Jahangir's World Times First Comprehensive Magazine for students/teachers of competitive exams and general readers as well.
The case presents a rare opportunity to examine the economic implications of a legal matter.
The case presents a rare opportunity to examine the economic implications of a legal matter. To contextualise the matter, here is a resume of the case.
A contract (joint venture styled as Chaghai Hills Exploration Joint Venture Agreement/CHEJVA) between a foreign company (BHP International, a company incorporated in Delaware, USA) and an autonomous body (Balochistan Development Authority) that took place in July, 1993 was held void ab initio in January 2013. Here the following points merit mention:
One, the Supreme Court of Pakistan in its short order has stated that the Balochistan Mining Rules 2002 (BMR 2002) were relaxed in favour of one of the successor companies of BHP (Tethyan Copper Company Pakistan Ltd, which was sixth successor-in-interests of BHP since 1993) by the successive Balochistan governments and by authorisations from a governor. The relaxation of delegated rules BMR 2002 were an administrative act and were earlier challenged by Maulana Abdul Haq Baloch and the Balochistan High Court in its judgment dated 26 June 2007 held the relaxation legal.
Two, the Supreme Court, in 2011 in a leave to appeal, passed a consent order allowing the parties to contract to reach the Government of Balochistan for the mining licence of TCC Pakistan Ltd.
The facts reveal that a contract was held void ab initio 20 years after its conclusion and after an investment of the well over A$200 million. The law of contract, which forms the very foundations of market economy and is considered an embodiment of the protection of property rights, was brought into an uncertain arena.
The decision on the Reko Diq case received a mixed response. There are those who applaud it, while others express a divergent opinion. Those who favour the decision carve out their arguments from patriotic and nationalistic propensities. Those who have a differing approach state that there must be some limits of judicial review which is primarily designed for administrative actions and not for economic decision-making and not obviously for contractual obligations. Since the SC decisions have a binding effect in view of Article 189 of the Constitution of Pakistan, the following implications seem obvious:
First, the sphere of uncertainty in the domain of Law of Contract has been broadened by the decision. The reason for holding the contract void has not been unequivocally recorded in the short order. Resultantly, the legal and economic reasoning for holding the contract void is not clear. The very basis of doctrine of stare decisis (which is the basis of Article 189 of the Constitution of Pakistan) is to achieve legal certainty. In commercial transactions, the need for legal certainty cannot be over-emphasized. Lord Bingham observed in Golden Straight Corporation v Nippon YKK [2007] UKHL 12, para 1 that:
Likewise, the EU’s Court of Justice espoused certainty in its jurisprudence. It said:
‘the principles of legitimate expectation and assurance of legal certainty are part of the legal order of the Community’ (Deutsche Milchkontor GmbH v Germany (Joined Cases 205-215/82))
In international law, the rule of law has been treated as a principle of governance and one of its central themes is legal certainty. The United Nations (UN) Secretary General in his report on the Rule of Law and Transitional Justice (2004) observed that:
‘For the UN, the rule of law refers to a principle of governance. It requires as well measures to ensure adherence to the principles of supremacy of law, equality before law, legal certainty, avoidance of arbitrariness and procedural and legal transparency.
‘For the period July to April 2009-10, FDI totalled US$ 1.8 billion as compared to US$ 3.2 billion in the same period of FY09. This represents a decline of 45 percent.
A foreign investor, who is not sure how his contracts will ultimately fare up, will be shy to bring in investment. Any judicial review that adjudicates on economic activity of contractual nature instead of on administrative actions of public officials is likely to cause legal snags for any prospective foreign investor. Perhaps this is the reason that some judges like Stephen Beyers in the US have advocated that judiciary should seek to resolve matters in a manner that encourages popular participation in governmental decisions. Justice Stephen Beyers, while explaining the theme of his book ‘Active Reality: Interpreting Our Democratic Constitution’ (2005), in a lecture at Harvard University elucidated:
‘The concept of ‘active liberty’ as I said at the outset ‘refers to a sharing of a nation’s sovereign authority among its people. Sovereignty involves the legitimacy of a governmental action and a sharing of sovereign authority suggests several kinds of connection between that legitimacy and the people.’
In Pakistan’s case, however, it is to be seen whether the sovereign authority can be shared in the way envisioned by Justice Beyers.
Finally, it is reverently submitted that the Supreme Court is embarking upon an extended review with every passing day. In the words of M. A. Fazal who, in his celebrated book ‘Judicial Control on Administrative Action in India and Pakistan’, wrote that while the judiciaries of both the countries were expanding on their review prowess, they must hinge the reviews on the ‘fixed principles of law’. It is believed that the detailed reasoning of the Supreme Court will address the issues of legal uncertainty and will propound a coherent Law of Contract, which reassures foreign investors about Pakistan’s commitment to enforceable contractual obligations.
