Challenging the Invisible and Invalid Contract

Response to ‘Farewell to FDI?’ Reproduced op-ed from the Daily Star  

By Kallol Mustafa, 20 January, 2015

The op-ed piece (‘Farewell to FDI?’,The Daily Star, Jan 13, 2015) is based on some misleading and partial information regarding Asia Energy’s (GCM) Phulbari Coal Project and the peoples’ protest against it. The writer termed the peoples’ protest against Asia Energy chief’s visit to Phulbari as ‘vandalism’ but did not mention how, for a long time, Asia Energy has been trying to bribe the local youth, provide them with drugs and destabilise the local situation. He blamed the government and local administration for not taking action against the protesters and warned that this might harm foreign investment, without even mentioning the responsibility of the government to implement the Phulbari agreement signed with the local people and honour expert opinion against open pit mining on different occasions.

The writer declared the government official’s denial of existence of mining contract with Asia Energy as “erroneous,” as he completely relied on Asia Energy propaganda published in Energy & Power, but failed to present the correct picture based on original documents and experts’ opinion already submitted to the government.

Based on the article ‘Records Need making Straight’, published in Energy & Power, widely known as lobbyist of Asia Energy, the writer states that Asia Energy has valid contract for mining with the government of Bangladesh and it obtained ‘mining lease’ in April 2004.  But the April 2004 letter, which the Energy & Power article referred to as evidence of Asia Energy’s mining contract, was indeed issued “…in the interest of preparing feasibility report and submitting to the government” and in no way can be used as a valid contract for mining operation. It was very clear in its following statement:

“(c) On receipt of the Feasibility Study Report, the technical aspects of the project will be examined and evaluated by experts and on the basis of this government will take final decision regarding real mining operation.

(d) Within this time, the lessee will not conduct any commercial activities of the mine.” (Emphasis added)

He also missed the evaluation and recommendation of the expert committee (formed by the government and headed by Prof. Nurul Islam) on the development plan submitted by Asia Energy. The expert committee in its report rejected the development plan of Asia Energy saying that:

According to the Mines and Minerals Rules prepared in 1968 under East Pakistan Mines & Minerals act 1967 (Regulation & Development) and amended in 1987 and 1989, royalty rate was fixed at 20% of the price of produced coal at the mine mouth. Accordingly, the Bureau of Mineral Development (BMD) signed an agreement for Boropukuria coalmine on 10/07/1994 at 20% royalty rate. Yet, on 20/08/1994, only a month and ten days after having signed this agreement, the BMD signed another agreement with BHP for coal mining in Dinajpur and Rangpur areas at only 6% royalty rate. This agreement with BHP is illegal as per the then existing mining law. In this situation, this illegal contract may be declared invalid and steps should be taken against concerned persons according to Article 5 of Mines and Mineral Act 1992.

According to Article 32 of Mines and Mineral rules 1968, which was in effect during the signing of the contract, as 3 years had already passed after first issuance of the license, the authorities did not have any right to extend the license period beyond 15/01/1998. For that reason the license renewal order on 26/01/98 for Area ‘B’ was illegal. During handover of the license for Area ‘B’ under the Assignment Contract [the transfer of contract from BHP to Asia Energy], BHP did not have any valid license to transfer as the license was already expired. That’s why all actions taken by the Asia Energy in that block are illegal. BHP lost permission for all kind of activities in Block ‘B’ on 15/01/98 in consequence of which Asia Energy did not have any valid permission to work in that block. So Asia Energy never had any right to apply for mining lease.

For the above two reasons, the Assignment contract signed with Asia Energy on 11/02/1998 has no legal basis. Alternatively, if it is considered that the application for the mining lease will be operated under Mining Rules amended in 1995, the government still cannot consider the Mining Lease Application because 3% of the estimated cost of the scheme has not been deposited with the application as Bank Guaranty as required by the Rules. It is to be noted that 3% of the total estimated cost — $12,460 million (capital cost $2090 million + operating cost $10,370) is $373.8 million, i.e Tk. 2, 616 crore.

(Source: Article 5.2, Report of the Expert Committee (REC) to Evaluate Feasibility Study Report and Scheme of Development of the Phulbari Coal Project, submitted by Messieurs Asia Energy Corporation, (Bangladesh) Pvt. Ltd. (AEC), 20 September 2006 [Author’s translation])

In brief, according to the expert committee, the contract and exploration license which Asia Energy received from BHP have no legal basis and the so-called mining lease (without permission of mining!) granted to Asia Energy under this contract is also legally invalid. That’s why there was nothing wrong or erroneous when Energy and Mineral Resources Division Secretary Abu Bakar Siddique said: “Asia Energy has no valid licenses to develop Phulbari coal mine” (Daily Sun, 8 Dec 2014).

Therefore, the government of Bangladesh (GOB) has no legally binding obligation to allow Asia Energy to do open pit mining and mining related activities in Phulbari, and there is no question of damage payment to Asia Energy for scrapping the Phulbari project as feared by Mr. Syed Mansur Hashim. Rather, the GOB can easily reject its Feasibility Study and Mine Development Scheme for open pit mining following the recommendations of the expert committee.

In fact, the GOB has legal and moral obligation to scrap Phulbari coal project according to the agreement signed between the government of Bangladesh and the people (National Committee to Protect Oil Gas Mineral Resources Port and Power represented the people) on August 30, 2006. The agreement was fully supported by the then opposition leader and current Prime Minister Sheikh Hasina. The main point of the agreement was: “Phulbari coal project will be scrapped and Asia energy will be ousted from the country.” It is now the duty of the GOB to implement its legal and moral obligation to the people by taking action against illegal activities of Asia Energy.

Read this article on the Daily Star (20/01/15): Response to ‘Farewell to FDI?’

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