MAULANA ABDUL HAQUE BALOCH AND OTHERS VERSUS GOVERNMENT OF BALOCHISTAN THROUGH SECRETARY INDUSTRIES AND MINERAL DEVELOPMENT AND OTHERS

(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 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.