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Introduction
The recent decision of the Permanent Court of Arbitration (“PCA”) in Islamic Republic of Pakistan v Republic of India (Indus Waters Treaty) has confirmed the PCA’s competence to determine certain disputes under the Indus Waters Treaty (the “Treaty”), which was entered into by Pakistan and India (the “Parties”) in 1960 following a water sharing dispute. Pakistan commenced an arbitration under the Treaty in 2016, alleging that the Kishanganga hydro-electric project (the “Kishanganga Project”) on the Indus River system consumed more water than it was entitled to under the Treaty.
Factual background
In the mid-20th century, disputes arose between Pakistan and India in relation to the use of water from the Indus River system. On 19 September 1960, the Parties signed the Treaty, which governs the Parties’ respective rights and obligations in relation to the water provided by the Indus River system. The Treaty also contains provisions relating to the settlement of “differences and disputes” arising under the Treaty.
In 2007, India began construction of the Kishanganga Project, a hydro-electric project that diverts water from the Kishanganga River to a power plant on the Jhelum River. Pakistan argues that this has the effect of diverting water to India that would otherwise have flowed into Pakistan.
In 2007, Pakistan raised objections to India’s Kishanganga Project. While the dispute was largely resolved by an arbitral award delivered in 2013, a number of issues relating to the design of the Kishanganga Project remained outstanding, such as the placement of power intakes, the outlet design and the type and placement of spillways. After unsuccessfully negotiating with India between 2013 and 2016, Pakistan issued a Request for Arbitration on 19 August 2016. On 4 October 2016, under Article IX of the treaty, India requested that the World Bank appoint a neutral expert to determine a number of issues that were substantially similar to the issues that Pakistan had already raised in its Request for Arbitration.
The arbitration and the PCA’s decision
India objected to competence of the PCA on the following grounds:
In February 2023, the PCA decided that it would consider India’s objections and determine its competence on an expedited basis as a preliminary phase of the proceedings. India refused to appoint arbitrators in the dispute, appear before the PCA or otherwise participate in the proceedings.
However, the PCA concluded that India’s failure to “participate [did] not and [could not] prevent the proceedings before the Court from advancing, nor prevent the Court from issuing orders, directions or decisions, culminating in awards with final and binding effect on both Parties”.
In reaching this conclusion, the PCA referred to India’s conduct during the 2013 arbitral proceedings. In those proceedings, while India did not accept that the PCA was competent to resolve the dispute in 2013, it nonetheless appointed two arbitrators and appeared before the PCA. The PCA found that India had accepted that, under the terms of the Treaty, its objections regarding competence were to be decided by the PCA and were not a question that it could determine unilaterally. However, the PCA noted that India’s lack of participation did not lessen the importance of the PCA’s duty to verify its competence and jurisdiction over the dispute before it.
The PCA unanimously rejected each of India’s objections with respect to its competence.
The PCA found that India’s act of signing and ratifying the treaty indicated its consent to the PCA being able to determine its own competence in respect of disputes it was seized with. In relation to India’s second, third, fourth and sixth objections, the PCA found that the prerequisites for an arbitration had been established and that the Tribunal was properly constituted.
Finally, the PCA found that while the Treaty prohibits an arbitration being commenced while disputes are being dealt with by a neutral expert, India had only appointed a neutral expert after Pakistan had already issued its Request for Arbitration. Accordingly, the arbitration had not been commenced wrongfully. Further, the PCA noted that the Treaty does not prohibit the Parties from arbitrating and seeking a neutral expert’s determination as “parallel proceedings”, and that such arrangements “are, in fact, commonplace in public international law … In such circumstances, there is a general duty of any international dispute resolution body to exercise its competence in such a manner as to facilitate the actual resolution of the Parties’ dispute and to avoid the risks of duplicative proceedings or conflicting decisions”. Nonetheless, the PCA elected to progress the proceedings in a “phases”, by first considering the issues that were not before the neutral expert (i.e. questions of interpretation and application of the Treaty) before later deciding whether and how the other issues should be dealt with.
Conclusion
The PCA’s interpretation of the Treaty in the decision is consistent with established principles international law and arbitration. As the PCA noted it is trite law that “fewer propositions in international law can be more confidently advanced than that the non-appearance of a party does not deprive a properly constituted court or tribunal of its competence”, including arbitral proceedings governed by the Treaty. While it failed to appear in the jurisdictional phase, it remains to be seen whether India appears in the merits phase and the decision of the PCA on the substantive issues before it.
24 August 2023
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