Sunday, August 1, 2021

Pakistan To Lose Its Billion-Dollar New York Roosevelt Hotel As International Court Moves To Freeze Assets In Reko Diq Case?

Pakistan’s national carrier may lose its billion-dollar Roosevelt Hotel in New York as an international court moves to freeze the airline’s assets in the Reko Diq case.

A Pakistan International Airlines (PIA) passenger plane was last week impounded by the Malaysian authorities owing to a British court case over the jet’s lease. The Boeing 777 aircraft, owned by the airline was held back after a court order and the passengers were allotted other flights to fly from Kuala Lumpur to Pakistan.

According to PIA, the case involved a $14 million lease dispute. PIA spokesman Abdullah H. Khan in a statement termed the decision by a local court in Malaysia as being “one-sided” pertaining to a legal dispute between PIA and another party pending in a UK court.

“We were told that the plane has been impounded on a court order,” Khan said in a video statement. “PIA’s legal team will pursue it in the Malaysian court, and we hope that we will resolve this issue as soon as possible.”

The Kuala Lumpur High Court passed the order on Thursday, the plaintiff of which is the Peregrine Aviation Charlie Limited and the matter pertains to two jets leased to PIA by Dublin-based AerCap, the world’s largest aircraft lessor, in 2015.

“According to the interim injunction, PIA is restrained from moving two aircraft in its fleet – a Boeing 777-200ER with serial number 32716 and a Boeing 777-200ER with serial number 32717 – once they have landed or parked at Kuala Lumpur International Airport until a further hearing on the matter later this month,” reported Al Jazeera.

The incident is the latest in the ever-growing troubles for the country’s beleaguered airline, which has many such cases pending in foreign courts. A key hearing in another multibillion-dollar Reko Diq case was set to take place in a London court on January 18, in which Pakistan, for the first time, filed a petition for the restoration of its frozen assets through a panel of lawyers.

The country is faced with up to a $6-billion fine in a foreign court in the Reko Diq case.

A court in the British Virgin Islands (BVI) has awarded shares of three companies owned by Pakistan’s national airline (PIA), including the Roosevelt Hotel in New York and the Scribe Hotel in Paris, to the Tethyan Copper Company (TCC). The authorities in Pakistan have reportedly now stepped up efforts to save the assets.

The International Center for Settlement of Investment Disputes (ICSID), which is a World Bank-run arbitration tribunal, had in July 2019 slapped Pakistan with a massive fine of $5.9 billion for revoking a gold-cum-mineral exploration license held by Tethyan Copper Company (TCC), a joint venture of Barrick Gold Corporation of Australia and Antofagasta PLC of Chile, in 2011.

Reko Diq mine is based in a small desert area of Chagai in northwestern Balochistan and is known for its huge gold and copper reserves. The mine is estimated to have the world’s fifth-largest gold deposit. It is estimated that the region can produce about 200,000 tons of copper and 250,000 ounces of gold derived from 600,000 tons of concentrate annually.

TCC, which was given the contract for the mine, estimated the annual profit from the mines at about $1.14 billion for copper and $2.5 billion for gold, totaling $3.64 billion annually. TCCs contract was abruptly revoked by a court in Balochistan for transparency concerns, and further legal hurdles in the country resulted in the total revocation of the deal.

According to BBC, Pakistan was to be represented at the January 18 hearing by a panel of lawyers, not only from the government of Pakistan but also from PIA’s side. It is unclear as to what extent the country is able to get some relief through its efforts at the court and protect its foreign assets.

The question is why the BVI court in a case against the government of Pakistan decided to freeze only the assets of PIA, and what effect such a decision might have on this case.

According to BBC, the government of Pakistan does have some shares in PIA, but the airline was not owned by the Pakistani government, it said quoting top Pakistan officials. The officials told the BBC that the confiscated assets are owned by a company called PIA Investment, which is not managed by PIA.

Officials said the PIA has appointed a lawyer in the case to persuade the court not to “punish the company in a case against the government of Pakistan.” According to the 2019 report, the value of these international assets of PIA is currently less than one billion dollars.

This means that even if these assets are confiscated, the foreign company TCC will not be able to achieve its target of about $ 6 billion. The report estimated the Roosevelt Hotel’s value at $ 560 million.

If the hotel is sold, then the amount after taxes and other legal payments will be less than half the quoted amount. The same is true of the other two companies, valued at barely $200 million. In that case, the only viable solution for the company would be to come to the negotiating table. However, according to officials, the TCC may knock on the door of the World Bank to implement the decision.

However, Pakistani officials say that the country has yet to present its position in detail in this case and it would be premature to draw any final conclusions in this regard. A press release issued by the Attorney General’s Office said that Pakistan would do its best to ensure the security of its assets anywhere in the world.

When the PIA had decided to sell the Roosevelt Hotel in 2007, the value of the 1,000-room building was put at $1 billion.

Built in 1924, the hotel was closed last year due to a crisis caused by the Coronavirus.

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