In July 2019, the bank had slapped the whopping fine against Pakistan for denying the mining lease to an Aus­tralian company, followed by Pakistan's appeal in November 2019 seeking its annulment.

Local officials visit the gold and copper mine site in Reko Diq district in southwestern Pakistan's Balochistan province on March 18, 2017.
Local officials visit the gold and copper mine site in Reko Diq district in southwestern Pakistan's Balochistan province on March 18, 2017. (AP Archive)

An international tribunal has granted a stay pending a final decision on a $5.8 billion penalty imposed on Pakistan for denying a mining lease to an Australian company.

Saleem Bajwa, an adviser to Prime Minister Imran Khan, tweeted on Friday that the tribunal's decision was a "great relief" for Pakistan. 

The decision was also hailed as a "success" in a brief statement from the attorney general's office late on Thursday. 

Both Islamabad and the mining company say they're willing to consider a settlement pending a final decision on the award, which might not come until next year.

Pakistan had appealed the penalty imposed by the World Bank's International Center for Settlement of Investment Disputes and has said it would hinder the country's handling of the coronavirus pandemic. 

The case is testing Khan's ability to use back-channel diplomacy to settle disputes and keep alive efforts to lure more foreign investors to his impoverished country.

The fine, nearly $6 billion including the damages award and interest, is equal to about 2 percent of Pakistan's GDP and is on a par with a $6 billion bailout package the country secured from the International Monetary Fund last year. 

In July 2019, the bank had slapped the whopping fine against Pakistan for denying the mining lease to an Aus­tralian company, followed by Pakistan's appeal in November 2019 seeking its annulment.

READ MORE: Leading economist slams World Bank’s unjust arbitration fine on Pakistan

At the heart of the issue 

Experts have questioned the reasoning behind the huge award, which is more than double the size of the largest similar arbitration award in a case between Dow Chemical and Kuwait Petrochemical Corp.

The penalty centered around Pakistan's cancelling of the Reko Diq mining lease for Australia's Tethyan Copper Corp, a 50-50 joint venture of Barrick Gold Corp of Australia and Antofagasto PLC of Chile, to build and operate a copper-gold open-pit mine.

The Reko Diq district in southwestern Pakistan's Balochistan province is famed for its mineral wealth, including gold and copper. 

The Reko Diq mine hadn’t produced a single ounce of gold or a ton of copper as it was years away from becoming operational when it ran into legal trouble. 

Pakistani officials in both Islamabad, the capital, and Balochistan say the mining lease was terminated by the Balochistan government because it was secured in a non-transparent manner and granted too many concessions to the company, violating government rules and regulations and ignoring national interests.

Khan's government considers it a strategic national asset, especially as prices for commodities surge, with gold recently at more than $2,000 an ounce. 

The Balochistan government has since set up its own company to develop the mine.

Tethyan had invested $220 million in Reko Diq by 2011 when Pakistan terminated its mining lease. 

The company sought help from the tribunal the following year, and it ruled against Pakistan in 2017.

READ MORE: Multi-billion dollar fine on Pakistan puts the spotlight on a secret court

Pandemic impacts

The tribunal declined to comment in response to a request by The Associated Press on Friday.

Paying compensation equivalent to 40 percent of the country's foreign exchange reserves would have been a challenge as Pakistan struggles to revive its economy. 

The coronavirus pandemic has infected more than 300,000 of Pakistan's 212 million people and killed more than 6,400, while the economy contracted for the first time in decades in the fiscal year that ended in June.

Source: TRTWorld and agencies