Province of Balochistan v Tethyan Copper Company Pty Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Robin Knowles CBE,Robin Knowles J |
| Judgment Date | 06 July 2021 |
| Neutral Citation | [2021] EWHC 1884 (Comm) |
| Docket Number | Case No: CL-2019-000491 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 1884 (Comm)
Mr Justice Robin Knowles CBE
Case No: CL-2019-000491
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QUEEN'S BENCH DIVISION)
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Hancock QC, George Spalton and Sam Goodman (instructed by Gresham Legal) for the Claimant
Lord Goldsmith QC, Patrick Taylor and Tom Cornell (instructed by Debevoise & Plimpton) for the Defendant
Hearing dates: 1 – 3 March 2021
Approved Judgment
I direct that pursuant to CPR PD39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic
Introduction
This is the judgment of the Court determining certain preliminary issues in an arbitration claim (“the Arbitration Claim”).
The Arbitration Claim is brought pursuant to section 67 and section 68 of the Arbitration Act 1996 (“the 1996 Act”) in respect of a Partial Award dated 8 July 2019 (“the ICC Partial Award”) of an arbitral tribunal in an ICC arbitration (ICC Case No. 18347/VRO/AGF/ZF/AYZ/HTG) (“the ICC arbitration”).
London was designated as the seat of the ICC arbitration.
The arbitral tribunal in the ICC arbitration comprises Lord Collins of Mapesbury, Sir David A. R. Williams QC and Dr Michael Moser (“the ICC tribunal”).
The Arbitration Claim challenges the jurisdiction of the ICC tribunal. The ICC tribunal upheld its own jurisdiction in 2014, in a decision that was later, in 2019, incorporated into the ICC Partial Award.
The Defendant in the Arbitration Claim (and Claimant in the ICC arbitration) is Tethyan Copper Company Pty Limited (“TCCA”). TCCA is an Australian company owned by two of the world's largest mining corporations, Antofagasta (a Chilean corporation) and Barrick Gold (a Canadian corporation)
The Claimant in the Arbitration Claim, the Province of Balochistan (Respondent in the Arbitration), is one of the four provinces of the Islamic Republic of Pakistan.
The Chagai District of the Province of Balochistan, located close to Pakistan's border with Iran and Afghanistan, contains what is believed to be the world's fifth largest goldmine. TCCA alleges that in breach of contract the Province of Balochistan denied an application in 2011 for a Mining Lease in the Chagai District.
Context
The contract in question is the ‘Chagai Hills Exploration Joint Venture Agreement’ (“the CHEJVA”) dated 15 or 29 July 1993, together with related agreements. These include an Addendum dated 4 March 2000 (“the Addendum”) and a Novation Agreement dated 1 April 2006 (“the Novation Agreement”). Over time other agreements were entered into including what was known as an Alliance Agreement, and share-purchase agreements, together with transfers of interest.
The question whether the Government of Balochistan (and hence the Province of Balochistan) was a party to the CHEJVA has been in issue.
The stated purpose of the CHEJVA was to explore and evaluate the economic viability of mineral deposits in the Reko Diq area of the Chagai District.
TCCA was not originally a party to the CHEJVA. On its face the CHEJVA was originally entered into by BHP Minerals Intermediate Exploration Inc. (“BHP”) and Balochistan Development Authority (“BDA”). The Novation Agreement provided for TCCA to replace BHP as a party.
In due course, in 2008, the Islamabad High Court granted a Scheme of Arrangement (“the Scheme of Arrangement”). Under this (broadly speaking, as the Province puts it) TCCA's rights were transferred to its wholly owned Pakistani subsidiary (“TCCP”). However the question of the extent to which TCCA's rights in relation to the CHEJVA were transferred has been in issue.
Among other allegations, the Province of Balochistan alleges that TCCA and its predecessors paid significant bribes to Government of Balochistan officials over a period of many years (before and after the commencement of the CHEJVA). The officials, it is said, were caused to violate their public duties and to award various illegitimate benefits in relation to the CHEJVA and the natural resources in the Chagai District. Investigations into alleged corruption are said to continue.
In light of exploration over a number of years, an area of 99.47 km was in due course made the subject of an application to the Government of Balochistan to grant a Mining Lease to TCCP. The application was refused and two arbitrations have followed.
The first is the ICC arbitration (between TCCA and the Province of Balochistan). The agreement to arbitrate on which the ICC arbitration is founded is contained in the CHEJVA.
The second is an ICSID arbitration under the Bilateral Investment Treaty between Australia and the Islamic Republic of Pakistan (“the BIT”). The arbitral tribunal in the ICSID arbitration comprises Professor Dr Klaus Sachs, Lord Hoffmann and Dr Stanimir Alexandrov.
Related proceedings were commenced in the Courts of Pakistan, including the Supreme Court of Pakistan. A constitutional petition was filed pursuant to Article 199 of the Constitution of Pakistan.
On 7 January 2013, following a hearing of 25 days and reserving its full reasons, the Supreme Court of Pakistan made an order declaring that the CHEJVA was “illegal, void and non est”. The Supreme Court of Pakistan further declared that all agreements “which are based upon, and emanated from, CHEJVA”, including the Novation Agreement, “are also held to be illegal and void” and “do not confer any right” on TCCA.
On 10 May 2013, the Supreme Court handed down its full reasoned judgment (“the Judgment of the Supreme Court of Pakistan”), extending to 149 pages. In this it also expressed the conclusion that “no operative part of the [CHEJVA] survives to be independently enforceable and the principle of severability [sic] cannot be applied to save any part thereof”.
On 10 November 2017, the ICSID tribunal issued a ‘Decision on Jurisdiction and Liability’ and a ‘Decision on Respondent's Application To Dismiss The Claims (With Reasons)’.
In summary, in these two Decisions, the ICSID tribunal held that it had jurisdiction under the BIT to determine TCCA's claims, and that Pakistan had breached various provisions of the BIT. The ICSID tribunal dismissed allegations of corruption in relation to the CHEJVA, although the Province emphasises (in a third witness statement of Mr Diego Gosis of GST LLP, the law firm now representing the Province in the ICC arbitration) that the allegations in the ICSID proceedings and the allegations made here “are not all exactly the same and there are important differences”.
On 12 July 2019, the ICSID tribunal awarded TCCA US$ 4.087 billion and approximately US$ 1.7 billion in interest. The Province of Balochistan's legal team believe the award to be the second largest award in ICSID history. The award is currently being challenged in ICSID annulment proceedings, including a challenge on the basis that the ICSID tribunal lacked jurisdiction.
The ICC tribunal issued ‘Rulings on Preliminary Issues’ on 21 October 2014. These included rulings by the ICC tribunal that the arbitration agreement in the CHEJVA (with the Addendum and Novation Agreement) was valid and that the ICC tribunal had jurisdiction to consider TCCA's claims. Following and on the basis of an exchange of correspondence with the ICC tribunal, which is considered further below under the discussion of ‘the October/November 2014 exchange’, the rulings were later incorporated into the ICC Partial Award.
Appearing before the Supreme Court of Pakistan, Counsel for the Province of Balochistan criticised the decision of the (Federal) Government of Pakistan to enter into the BIT, arguing that this was “without consultations from Balochistan or any other Province”. In its Judgment, the Supreme Court (at paragraph [107]) recorded Counsel's argument, after further development, as including the following:
“The consequence is what we are witnessing; identical claim is made before ICSID along with one in ICC. This issue is required to be considered by the Federal Government before signing any further BITs …”.
The Corruption Allegation and the Issues for Determination
The preliminary issues for determination by this Court use the term “Corruption Allegation”. The term is defined to mean the allegation by the Province of Balochistan to the effect that the ICC tribunal lacked jurisdiction because the CHEJVA and related agreements were void due to the existence of corruption.
That definition is recorded in an Order dated 7 August 2020 made by Henshaw J. Henshaw J also required the Province to serve a document identifying the corruption allegations on which it seeks to rely on for the purpose of its challenge under section 67 of the 1996 Act. A “Schedule of Known Corruption Allegations” was served.
In his Order dated 7 August 2020, Henshaw J ordered the following 7 preliminary issues for determination, among others:
(1) Whether the Corruption Allegation is precluded by section 73(1) of the 1996 Act (Preliminary Issues Order paragraph 2.1, first part).
(2) Whether the Corruption Allegation is precluded pursuant to the doctrine of waiver by election (Preliminary Issues Order paragraph 2.1, second part).
(3) Whether TCCA is precluded by an issue estoppel arising from the Judgment of the Supreme Court of Pakistan from alleging separability of the arbitration agreement (Preliminary Issues Order, paragraph 2.2(a)).
(4) Whether TCCA is precluded by an issue estoppel arising from the Judgment of the Supreme Court of Pakistan from denying that the arbitration agreement is governed by the law of Pakistan (Preliminary...
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