Pakistan's Experience With Investor-State Arbitration: Two Contrasting Decades (2000-2010 And 2010-2020)

305 PAKISTAN'S EXPERIENCE WITH INVESTOR-STATE ARBITRATION: TWO CONTRASTING DECADES (2000-2010 AND 2010-2020) By Ali Zahid Rahim, Advocate There is no better account of why Pakistan came to sign and enter into multiple International Investment Agreements (IIAs) (specifically, Bilateral Investment Treaties (BITs)) especially from the 1990s onwards than the following 2009 ITN interview of the former Attorney-General for Pakistan, Mr. Makhdoom Ali Khan1 conducted by Professor Lauge N. Skovgaard Poulsen2 and Damon Vis-Dunbar: Reflections on Pakistan's investment-treaty program after 50 years: an interview with the former Attorney General of Pakistan, Makhdoom Ali Khan3 By Lauge Skovgaard Poulsen and Damon Vis-Dunbar 16 March 2009 Pakistan inked the first ever bilateral investment treaty (BIT) with the government of West Germany 50 years ago, before going on to accumulate one of the largest portfolios of BITs held by a developing country: some 47 in total, 35 of which were signed in a flurry of activity between 1988 and 1999. However, in recent years, the expansion of Pakistan's investment-treaty network has slowed down substantially. The timing is no accident; the brakes were applied at the same time that Pakistan faced its first lawsuit under a BIT in 2001 by the Swiss multinational Society General de Surveillance (SGS) under the Switzerland-Pakistan BIT. While the SGS dispute ended in a settlement favourable to Pakistan, its effect on the Pakistani administration at the time was considerable. ****** 1. Mr. Khan was the Attorney-General for Pakistan from September 2001 to August 2007 and is undoubtedly and by far, one of the most famous and well recognized Pakistani international arbitration lawyer / arbitrator / jurist in the world. He is one of four Pakistanis nominated by Pakistan to the ICSID panel of arbitrators and conciliators and has held key leadership positions in key arbitral institutions such as the London Court of International Arbitration (LCIA). Due to Mr. Khan's experience in defending the State of Pakistan against several investment treaty and international commercial arbitrations in the 2000s when he was the Attorney-General and the subsequent switch to representing claimants against Pakistan, roughly in the decade 2010-2020, after he stepped down as the Attorney-General in 2007, he is perhaps the only Pakistani "insider" as it were when it comes to all things international arbitration - a key actor by all means. 2. https://www.ucl.ac.uk/political-science/people/dr-lauge-poulsen 3. https://www.iisd.org/itn/en/2009/03/16/pakistans-standstill-in-investment-treaty-making-an-interview-with-the-former-attorney-general-of-pakistan-makhdoom-ali-khan/ ****** Pakistan's Attorney General during the SGS dispute, and others that followed, was Mr. Makhdoom Ali Khan. To learn more about the impact of these disputes on Pakistan's investment-treaty program during his tenure as Attorney General, ITN spoke to Mr. Khan in Karachi. ITN: How did you get involved with Pakistan's BIT-program? The Secretary of Law called me up in 2001 and asked what I knew about the International Centre for Settlement of Investment Disputes (ICSID) and this thing called a bilateral investment treaty (BIT). He informed me that Pakistan was being sued by SGS at ICSID and asked how SGS could do that. To be perfectly honest, I did not have a clue, so I had to look it up on Google. I typed in 'ICSID' and 'BIT', and that's how I learned about these instruments for the first time. I asked the Ministry of Industries, who were responsible for BITs at the time, how these treaties were signed. I was told that when the President, or Prime Minister, went abroad, our foreign missions would tell the Ministry that BITs are 'one of the doables'. Since Pakistan had signed BITs without any consequences for a long time, everyone simply considered the treaties a piece of paper, something for the press, a good photo opportunity-and that was the end of it. Now, one option was of course not to participate in the SGS proceedings and instead try to rely on our local courts to avoid enforcement of a possible award. But I advised against this option, as it would give Pakistan's courts a bad reputation internationally... ITN: What subsequent impact did the SGS case have? The secretariat of the Chief Executive [former President Pervez Musharraf] issued a directive which provided that no more BITs were to be signed by Pakistan until the Attorney General's office was consulted and all other government stakeholders were onboard. This was a first for Pakistan. Previously, I don't think any ministry---except that in charge---even knew that the BITs had been signed, and I couldn't find files on record demonstrating that meaningful negotiations had actually taken place. The maximum level of input to the negotiations from Pakistan appears to have been proof-reading, and at times, albeit rarely, some not very significant suggestions on the text. Secondly, the Board of Investment BOI [the agency now in charge of BITs] and I brought in experts from abroad to speak with the government stakeholders. If someone of any note in the world of public or private international law was visiting the region, we would invite them to come and speak. This was an education process of sorts, allowing us to understand what could, and could not, be the consequences of signing BITs. This, combined with a couple of excellent officials within the BOI, meant that Pakistan's negotiating capacity was upgraded significantly at the time. ITN: Has this 'education process' succeeded? I don't think that is the case. While the Pakistani team involved in the long and difficult BIT-negotiations with the United States [which remain ongoing] has been relatively well-prepared and rigorous in their approach, these negotiations were special because of the political relationship between our two countries and the scope of the U.S. proposal. So despite these efforts, I'm afraid the worst is yet to come. When I resigned as Attorney General in 2007, the approach to negotiating BITs was still haphazard and piecemeal. Notwithstanding a few very learned officials within the bureaucracy, there is not a shared understanding in Pakistan that negotiating BITs requires a lot of effort and---perhaps most importantly---legal expertise. Pakistan has therefore continued to sign BITs without seriously considering the implications. This is particularly troubling as Pakistan is not able to fulfill many of the legal obligations enshrined in BITs, which makes us an easy target for expensive investor claims. ITN: With this in mind, do you think Pakistan should stop signing BITs? I am not against BITs as such; I'm simply against the approach Pakistan has taken in the past, which is to passively sign these treaties, with no real negotiations, or sense of the risks involved. If Pakistan is going to seriously negotiate BITs, it needs to set aside an appropriate budget, so that the bureaucracy is well staffed and informed on these matters. Unfortunately, the Government of Pakistan has never considered BITs an important enough issue for this. But look at the legal costs in the three cases against us so far; I'm sure they exceed US$10 million as a very conservative estimate. For less than a fraction of that amount you can set up a department, hire lawyers---perhaps even get some assistance from outside Pakistan-and start looking at this process properly. But I don't think the will is there because the need is not felt. But come a day where we are faced with a similar situation as Argentina is now, this may change. Lauge Skovgaard Poulsen is a PhD-candidate at the London School of Economics (email: l.n.poulsen@lse.ac.uk ). Damon Vis-Dunbar is Editor of ITN. The prescient 2009 ITN interview serves as important historical context, specific to the decade 2000-2010, in understanding why Pakistan signed on to such IIAs, and then came to be sued on a regular basis under those IIAs in the last two decades - with two ICSID awards in 2017 (Karkey v. Pakistan)4 and in 2019 (Tethyan v. Pakistan)5 - against Pakistan in the crippling sums of damages6 worth approximately US$ 1 and 6 Billion (including interest) respectively.7 It is also useful in contrasting Pakistan's experience in defending the second wave of investor-state arbitrations in the past decade 2010-2020. ****** 4 ICSID Case No. ARB/13/1 Karkey Karadeniz Elektrik Uretim A.S. v. Pakistan - see https://www.italaw.com/cases/documents/6669 5 ICSID Case No. ARB/12/1 Tethyan Copper Company Pty Limited v. Pakistan - see https://www.italaw.com/cases/1631 6 The eminent University College London (UCL) professor and public international lawyer Dr. Martins Paparinskis path-breaking article titled A Case Against Crippling Compensation in International Law of State Responsibility discusses increasingly large compensation awards by international arbitral tribunals and among other things, what full reparation means under international law. The article can be accessed here: https://onlinelibrary.wiley.com/doi/full/10.1111/1468-2230.12562 7 The Tethyan award is the second largest ICSID award ever made almost equivalent to the size of the IMF bail-out package (US$ 6 Billion) the country received in 2019. ****** The Preface to Professor Poulsen's excellent 2015 work on IIAs titled "Bounded Rationality and Economic Diplomacy - The Politics of Investment Treaties in Developing Countries" (Cambridge 2015) is titled "The curious case of Pakistan" builds on the 2009 IISD interview above and is essential reading in understanding the history of the international investment regime and how states like Pakistan joined the BIT bandwagon in the 1990s without much thought. Preface titled "The curious case of Pakistan" (pages xiii to xvi) In October 2001 Pakistan's Secretary of Law received a letter. It related to a dispute between the Pakistani government and a Swiss company, Society General de Surveillance (SGS). The dispute had begun in 1996 after the Sharif government terminated a contract with SGS due to suspicions that it had been obtained through bribes. SGS objected and began a series of legal proceedings in both Switzerland and Pakistan. All failed. The letter received five years after the dispute had begun was not from Switzerland or the Pakistani courts. This time it was from Washington DC. It came from a World Bank institution called the International Centre for the Settlement of Investment Disputes. ICSID said SGS was claiming more than US $110 million in compensation based on a so-called bilateral investment treaty (BIT). This puzzled the Secretary, as neither ICSID nor the BIT had been mentioned by SGS while the contractual dispute had lasted.8 He therefore called up his Attorney General to ask what he knew about ICSID, and how SGS could possibly use a BIT to file such a claim. Although one of the most notable experts on international public and commercial law in Pakistan, the attorney general couldn't give him an answer. 'To be perfectly honest,' he later said to me, 'I did not have a clue.'9 After hanging up, the attorney general therefore went on to Google. Here he typed in two questions: 'What is ICSID?' and 'What is a BIT?' And that is how he learned of these instruments for the first time. ****** 8 ICSID Case No. ARB/01/13, Decision on Jurisdiction, 6 august 2003, par. 63 . 9 Interview, Karachi, January 2009 . ****** It didn't take long before the attorney general realized that the letter from ICSID was serious indeed. Unlike the contract with SGS, which involved specific commercial rights, the six-page BIT provided SGS a right to compensation for a wide range of regulatory conduct based on very vague treaty language. Pakistan was obliged to fully compensate Swiss investors for expropriation, indirect expropriation, or any other measures having the same nature or effect. What that meant remained unspecified. Swiss investors could also claim damages owing to war, revolts, states of emergency or other armed conflicts, none of which were strangers in a Pakistani context. They were promised free repatriation of their profits and other capital out of Pakistan, which again was a very significant obligation for a country facing serious foreign exchange short-ages at the time. The treaty also obliged Pakistan to treat Swiss investors in the same way as Pakistani investors (national treatment) or investors from other third countries (most-favoured-nation treatment), whichever was more favourable. Finally, it included a vague-- but potentially far-reaching - clause providing for fair and equitable treatment, which again remained unspecified. In essence, the BIT provided SGS something akin to an 'economic constitution' while operating in Pakistan that was independent of Pakistan's own laws and regulations. As important, it gave Swiss investors the right to settle disputes with the Pakistani government outside Pakistan's own legal system, for instance by using ICSID as the arbitration forum. This was in contrast to the usual procedure of international arbitrations, where foreign investors traditionally needed to go through domestic courts before inter-national proceedings could be initiated. The tribunal had the authority to admit SGS's claim, rule on its own jurisdiction, as well as award damages binding upon Pakistan and with no real options for appeal. Some corners of the Pakistani bureaucracy proposed to stay away from the proceedings and not comply with any potential arbitral awards, but the attorney general realized this was a bad idea. Like the vast majority of investment arbitration claims, SGS had asked for monetary compensation as a remedy. In case of non-compliance, the award would be enforceable against Pakistan's commercial assets around the world. Courts in enforcing states would have only limited options to refuse execution. Even more important, Pakistan was crucially dependent on financial assistance from the International Financial Institutions, so reneging on international legal obligations within a World Bank forum like ICSID would be imprudent. Clearly, this was not a claim to be taken lightly, so the attorney general wanted more information on the BIT and why it had been signed in 1995. But when inquiring with the relevant ministries, he was unable to trace any records of negotiations ever taking place with Switzerland. There were no files or documentation and no indication that the treaty had ever been discussed in Parliament. In fact, no one could find the treaty itself, so Pakistan had to ask Switzerland for a copy through formal channels. For a treaty with such a considerable scope, this was somewhat of a mystery. Yet, the attorney general later learned that this was no exception, as hardly any records existed of Pakistan's past BIT negotiations. This was peculiar. For although Pakistan was no stranger to allowing individual investors a right to international arbitration based on specific contracts, its BITs had provided a 'standing offer' to international arbitration to foreign investors as a group. When signing BITs Pakistan had given all existing and future investors covered by the treaties the option of taking their disputes to international arbitration. Combined with their vague and broad treaty language, this not only gave investors a second chance at adjudicating contract disputes, as in the SGS case, but also implied a potentially infinite number of claims involving Pakistan's regulatory conduct. But even though Pakistan had actually been the first country to ever sign a BIT in 1959 with West Germany, and had concluded a total of 40 similar treaties since then, no one could seem to find any documentation that they had been carefully negotiated. This was not because the negotiations were considered too sensitive to document in written form. On the contrary, when foreign delegations had come to the country, or the Pakistani leadership went abroad, BITs had merely been considered a diplomatic token of goodwill. There was an expectation that the treaties would lead to increased inflows of foreign investment, something Pakistan desperately needed, but they were not thought to have any potential liabilities or regulatory constraints. The claim by SGS made it obvious to the attorney general that this view was mistaken. For many, however, this probably sounds a little too convenient: now that Pakistan had to adhere to her international legal obligations, it appears opportunistic of a bureaucrat to claim ignorance on behalf of his former colleagues. So to corroborate the story, I contacted a consider-able number of officials involved in Pakistan's BIT program in the past. All confirmed more or less the same narrative, and today even government files admit to this view: 'BITs were initially instruments that were signed during visits of high level delegations to provide for photo opportunities'.10 It was thereby not until Pakistan was hit by a multimillion-dollar arbitration claim that officials realized the implications of treaties signed by shifting governments since 1959. ****** 10 Communication between Pakistan s Board of Investment and Ministry of Law concerning re-negotiation of German-Pakistan BIT, 23 November 2009. On file with the author . ****** This book will show that Pakistan's experiences have not been unique. During the 1990s and early 2000s, only few developing country governments realized that by consenting to investment treaty arbitration, they agreed to offer international investors enforceable protections with the potential for costly and far-reaching implications. The majority of developing countries thereby signed up to one of the most potent inter-national legal regimes underwriting economic globalization without even realizing it at the time. This not only means that the history of the international investment regime has to be rewritten; it also provides more general lessons for our understanding of economic diplomacy. For even if policy-makers try to pursue their own preferences when designing the rules that shape global economic governance, they are not always as careful and sophisticated as much international relations literature would have us believe. Instead, economic diplomats are no different from the rest of us by often struggling to make sense of their surroundings due to limited problem-solving capabilities. It is only through studying the nature and role of these cognitive constraints that we will understand the often irrational, yet predictable, nature of international economic relations. In summary, the story that emerges is that for several decades after independence, and mostly in the 1990s, Pakistan signed dozens of BITs without any understanding of the functioning or consequences of the international investment protection regime made up of BITs and Investor-State Dispute Settlement (ISDS).11 However, in the decade between 2000-2010, when Pakistan had a competent Attorney-General in Mr. Makhdoom Ali Khan for the most part of that decade, who quickly came up to speed with the system of ISDS and forged important relationships with well-known international arbitration experts, Pakistan successfully managed to stave off four ICSID claims12 and other international litigation involving Pakistani State parties such as, for example, the famous Dallah case that made its way right up to the UK Supreme Court.13 ****** 11 The first ever BIT was signed between Pakistan and Germany on 25 November 1959 (the BIT was titled: Treaty between the Federal Republic of Germany and Pakistan for the Promotion and Protection of Investments accessible here:https://investmentpolicy.unctad.org/international-investment-agreements/ treaty-files/1387/download ). 12 Please see ICSID case database for information on the eight ICSID arbitrations against the State of Pakistan between 1987 and 2013: https://icsid. World bank.org/cases/case-database and https://icsid.worldbank.org/about/member-states/database-of-member-states/member-state-details?state=ST105 with the ninth one having been initiated very recently (12 October 2021) by a Turkish investor under the 1995 Turkey Pakistan BIT. 13 https://www.supremecourt.uk/cases/docs/uksc-2009-0165-judgment.pdf ****** Pakistan's success in defending itself against arbitral claims in this period did not however, translate into enduring, robust institutional capacity. Indeed, the worst indeed came (as predicted by Mr. Khan - our Argentinian moment as it were) and in the decade after (2010-2020) following Mr. Khan's departure from government14, Pakistan was left rudderless with grave consequences. By the time the next two big cases against the state were filed in late 2011 (Tethyan) and 2013 (Karkey), one case was completely outsourced by the Government of Pakistan to a private Pakistani counsel and his firm who assembled a team of international lawyers and was in charge of the entire case virtually on his own with minimal involvement and oversight of the Office of the Attorney-General for Pakistan (OAGP)15 for the critical opening period between 2011-2014.16 ****** 14 From defending the State against arbitral claims as the Attorney-General, Mr. Khan switched to representing claimants against the State after he stepped down as the Attorney-General including representing the claimant Tethyan Copper Company Pty Ltd. in the Tethyan case between 2012 and 2015. See https://www.iareporter.com/arbitrator/Khan and https://www.italaw.com/ arbitrator/makhdoom-ali-khan. See interview number 31 In Conversation with Neil accessible to Delos members at: https://member-delosdr.org/video-neil-conversation-31-makhdoom-ali-khan/ 15 https://www.agfp.gov.pk 16 This was the time when Pakistan nominated Lord L.H. Hoffmann as Pakistan s arbitrator on the Tethyan ICSID panel. Lord Hoffmann was also on the panel of arbitrators that handed down an approximately US$ 6.6 Billion award in January 2017 against Nigeria in relating to the gas industry and like the Tethyan case where there was no operational project on the ground. See https://www.bloomberg.com/news/features/2019-09-04/is-one-of-the-world-s-biggest-lawsuits-built-on-a-sham ****** In the other case (Karkey), footnote 2 of the Award dated 22 August 201717 is telling of the state of affairs at the OAGP in mid-2013: "On 1 July 2013, the Secretariat received a letter by mail from Pakistan indicating that it forwarded "vide mail dated 10 June, 2013 the proposal of the appointment of Co-Arbitrator and the Presiding Arbitrator as Mr. Rashidin Nawaz Qasuri, Advocate, Supreme Court and Mr. Justice (R) Khalil-Ur-Rehman Ramday, former Judge of the Supreme Court of Pakistan respectively." On 2 July 2013, the Secretary-General acknowledged receipt of the 1 July 2013 letter and notified the Parties that it never received any such communication prior to 1 July 2013. In the Secretary-General's 2 July 2013 letter, she also noted that the Secretariat had sent multiple communications in June 2013 to the Parties regarding the appointment of the remaining arbitrators. As there was no response to the June 2013 letters, the Secretariat proceeded with the appointments of the missing arbitrators by the Chairman of the Administrative Council in accordance with Article 38 of the ICSID Convention. On 8 July 2013, the Claimant sent a letter informing the Secretary-General that it did not agree to the replacement of Sir David A.O. Edward pursuant to ICSID Arbitration Rule 7, and it did not concur in the appointment of Mr. Justice (R) Khalil-Ur-Rehman Ramday nor the naming a Pakistani national as a Member of the Tribunal". What the above indicates is that the OAGP did not know that under the ICSID convention and arbitration rules, a state cannot appoint its own national as arbitrator on an ICSID panel in an ICSID arbitration against the state itself. This also indicates a lack of communication between the OAGP and the Tethyan team in place at the time.18 At the time, the OAGP personnel did not even have secure official email addresses with apparently internal and confidential documents ending up with the other side in at least one case. There was no system of record-keeping (in fact, in some cases records were kept outdoors exposed to the elements and rotting away) and there were other shortcomings in terms of basic understanding, infrastructure and facilities.19 Ultimately, in terms of institution building and institutional memory, it appears that gains made between 2001 to 2007 were rather temporary. ****** 17 https://www.italaw.com/sites/default/files/case-documents/italaw9767.pdf 18 In 2011 ICSID Case No. ARB/11/8 Agility v. Pakistan also commenced, which was ultimately decided in Pakistan s favour (Award dated: 1 August 2016) because the claimant company accepted that the Tribunal lacked jurisdiction because the 1983 BIT (Kuwait-Pakistan) had never entered into force. This was two years after the Tribunal had first upheld jurisdiction in early 2013 (See https://www.iareporter.com/articles/jurisdiction-is-upheld-in-claim-by-logistics-company-agility-warehousing-against-pakistan/ ). In what is another indication of the deplorable state of affairs at the OAGP in early 2013, footnote 1 of the 1 August 2016 Award (available with the author on file) states: On 11 April 2013, the Respondent filed an Application for Annulment of the Decision on Jurisdiction. On 15 April 2013, the Secretary-General informed the Parties that the application for annulment could not be registered under Article 52 of the ICSID Convention because the Decision on Jurisdiction was not an award under Article 53 of the ICSID Convention . 19 These are the author s own observations and recollections from the time he worked closely with the OAGP (between 2015 and 2019). ****** While the OAGP was in control of and successfully resolved multiple complex ICSID and other international litigation and arbitrations between 2000-2010, it struggled during much of the subsequent decade. It would appear that little in the way of transfer of knowledge took place within the institution, and in what is quite typical of post-colonial countries such as Pakistan, a handful of personalities (and one personality in this case) can make a world of a difference as far as an institution's and indeed, the country's performance is concerned. Against this backdrop, in 2014-2015, a dedicated department (what Mr. Khan had mentioned in his interview above) and the precursor department / unit to what later came to be known as the International Disputes Unit (IDU) was set up within the OAGP to keep track of and supervise ongoing arbitrations involving the State of Pakistan. The IDU began operations in 2015 under the then-Attorney-General Mr. Salman Aslam Butt.20 However, between 2014 and 2015, because of capacity constraints, the well-known, "magic circle" international law firm of Allen & Overy, LLP was engaged by the OAGP to represent Pakistan and take the lead in at least four disputes including Karkey and Tethyan21 Though the IDU is responsible for overseeing all international arbitration matters involving the State of Pakistan or any of the Federal Government divisions and ministries, despite steady improvements, it remains under-staffed and capacity issues remain.22 The IDU's most important achievement to date has been to successfully settle the Karkey case without Pakistan having to pay Karkey anything.23 Given the US$ 1 billion plus award (with accrued damages as of the date of settlement), this is a significant achievement.24 ****** 20 The first head of the IDU (not called that at the time) was Mr. Faisal Habib Khan, a current partner at the law firm Cornelius, Lane and Mufti. The current Head, IDU, Mr. Ahmad Irfan Aslam succeeded Mr. Khan in late 2016. 21 Between 2015 and 2020, Allen and Overy represented Pakistan in two ICSID cases (Karkey and Tethyan), two PCA-UNCITRAL gas sector Allawi arbitrations as well as the National Accountability Bureau (NAB) Broadsheet LLC arbitration under the Chartered Institute of Arbitration Rules. 22 https://tribune.com.pk/story/2048693/agp-office-understaffed-deal-international-disputes There is also the issue of jurisdiction and coordination between the OAGP and the Law and Justice Division. As per the Federal Government Rules of Business, 1973, (accessible here: https://www.cabinet. gov.pk/SiteImage/ Misc/files/ROB%20(As%20amended%20up%20to%201st%20December%2C%202021).pdf - Schedule II [Rule 3(3)] Distribution of Business among the Divisions), the Law and Justice Division (at serial number 21), is responsible for dealings and agreements with other countries and International orginizations in judicial and legal matters (entry number 4 under serial number 21 of the Schedule) and Arbitration in respect of Federal areas and International arbitration (entry number 17 under serial number 21 of the Schedule). The proviso of Rule 14(2) however, states that Provided that for the purpose of settlement of its disputes through arbitration at national and international level, the Division concerned may make direct consultation with the Attorney-General for Pakistan . As things stand now, it is the IDU housed at the OAGP that has complete visibility of all international arbitration matters involving the State of Pakistan. 23 https://www.italaw.com/cases/2024 Luckily for Pakistan, the Karkey case was settled in late 2019 with Pakistan not having to pay anything. See https://globalarbitrationreview.com/pakistan-settles-billion-dollar-award-without-payment . Recently, an in-principle, framework agreement has also been reached with the owners of the Tethyan Copper Company Pty Ltd. (a joint venture entity held equally 50:50 by the owners -- Barrick Gold Corporation and Antofagasta Plc - see https://www.barrick.com/English/news/news-details/ 2022/barrick-pakistan-and-balochistan-agree-in-principle-to-restart-reko-diq-project/default.aspx and https://www.antofagasta.co.uk/investors/news/2022/ antofagasta-agrees-in-principle-to-exit-reko-diq-project-in-pakistan/ ) leading to a possible settlement of the Tethyan case (or cases as alongside the Tethyan ICSID case, there is a parallel ICC arbitration as well) with Barrick acting as the main operator of the eventual mining project and Antofagasta receiving a settlement payout of US$ 900 Million. From the press releases of both claimant parties, it appears that there is still a lot to do before definitive agreements are concluded settling both Tethyan cases. The Tethyan ICSID case is otherwise, currently pending with post-award, annulment as well as revision proceedings underway. 24 In the decade 2010-2020, Agility can also be seen as a victory for Pakistan. Pakistan s costs in the amount of US$ 6,362,844.59 were ordered to be paid by the Claimant although one wonders whether Pakistan should have racked up these costs (US$ 4,967,306 in Pakistan Law Firm s Fees and Disbursements) to begin with given the status of the underlying BIT never having come into force. Similarly, two PCA-UNCITRAL, gas sector (LPG) Allawi arbitrations against Pakistan (both decided on 30 August 2016) were clear victories for Pakistan. ****** As Pakistan looks towards the future, a clear understanding and sense of history is thus required to understand the wider ISDS system and its evolution over the last twenty-five years. A common argument in support of the ISDS system is that it is a means for a State to encourage foreign investment into its territory especially from the Contracting State party to an IIA. While this argument is still repeated by many involved in the system, consensus is beginning to emerge that this is just not true. The latest comprehensive economic research on the causal link between States executing IIAs and such IIAs leading to more FDI denies such a link by carrying out a "meta-analysis of the effects of international investment agreements for the protection of foreign investors on foreign direct investment using 2017 estimates drawn from 74 studies". The research published in September 2020 in the Journal of Economic Surveys is titled "Does Investor Protection Increase Foreign Direct Investment? A Meta-Analysis"25 by two economists associated with the CERGE-Economic Institute of the Czech Academy of Sciences and Charles University. The research concludes by stating that "Our meta-synthesis, presented in Table 3, indicates that , all types of international treaties, bilateral investment treaties, multilateral investment treaties, bilateral trade agreements and multilateral trade agreements have an effect on FDI that is so small as to be considered as negligible or zero". Over the last few years, more evidence has come forward that shows that providing investors with access to arbitration in investment treaties does not lead to additional investment.26 In this light, Pakistan should instead focus on rethinking its World Bank driven "ease of doing business" rankings approach to economic policy and reform, which appears to have been hard-wired into the Pakistani system over the last ten years at every level within the Federal Board of Investment (BOI)27 as well as provincial BOIs and other government departments and ministries. As things stand now of course, The World Bank itself has put an end to the Doing Business Report over data irregularities.28 One size certainly does not fit all especially as far as increasing FDI is concerned and the "ease of doing business"/"one-window"/"one-stop shop"/"regulatory guillotine"29 mentality and offering a new, updated and modern model BIT will not get us there.30 ****** 25 https://onlinelibrary.wiley.com/doi/epdf/10.1111/joes.12392 26 See J. Bonnitcha, Lauge N. S. Poulsen and M. Waibel The Political Economy of the Investment Treaty Regime (Oxford 2017). 27 https://invest.gov.pk . 28 https://www.theasset.com/article-esg/41636/world-bank-should-stop-doing-business and https://www.worldbank.org/en/news/statement/2021/09/16/world-bank-group-to-discontinue-doing-business-report 29 https://business.gov.pk/brief-for-the-meeting-on-regulatory-guillotine/ and https://invest.gov.pk/node/1813 30 https://www.brecorder.com/news/40128760/boi-begins-dialogue-with-bit-partners The new model BIT is not available publicly and no public consultation appears to have taken place in its finalization. Even otherwise, the recent Eco Oro award (see ICSID Case No. ARB/16/41 - https://www.italaw. com/cases/6320 ) serves as a reminder on the limitations of new, balanced and reformed model texts of IIAs (in this case, the Canada Colombia FTA (signed in November 2008 and came into effect in 2011) see https://www.afronomicslaw.org/index.php/category/analysis/arbitral-award-eco-oro-v-colombia-dispute-bad-law ****** In the context of Pakistan's experiences over the past two decades and practical, institutional reform, former Attorney-General Mr. Khan has advocated for Pakistan to follow the Peru model.31 Mr. Khan's views which he shared publicly at the International Law Association, Pakistan Chapter's lecture event in Islamabad in December 202032 (where the well-known Freshfields arbitrator/lawyer Ms. Lucy Reed33 was the main guest of honour) do not make much sense as Pakistan already has the IDU in place, which has been functioning for almost seven years now. While the IDU should pay attention to the Peru SICRECI model and be more transparent and be constantly improving its systems and protocols, this obviously cannot be the only reform measure or the big solution Pakistan needs given the real exposure it faces in light of all the BITs still in effect.34 Personal motives whereby a privileged set of elite lawyers and law firms benefit from handling continuing disputes involving the State cannot and should not be Pakistan's path to address debacles like Karkey and Tethyan. As an UNCITRAL Member State,35 Pakistan can and should make use of the UNCITRAL Working Group III (Investor-State Dispute Settlement Reform) to state its official position in terms of how it views ISDS reform and in highlighting issues it has faced vis- -vis two ICSID disputes in particular (Karkey and Tethyan) in which it has been involved in the last decade -- two decisions that typify the profoundly problematic nature of the ISDS system as a whole, especially, vis-a-vis the lack of consistency and coherence; incorrect decision-making; the treatment of corruption allegations by arbitral tribunals; arbitrator conflict of interest and determination of quantum of damages by applying novel valuation methodologies. ****** 31 See https://www.mef.gob.pe/es/acerca-de-las-asociaciones-publico-privadas-apps/sicreci and https://www.southcentre.int/wp-content/uploads/2016/11/ IPB6_Peruvian-State's-Strategy-for-Addressing-Investor-State-Disputes_EN.pdf and http://arbitrationblog.kluwerarbitration.com/2020/05/04/protectionist-amendments-to-perus-arbitration-law-disguised-as-transparency/ 32 https://ila-pakistan.org/a-society-for-the-promotion-of-international-law/ 33 Lucy Reed is the current president of the ICCA with Mr. Khan being a Governing Board member https://www.arbitration-icca.org/icca-governing-and-advisory-board 34 See <https://investmentpolicy.unctad.org/international-investment-agreements/ countries/160/pakistan?type=bits> Pakistan has currently entered into fifty-three (53) BITs, out of which thirty-two (32) are in force although it has reportedly resolved to terminate twenty-three (23) BITs https:// www.iisd.org/itn/en/2021/10/07/pakistan-terminates-23-bits/ A total of nineteen (19) out of the thirty-two (32) of the Pakistani BITs that are in force provide for ICSID as an option vis- -vis investor-State arbitration. Approximately nine (09) out of the thirty-two (32) of the Pakistani BITs that are in force provide for non-ICSID investor-State arbitration. Further, around eleven (11) of the Pakistani BITs, that are signed but not in force, provide ICSID as an option for investor-State arbitration. Certain BITs require that investors must resort to domestic courts for resolution of disputes and stipulate certain conditions that must be fulfilled, such as negotiations for a specific time period or exhaustion of local remedies before initiation of international arbitration. 35 Pakistan was a Member State of the UNCITRAL from 2004 to 2015 and was re-elected to the Commission by the General Assembly, in New York, in November 2015, for another six-year term from 2016 to 2022. As is evident from the WG III record, Pakistan has not made any submission to WG III so far, oral or written. Moreover, it appears that Pakistan may not have been elected for another six-year term at the recently held elections of Member States see https://unis.unvienna.org/unis/en/pressrels/2022/unisl325.html ****** In conclusion, the answer as to why Pakistan signed on to such IIAs in the 1990s to begin with (and then came to be sued on a regular basis under those IIAs in the last two decades) is simple: like many other unknowing countries, Pakistan saw executing IIAs (BITs for the most part) in the 1990s as convenient "photo opportunities" for its government officials with the potential to increase much needed FDI. Without much thought, Pakistan joined the bandwagon -- it was simply what other similarly placed developing countries were doing. What happened subsequently, in the two contrasting decades (2000-2010 and 2010-2020) in terms of defending against the first and second wave of ICSID disputes in specific, serves as essential historical context for Pakistan to learn from -- and there are many valuable lessons out there, which require a lot of work on multiple fronts by many different government entities -- not only IIA reform but institutional reform as well as policy and legislative reform. As Pakistan looks towards the future, proactive measures need to be taken and the danger is that because of successful settlements over the last two decades, it gets lulled into a false sense of security. There is no room for complacency. Sensible States (developed and developing -- form the North and the South) have thought long and hard about the many injustices the IIA and ISDS system has given rise to and have taken active measures in the last ten years to defend themselves from the vagaries of the system and to limit their exposure to expensive claims. Pakistan needs to follow suit and work on formulating coherent policies and strategies.