was to
undertake the work and entire cost of the exploration and infrastructure etc.
thereof. The respective Percentage Interests were 25% for BDA and 75% for BHP.
The Joint Venture was granted ten Prospecting Licenses (PLs) in 1996 for an
area of 1000 Sq. Km. BHP carried out reconnaissance and detailed work up to
1999 in these areas and reported large deposits of Copper, Gold etc. at
Reko-Diq.
The Joint Venture thereafter
surrendered 8-PL’s and retained Two PLs of Reko-Diq. After the new National
Mineral Policy and the enactment of Balochistan Mineral Rules, 2002, a
consolidated Exploration License No.EL-5 was granted to the Joint Venture for a
defined area of Reko-Diq in 2002 for three years. On two renewals thereof, EL-5
was to remain valid upto 18th February, 2011. During the extended period of
EL-5, ADDENDUM No.1 to the CHEJVA was signed between BDA/GOB and BHP, whereby
inter alia, Government of Balochistan became a Joint Venture partner in CHEJVA
with BDA as its Agent. ADDENDUM also permitted transfer or assignment of a
party’s interests in CHEJVA wholly or partly. Whereon through intermediary
corporate instrumentalities, share interest of BHP in CHEJVA was routed and
re-routed via Mincor Resources N.L/Tethyan Copper Company Ltd., of Australia
(TCC) per the OPTION AGREEMENT/ALLIANCE AGREEMENT. And finally under the
NOVATION AGREEMENT OF 2006 JVA was renewed to substitute TCC for BHP as a full
party with Deed of Waiver and Consent of GOB for such transfer. BHP was thus
replaced by TCC in the Joint Venture which became TCC-BDA/GOB’ CHAGAI HILLS
JOINT VENTURE.The respective Percentage Interests were restated for GOB (25%)
and TCC (75%). Antofagasta of Chile and Barrick Gold Corporation of Canada;
stated to be amongst the largest companies prospecting for gold and copper in
the world, then stepped in and jointly purchased TCC’s entire 75% Percentage
Interest in the Joint Venture. Antofagasta and Barrick Gold; on thus acquiring
TCC, carried out the drilling and exploration programme at EL-5 area of
Reko-Diq at a claimed expense of millions of US $, with no financial cost
burden on GOB/BDA.
In 2006, C.P. No. 892 of 2006 was
filed by Maulana Abdul Haq etc., in the Balochistan High Court challenging
legality of CHEJVA, relaxation of 1970 Mining Rules by GOB and BHP’s lukewarm
exploration activity. The Government of Balochistan denied illegality of CHEJVA
and its alleged contrariness to public interest. This Constitutional Petition
was dismissed by the High Court of Balochistan on 26-6-2007. The relaxation of
1970 Rules, acts of GOB/BDA and CHEJVA were held to be legal. Hence the instant
Civil Petition was filed before the Supreme Court of Pakistan in its appellate
jurisdiction.
During the pendency of the leave
petition, a major development took place. Exploration work including drilling
was completed by TCC within the stipulated period. Substantial discoveries of
gold and copper etc. were made. The license period expired on 18th of February,
2011. TCC submitted to GOB Feasibility Study Report; a study to ascertain the
commercial feasibility of the mining of the resource, treatment of ore obtained
in mining operation, expected optimum return, life of the mine, mineable
reserves and grade and the results of geological and geophysical investigations
etc. When the Feasibility Study was under examination of GOB a former Advocate
General namely Mr. Salahuddin Mengal offered to share the feasibility report
with the Supreme Court.
During the course of proceedings the
Supreme Court recalled its restraining order dated 3-2-2011 and directed the competent
authority in the Government of Balochistan to proceed expeditiously to decide
TCC’s application for the grant of mining lease transparently and fairly in
accordance with the law and the rules. It was further directed that in so doing
the Government of Balochistan shall not be influenced in any manner whatsoever
by the pendency of the proceedings or by the orders therein passed by the
Court. The application for grant of mining lease submitted by Tethyan Copper
Company Pakistan (Pvt.) Ltd. (TCCP), incorporated in Pakistan, was dismissed by
the Mines Committee constituted under the Balochistan Mining Rules, 2002
(hereinafter referred to as the BMR 2002) in its special meeting held on
14.11.2011 and the decision communicated to TCCP vide letter dated 15.11.2011.
TCCP challenged the said decision by means of an administrative appeal before
the Secretary, Department of Mines & Minerals, Government of Balochistan,
as provided under the BMR 2002, which too was dismissed. Both these orders were
not challenged by TCCP.
The Tethyan Copper Company (TCC),
incorporated in Australia, invoked the jurisdiction of the International Centre
for Settlement of Investment Disputes (ICSID) against the Government of
Balochistan (GOB) seeking specific performance of CHEJVA and grant of mining
lease. The claim of TCC was not registered by ICSID. Later, TCC filed a claim
against the Government of Pakistan on the basis of the Pakistan-Australia
Bilateral Investment Treaty of 1998, which is reportedly pending for
adjudication. The claimant also moved an application for provisional measures
to immediately grant a temporary restraint order pending disposition of the
request. In the said application, it was requested to freeze the work of the
GOB in 99 square kilometers including H-4 ‘Tanjeel’. Dr. Samar Mubarakmand also
entered appearance as a witness before the Tribunal on 06.11.2012 and stated
that the GOB was planning to work in H-4 area as early as possible. The ICSID
Tribunal vide decision dated 14.12.2012 rejected the application of TCC for
provisional measures and allowed the GOB and Dr. Samar Mubarakmand to carry out
mining in H-4 ‘Tanjeel’ in Reko Diq. The plea of TCC regarding urgency and
irreparable loss was also declined. However, the GOB was asked to keep the
Tribunal informed of its specific plans and developments at the site.
Simultaneously, TCC had also invoked the jurisdiction of the International
Chamber of Commerce (ICC) primarily seeking specific performance of CHEJVA and
grant of mining lease in the Reko Diq area of 99 kilometers comprising 14
deposits.
It is pertinent to mention here
that TCCP on having accepted the order of rejection of application for grant of
mining lease as well as the order of the appellate authority under the BMR
2002, instead of invoking the jurisdiction of the High Court under Article 199
of the Constitution for judicial review of both the orders, approached ICSID
and ICC purportedly in light of the provision of Article 15 of CHEJVA executed
between BHP and BDA. Before submitting the application for issuance of
Prospecting Licences (PLs) under the Balochistan Mineral Concession Rules, 1970
(BMCR 1970), the counsel of BHP Mr. Martin Harris suggested relaxation of a
number of rules, including the rule relating to persons by whom applications
may be made. The said request by BHP’s counsel was forwarded by BDA to the GOB
and ultimately notification dated 30.01.1994 was issued, whereby a number of relaxations were granted including Grant of
Exploration Areas, Area available for prospecting Licenses, Application for
prospecting Licence, Satisfaction of conditions attaching to prospecting Licenses,
Exclusive right,Other Minerals, Government rights pre-emption acquisition
merger, and taking control in National emergency, Assignment, Application for
Mining License ,Royalty, Penalties compensation and cancellation, Employment
and training and Mining Lease.In the year 1996, BHP applied for 10 PLs, which
were granted on 08.12.1996.
A three member bench headed by
the Honorable Chief Justice of Pakistan after extensively hearing the matter on
various planes vide its short order observed that CHEJVA, which was originally
executed between BHP and BDA appeared to suffer was suffering from certain
legal deficiencies, therefore, Addendum No.1 to CHEJVA was executed on
04.03.2000, allegedly under the authorization of the then Governor of
Balochistan, Justice (Retd) Amir-ul-Mulk Mengal. The Supreme Court noted that
through the Addendum, drastic changes were made in CHEJVA, inasmuch as
permission was granted for transfer or assignment of a party’s interests in the
agreement wholly or partly. Further, the GOB was made a joint venture partner
and the BDA represented itself as an agent of GOB through ratification of
agency. Thus, there were serious question marks on the manner in which the then
Governor of Balochistan granted authorization by executing an undated document,
however, from certain documents it appeared that the same was executed on
24.12.1999. Although prior to this authorization, former Governor Syed Fazal
Agha had not signed the document, which was placed before him for the purpose
of executing authorization, prima facie, for the reason that before 12.10.1999,
the GOB through the Chief Minister had decided to constitute a two-member
committee to examine the said document. The Supreme Court observed that by
means of the Addendum, in the name of ratification in terms of section 196 of
the Contract Act, 1872, instead of supplementing CHEJVA, its entire complexion
was changed.
It was further observed that on
the basis of the Addendum, an ‘Option Agreement’ was also executed and in the
garb of reliance on one of the clauses contained in CHEJVA, namely, Article 14
‘Assignment’, Mincor option was created in favour of Mincor NL, a company
incorporated in Western Australia, enabling it to enter into an Alliance
Agreement under clause 3 of the Option Agreement. The Mincor Option gave the
sole and exclusive right to Mincor or its nominee to enter into alliance with
BHP to explore in the region. On 24.10.2000, TCC, as nominee of Mincor,
exercised the Mincor Option and executed an Alliance Agreement on 19.04.2002. It
may be mentioned that TCC was a company incorporated in Western Australia with
its place of business situated at Perth. In 2006, Antofagasta, a Chilean
company registered in the United Kingdom through its subsidiary Atacama Copper
Pvt. Ltd., made an offer to buy the shares of TCC, which was accepted by the
Board of TCC. As such, Antofagasta through Atacama acquired the total shares of
TCC for AUD 220 million.
It was observed that TCC also
purchased the claw back right of BHP for US$60 million. In September 2006,
Barrick Gold of Canada purchased 50% shares of Atacama from Antofagasta through
share-purchase agreement and thus acquired 50% ownership interest of TCC.
Pursuant to the share-sale agreement, an interim shareholders agreement dated
22.09.2006 was executed between Barrick Gold and Antofagasta to govern their
relationship vis-à-vis the management of TCC. TCC started its operations in
Pakistan through its Branch Office registered with the Board of Investment. It
also incorporated a local subsidiary in Pakistan called TCCP. In December,
2007, TCCP approached the Lahore High Court for amalgamation of TCC’s Branch
Office in Pakistan and TCCP, incorporated in Pakistan, which had been
functioning simultaneously until that time.
The Supreme Court recorded in its
order that the Islamabad High Court, to which the case was transferred on its
establishment, vide order dated 11.04.2008 approved the amalgamation of both
the companies as per the scheme of arrangement. As such, licenses and
properties held by Pakistan Branch of TCC stood transferred to TCCP. In the
meanwhile, the BMR 2002 were enforced, and on 03.09.2002, TCCP applied for an
Exploration Licence (EL) for copper, gold and associated minerals in an area of
973.75 sq. km. in Chagai District and was granted EL-5 vide letter dated
09.09.2002. EL-5 was renewed twice and remained valid upto 18.02.2011. In April
2006, BHP, TCC and GOB through its purported agent BDA, executed a Novation
Agreement to CHEJVA, whereby the 75% interest of BHP in the agreement as well as
in EL-5 was transferred to TCC. The Novation Agreement was purportedly made for
the purpose of substituting CHEJVA, and the GOB was also made a party to the
Joint Venture, which was not permissible under BMR 2002 as well as the Rules of
Business of the Government of Balochistan, particularly Rule 7 and other rules.
The GOB, in purported exercise of the powers vested in it under the BMR 2002,
granted relaxations in violation of rule 98 as no reason was assigned for the
relaxation of the relevant Rules.
The Supreme Court noted that in
addition to these defects, after having invoked the jurisdiction of the
original as well as the appellate authority under the BMR 2002, TCC had
submitted to its forum/jurisdiction. Both these authorities had derived their
powers and jurisdiction from the BMR 2002, which were framed under the Act of
1948. The findings so recorded were adversely operating against them and, for
all intents and purposes, they had no claim of any nature whatsoever against
the GOB or the Government of Pakistan. It was also noted that in the
Constitution Petition filed before the High Court of Balochistan, the GOB had
opposed the petition. However, when the matter came up before the Supreme Court
in CPLA in 2007 and orders dated 03.02.2011 and 25.05.2011 were passed, wherein
certain issues were noted, the GOB supported the stance of the petitioners, who
also filed additional grounds in light of the changed circumstances.
The Supreme Court, besides being seized of CPLA was also seized of Constitution Petitions under Article 184(3) of the Constitution and miscellaneous applications filed therein. Accordingly, CPLA as well as Constitution Petitions under Article 184(3) of the Constitution were simultaneously held maintainable under the Constitution.
The three member bench of the Supreme Court headed by the incumbent Honourable Chief Justice of Pakistan for detailed reasons to be recorded later, converted CPLA into appeal and allowed the appeal as well as the Constitution Petitions under Article 184(3) of the Constitution with costs throughout whereas the Miscellaneous Applications were disposed of.
The Supreme Court, besides being seized of CPLA was also seized of Constitution Petitions under Article 184(3) of the Constitution and miscellaneous applications filed therein. Accordingly, CPLA as well as Constitution Petitions under Article 184(3) of the Constitution were simultaneously held maintainable under the Constitution.
The three member bench of the Supreme Court headed by the incumbent Honourable Chief Justice of Pakistan for detailed reasons to be recorded later, converted CPLA into appeal and allowed the appeal as well as the Constitution Petitions under Article 184(3) of the Constitution with costs throughout whereas the Miscellaneous Applications were disposed of.
The Chagai Hills Exploration
Joint Venture Agreement dated 23.07.1993 was held to have been executed
contrary to the provisions of the Mineral Development Act, 1948, the Mining
Concession Rules, 1970 framed thereunder, the Contract Act, 1872, the Transfer
of Property Act, 1882, etc., and was declared to be illegal, void and non est. The
Addendum No. 1 dated 04.03.2000, Option Agreement dated 28.04.2000, Alliance
Agreement dated 03.04.2002 and Novation Agreement dated 01.04.2006, which were based
upon, and emanated from, CHEJVA were also held to be illegal and void. The apex
Court observed that all these instruments did not confer any right on BHP,
MINCOR, TCC, TCCP, Antofagasta or Barrick Gold in respect of the matters
covered therein. It was further held that EL-5 tantamount to exploration
contrary to rules and regulations as the claim of TCCP was based on CHEJVA,
which document itself was declared non est.