In a significant development, Pakistan and Saudi Arabia have reached a consensus on the investment modalities, marking a crucial step towards the long-awaited ratification of a free trade agreement (FTA) with the Gulf Cooperation Council (GCC). Led by Interim Commerce Minister Gohar Ejaz, a high-powered delegation engaged in final discussions in Riyadh, successfully concluding the investment segment.
The agreed-upon investment chapter is now poised for presentation to GCC ministers for approval, a pivotal agenda item during the GCC Foreign Ministers’ meeting in Doha. This achievement holds historical significance as it could lead to the first trade and investment agreement that the GCC has entered into with any country in the past 15 years.
A noteworthy element of the agreement is the provision for resolving disputes at the local level within eight months before escalating them to the International Court of Arbitration. Minister Gohar Ejaz emphasised the successful crafting of a graduated approach, allowing investors to mutually settle disputes within the stipulated eight-month period before resorting to international arbitration.
The FTA with the GCC has been a topic of negotiation for 19 years, with the signing postponed in September due to Saudi Arabia’s insistence on incorporating an investment chapter. The demand aimed at including a protection clause, specifically the provision of the International Centre for Settlement of Investment Disputes (ICSID).
This breakthrough follows a revival of dialogue in 2021 after a substantial hiatus, with both parties conducting technical-level discussions in the previous year to assess the feasibility of finalising the agreement. The potential agreement holds significant promise for enhancing Pakistan’s export capacity to the GCC bloc.
Addressing an investment dispute, the former government of Pakistan Tehreek-i-Insaf introduced a new template for investment treaties, responding to the ICSID penalty of $6 billion on Pakistan. The penalty resulted from Pakistan’s refusal to grant a mining lease for the Reko Diq project to Australia’s Tethyan Copper Company. In response to Saudi Arabia’s dissatisfaction with the template, the investment chapter was revised to include three international arbitration bodies: the ICSID, the Permanent Court of Arbitration, and the Dubai International Arbitration Centre.
This positive development not only reflects diplomatic persistence but also sets a precedent for a pragmatic and cooperative approach in the face of prolonged negotiations. The comprehensive resolution of disputes and the incorporation of international arbitration mechanisms underscore the commitment to fostering a conducive environment for trade and investment between Pakistan and the GCC.