Dr. Ikramul Haq & Abdul Rauf Shakoori
The modern national democratic states, by and large, stand on three pillars, namely, legislature, executive and judiciary. The written or unwritten constitution of a democratic country, representing the will of people, takes birth in the house of legislature considered as the representative elected body of the people. Constitution, supreme law of the land, is the most important document/instrument defining powers, roles and limitations for each organ of the state. In Pakistan, however, different organs of the state have been frequently crossing their defined and determined boundaries in utter defiance of the principle of trichotomy of powers under the three constitutions frames since inception of the country.
The judiciary in Pakistan since Dosso case is accused of approving extra constitutional steps and interfering in administrative matters—the sole prerogative of executive. Pakistan is known for continuous military interventions/interferences and experiments in controlled democracy. It witnessed four extra-constitutional rules under military dictators. During this period except in the last judicial martial law of General Pervez Musharraf, the judiciary acted as approver of unconstitutional rules. As custodian of the constitution, the judiciary has also failed to play its role of defending the citizens’ fundamental rights. In many commercial matters of governments dealing with foreign and/or local investors as well, its role has remained controversial and because of many questionable decisions, it has allegedly weakened state institutions, democratic values, besides causing substantial economic loss to the country.
There have been instances of abuse/excessive suo moto powers or arbitrary application of law. These rendered government departments dysfunctional. Apart from the fact that the country has been paying a very high price of judicial interferences from time to time in the affairs of executive and legislature, some judgements of higher courts in contractual matters have negatively affected investment environment tarnishing Pakistan’s global image. Orders by the apex court, involving mining and power sector agreements between the governments and private/public international parties, were challenged at international dispute resolution forums. Consequently, fines and penalties of billions of dollars were imposed. One of the prime examples is the Reko Diq case where London-based International Centre for Settlement of Investment Disputes (ICSID) awarded damages of $5.84 billion to Tethyan Copper Company Pty Limited.
Brief facts are that BHP Minerals Intermediate Exploration Inc. (BHP) entered into a Joint Venture Agreement in 1993 with Balochistan Development Authority (BDA) established under the Act of 1974 to explore the Reko Diq area under the name of Chagai Hills Exploration Joint Venture Agreement (CHEJVA).
In March 2000, the CHEJVA was amended by BHP and the BDA in April 2000, BHP decided to exit the joint venture and granted Mincor an option to enter into an alliance for exploration in Reko Diq area, whereas in October 2000, Tethyan Copper exercised Mincor’s option and entered into the alliance with BHP. Further, in April 2006, the claimant became a party to the CHEJVA and the assignee of exploration license. Soon after the 2006 agreement, the 1993 agreement was challenged before Baluchistan High Court on the grounds that the Balochistan Government acted illegally in relaxing relevant rules and granting mineral titles for Reko Diq to BHP. However, in June 2007, the Balochistan High Court dismissed the petition. Those aggrieved by the orders of the Balochistan High Court challenged this dismissal before the Supreme Court. The three-member bench of the Supreme Court of Pakistan comprising former Chief Justice Iftikhar Muhammad Chaudhary, Justice Azmat Saeed and Justice Gulzar Ahmed, ordered that the 1993 agreement was contrary to law and public policy. Accordingly, the 1993 agreement and the 2000 and 2006 agreements derived from it were declared void. Thus, Supreme Court dismantled the legal structure commissioning exploration of Reko Diq. The judgment failed to convince international dispute resolution forums and this breach of contractual obligation attracted huge costs, fines and damages.
Similarly, in the case of rental power producer, Karkey Karadeniz Elektrik Uretim A.S versus Islamic Republic of Pakistan, the decisions of courts attracted penalties worth US$ 1.2 billion at international forum. The international tribunal in its award has mentioned that the Supreme Court played an active part in several of the acts attributable to Pakistan, presented by Karkey as a general pattern of breaches. Further, the Supreme Court proceeded on the basis of erroneous assertion of the petitioner (Faisal Saleh Hayat) that Pakistan had sufficient generation capacity. It was despite the fact that Pakistan Electric Power Company (PEPCO) demonstrated that petitioner had mistakenly compared Power (MW) with Energy (MkWh), which are two different things. Further, the Court imposed identical liability on all the rental power plant sponsors, despite material differences between the procurement, financing, and operational status of the different rental power plant arrangements. In its judgement the Tribunal disapproves the proceedings by mentioning that “it is reasonable to expect that a judgment having such serious consequences for those concerned would have defined with some particularity the evidential and legal basis on which each of them, considered separately, was liable to suffer such consequences”. It also exposed the quality of judgement by stating that the Supreme Court declared all rental power plant (RPP) contracts to be both “void ab initio” and “rescinded forthwith”, even though such findings were mutually inconsistent!
Recently Pakistan made an out of court settlement in Reko Diq award case and is expected to avoid penalty to the tune of US$ 11 billion, which is now more than our total foreign exchange reserves. The question arises that if this out-of-court-settlement fails and Pakistan is forced to pay these damages, who will be responsible? Will the courts and authors of the judgement be questioned? Will National Accountability Bureau (NAB) and courts recommend jail terms to all those responsible for incurring liability of billions of dollars?
Reko Diq has one of the world’s largest undeveloped copper-gold deposits. Earlier this year an agreement in principle was reached between Pakistan (Federal government and provincial government) and Barrick which provides for reconstitution and resumption of the project, which has been on hold since 2011. As per the new arrangement, the project will be operated by Barrick with 50% ownership whereas remaining 50%, would be split in half by the Government of Balochistan and state-owned enterprises of Pakistan. After recent meeting with Finance Minister, Miftah Ismail, Barrick confirmed that definitive agreements underlying the framework agreement are currently being finalised. After completing the process, and taking the necessary steps, Barrick will update the original feasibility study. This process would hopefully take up two years with first production of copper and gold is expected in 2027/2028.
The nation eagerly looked forward that courts would learn from previous mistakes and the practice of interference in contractual maters would end but the recent chain of events suggest otherwise. Independent analysts and experts believe that courts are among the main sources of political unrest leading to economic chaos in the country. They have been passing judgements based on subjective interpretations rather than relying on the letter and spirit of the Constitution of Islamic Republic of Pakistan [“the Constitution”]. They try to mediate between political parties as a dispute resolution body whereas no such powers or authority is available under Article 175(2) of the Constitution. This deviation from the Constitution has adversely affected judiciary’s credibility, quality of justice and has weakened the trust of people in dispensation of justice. This unfortunate detrition is also confirmed by World Justice Project where Pakistan is ranked at 130 out of 139 countries on rule of law index.
The courts have been objecting to constitutional powers vested in Prime Minister as executive head of the state for taking necessary decisions. Allegedly, some chief justices of the apex court in the past constituted benches of specific judges in every case of political and national importance. This pattern is regularly being observed in the last decade. Further, junior judges are appointed in the Supreme Court by ignoring senior judges of High Courts. It is legislature’s responsibility to come forward and regain its constitutional mandate which is currently and undesirably in possessed by the Judiciary. For this it is imperative that limits defined are observed and enforced and strict accountability laws be framed with equal applicability across all arms of the government. Any deviation from the assigned role should be punishable. This is the only way forward to bring political, democratic and economic stability in the country.
Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He isVisiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
The recent publication, coauthored by these writes with Huzaima Bukhari, is: