A Virgin Islands court has unfrozen shares in two hotels belonging to Pakistan’s national airline in the latest development in Reko Diq, one of the highest-dollar cases ever mediated through the territory’s courts.
In December, the VI Commercial Court, at the request of an Australian mining venture seeking to enforce a $6 billion award levied through the World Bank’s International Centre for Settlement of Investment Disputes, issued an order allowing Australia’s Tethyan Copper Company to enforce up to $3.1 billion of the award. The award is the largest ICSID settlement= yet, and among the largest-ever awards in the VI as well.
ICSID
is an entity set up to mediate disputes involving direct foreign investment by developed countries in less-developed ones.
The $6 billion ruling still stands, according to Pakistani media reports.
However, late last month, the court reversed an ex parte order freezing the airline’s assets.
“Pakistan has won the BVI case initiated by TCC to enforce the ICSID award,” Pakistani Attorney General Khalid Jawed Khan said in a statement, calling the decision a legal victory for Pakistan as well as Pakistan International Airlines, which is majority owned by the Pakistan government. Mr. Khan added that all ex parte orders obtained by TCC earlier had been set aside.
The airline also celebrated the decision.
“Justice prevails!” PIA tweeted after the announcement of the verdict. “By the grace of Allah and with the prayers of all our countrymen, courts in BVI decide in favour of PIA, releasing all hard-earned assets — i.e., Roosevelt NYC & Scribe Paris. Great victory for PIA and Pakistan. We won this together!”
Licence dispute
The case stems from a nearly decade-long dispute surrounding a licence the Pakistan government granted to the Australian company to develop copper and gold mining ventures in the Balochistan region, one of the world’s largest untapped mineral deposits, according to court documents and news reports.
Last year, Pakistan agreed to pay damages of $5.84 billion to TCC for blocking the permit after the company had sunk $220 million into the project, Reuters reported. Interest, damages and legal fees over the course of nearly a decade resulted in the massive award, court documents explained.
A subsequent discovery of facts turned up the hotels in question, which are split between two VI entities.
Two orders
Subsequently, the court issued two orders: one allowing TCC to enforce up to $3.1 billion of the award, and another freezing the shares in two VI companies owned by PIA: PIA Investments and PIA Hotels.
The order also froze the airline’s 40 percent interest in a third VI company, Minhal Incorporated.
The first two companies indirectly own the Roosevelt Hotel in Manhattan and the Scribe Hotel in central Paris, according to court documents.
The receiver, Paul Pretlove of VI firm Kalo Advisors, was tasked with ensuring the hotels are not sold at below market value and securing the proceeds of any sale that occurs, the documents explain.
But as of last month, the Pakistan attorney general said the orders earlier passed against PIA had been recalled, adding that the court had also removed the receiver appointed for the hotels.
The cost of litigation was awarded as well, he said.
TCC statement
The ICSID is still considering Pakistan’s appeal against the over its decision to cancel the mining lease and a final hearing will take place later this year, according to Pakistan newspaper Dawn.
After the original $6 billion ruling, William Hayes, TCC’s chairman, expressed the firm’s willingness to discuss the potential for a negotiated settlement with Pakistan and said TCC “will continue to protect our commercial interests and legal rights until the conclusion of this dispute.”
Another Pakistan newspaper, the Express Tribune, reported that TCC plans to appeal the reversal of the decision to freeze the assets. The Beacon could not immediately reach TCC for comment on the reversal.
The value of the 1,000-room Roosevelt Hotel has been disputed, but it was valued at $1 billion when the PIA sought to sell it in 2007, court documents stated. The hotel, which opened in 1924, closed last month after its revenue was gutted by the Covid-19 pandemic.
In the VI proceedings, TCC is being represented by Gibson Dunn & Crutcher, Martin Kenney & Co., and Joshua Folkard of 4 New Square.
KRyS Global is providing expert evidence on asset recovery.