Pakistan and Saudi Arabia have come to an agreement on the investment modalities, clearing the way for the long-awaited ratification of a free trade agreement with the Gulf Cooperation Council (GCC).
This development, pending for the past 19 years, saw a high-powered delegation led by Interim Commerce Minister Gohar Ejaz concluding discussions with the GCC’s chief negotiator in Riyadh.
The aim was to finalize the investment segment of the FTA, a crucial step before the expected approval of the FTA with Pakistan at the GCC Foreign Ministers’ meeting in Doha on Sunday.
The agreed investment chapter is now slated for presentation to the GCC ministers for approval, marking the first trade and investment agreement the GCC has entered into with any country in the past 15 years if approved.
One significant decision is the resolution of disputes locally within eight months before resorting to the International Court of Arbitration. Minister Ejaz highlighted the successful finalization of the investment chapter in Riyadh, emphasizing the innovative eight-month period for mutual dispute settlement before resorting to international arbitration.
In September, Pakistan agreed on the FTA with the GCC. Still, the signing was delayed as Saudi Arabia insisted on incorporating an investment chapter, particularly focusing on the International Centre for Settlement of Investment Disputes (ICSID) as a protection clause.
The history of discussions dates back to 2004 when Pakistan and the GCC signed a framework agreement to explore an FTA. After a hiatus, negotiations were revived in 2021, potentially boosting Pakistan’s exports to the GCC bloc.
An investment dispute arose because Pakistan introduced a new investment treaty template, featuring only local arbitration. This was a response to a $6 billion penalty from ICSID on Pakistan.
Saudi Arabia insisted on including ICSID for arbitration, leading Pakistan to revise its decision. The revised investment template, including ICSID, the Permanent Court of Arbitration, and the Dubai International Arbitration Centre, was presented to the GCC negotiator after cabinet approval.
Gohar clarified that Pakistan already has international arbitration agreements, including ICSID, with four other GCC countries. The updated investment chapter will apply to investments with Saudi Arabia and Qatar, with its provisions extending to future investments with GCC countries.
