BREAKING: Final Award Issued in the Kishenganga Arbitration

The Court of Arbitration (CoA) constituted under the Indus Waters Treaty delivered its Final Award in the Kishenganga Arbitration between Pakistan and India on 20 December 2013. As reported previously, the CoA issued a Partial Award in the matter on 18 February 2013. The Partial Award allowed India to proceed with the construction of its Kishenganga Hydroelectric Power Project (KHEP), subject to ensuring a minimum downstream flow of water to be determined in the Final Award. It also prohibited India from using drawdown flushing for sediment control at the KHEP and any future run-of-river plant on the Western Rivers. (For more information on the Partial Award and the background to the dispute, please see my ASIL Insight on the Partial Award available here and here.)

In its Final Award, the CoA determined the minimum downstream flow of water to be ensured by India. The Parties’ submissions for the second phase of the proceedings included data on the water flow in the Kishenganga river, effect of the minimum flow of water on power generation, agriculture uses in the Neelum valley, and the environmental impact of the KHEP. The CoA described its task in the second phase of the proceedings as follows:

Taken as a whole, the task facing the Court — now having the benefit of significantly more information and analysis from the Parties — is to determine a minimum flow that will mitigate adverse effects to Pakistan’s agricultural and hydro-electric uses throughout the operation of the KHEP, while preserving India’s right to operate the KHEP and maintaining the priority it acquired from having crystallized prior to the NJHEP. At the same time, in fixing this minimum flow, the Court must give due regard, in keeping with Paragraph 29 of Annexure G, to the customary international law requirements of avoiding or mitigating trans-boundary harm and of reconciling economic development with the protection of the environment.

(Final Award, para. 87)

Having considered the Parties’ submissions, the CoA decided that “India shall release a minimum flow of 9 cumecs into the Kishenganga/Neelum River below the KHEP at all times at which the daily average flow in the Kishenganga/Neelum River immediately upstream of the KHEP meets or exceeds 9 cumecs.”

However, it also held that “[a]t any time at which the daily average flow in the Kishenganga/Neelum River immediately upstream of the KHEP is less than 9 cumecs, India shall release 100 percent of the daily average flow immediately upstream of the KHEP into the Kishenganga/Neelum River below the KHEP.” (Final Award, p. 43)

The CoA allowed the Parties to seek a reassessment of the minimum flow through the mechanisms in the Indus Water Treaty 7 years after the diversion of water from the Kishenganga river for power generation at the KHEP. Finally, the CoA noted that the “Final Award imposes no further restrictions on the operation of the KHEP” (Final Award, p. 43)

With respect to India’s request for a clarification, as to whether the CoA’s prohibition on the use of drawdown flushing contained in the Partial Award applied only to the KHEP or to all/any future hydroelectric projects on the “Western Rivers” under the Indus Waters Treaty, the Court issued a separate Decision on 20 December 2013, finding that the prohibition on drawdown flushing is of a “general application”, and is not limited to the KHEP alone.

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India seeks clarification in Kishenganga

According to this report, India has sought a “clarification or interpretation”of the Partial Award of February 18 in the Indus Waters Kishenganga Arbitration (Pakistan v. India). India reportedly has sought clarification over the prospective, binding nature of the Court of Arbitration’s ruling in the “Second Dispute” relating to the use of a technique of sediment management called “drawdown flushing”. To recall, in the Partial Award, the Court of Arbitration had held that India was prohibited from using drawdown flushing at the Kishenganga project or any future run-of-river plant on the Western Rivers, which are allocated to Pakistan under the Indus Waters Treaty. India presumably wants a clarification of the second part of the ruling, i.e., whether India is prohibited from using drawdown flushing at any future run-of-river plant on the Western Rivers. This raises very interesting issues relating to the tribunal’s jurisdiction and judicial remedies under international law generally. I hope to discuss some of these issues in future posts, but for now if you’re interested in learning more about the Partial Award, you can read my recently published ASIL Insight on the topic.

BREAKING: Award in India-Pak Kishenganga Arbitration Delivered

The Kishenganga Tribunal at the PCA

The Kishenganga Tribunal at the PCA

A Tribunal constituted under the 1960 Indus Waters Treaty (also called the “Court of Arbitration” under the Treaty) today rendered its (partial) Award in a dispute between India and Pakistan over the construction of the Kishenganga hydro-electric power project by the former (previously covered here, here, and here). According to The Hindu, the Tribunal in its Award found that:

India can go ahead with the diversion of the waters of Kishanganga, a tributary of Jhelum, for hydro-electric power generation.

However, the court restrained India from adopting the drawdown flushing technique for clearing sedimentation in the run-of-the river project designed for generation of 330 MW power. India may have to adopt a different technique for flushing.

In the initial reports received by The Hindu it is learnt that the court also sought statistics on the environmental flows into the river downstream of the project.

To recall, Pakistan had originally requested the Tribunal to determine two issues:

1. Whether India’s proposed diversion of the river Kishenganga (Neelum) into another Tributary, i.e. the Bonar Madmati Nallah, being one central element of the Kishenganga Project, breaches India’s legal obligations owed to Pakistan under the Treaty, as interpreted and applied in accordance with international law, including India’s obligations under Article III(2) (let flow all the waters of the Western rivers and not permit any interference with those waters) and Article IV(6) (maintenance of natural channels)? [the “First Dispute”]

2. Whether under the Treaty, India may deplete or bring the reservoir level of a run-of-river Plant below Dead Storage Level (DSL) in any circumstances except in the case of an unforeseen emergency? [the “Second Dispute”]

From the above, it thus appears that the Tribunal found in favour of India on the issue of diversion (the “First Dispute”), but against it on the second issue of reservoir level (the “Second Dispute”).

As of writing this post, neither the Award nor a press-release was available on the Permanent Court of Arbitration website. As always, we hope that the Award will soon be made publicly available. ILCurry will bring you more detailed analyses as and when that happens.

UPDATE (19 Feb. 2013): The partial Award is now available on the PCA website here. A press-release is available here. According to the press-release:

In its Partial Award, which is final with respect to the matters decided therein, without appeal and binding on the Parties, the Court of Arbitration unanimously decided:

1. that the Kishenganga Hydro-Electric Project (KHEP) constitutes a Run-of-River Plant under the Treaty, and India may accordingly divert water from the Kishenganga/Neelum River for power generation by the KHEP in the manner envisaged. However, when operating the KHEP, India is under an obligation to maintain a minimum flow of water in the Kishenganga/Neelum River, at a rate to be determined by the Court in a Final Award.

2. Except in the case of an unforeseen emergency, the Treaty does not permit India’s reduction below “Dead Storage Level” of the water level in the reservoirs of Run-of-River Plants located on the rivers allocated to Pakistan under the Treaty. This ruling does not apply to Plants already in operation or under construction (whose designs have been communicated by India and not objected to by Pakistan)

The Court expects to be able to render its Final Award determining the minimum flow of water India would be required to release in the Kishenganga/Neelum River by the end of 2013.

 

More on this soon!

Weekly Update: Investment Arbitration, BRICS, WTO, Tulbul and More….

Here are some of the major international legal developments of relevance to India and South Asia for the week ending 31 March 2012:

Investment Arbitration

  • Vodafone may file a claim against India under the India-Netherlands BIT for the capital gains tax sought to be retrospectively imposed by India against it: Indian Express, Independent, DNA, Wall Street Journal (paywalled).
  • Norwegian telecom operator Telenor, faced with the prospect of its Indian joint venture losing 22 2G mobile licences due to the Supreme Court judgment in the 2G case, has filed a notice of dispute  against India under the India-Singapore BIT seeking damages to the tune of USD 14 billion: Economic Times. [With a notice of dispute already filed by the Russian company Sistema against India, this makes it two investment treaty disputes arising out of the Supreme Court’s 2G judgment]

WTO Disputes

  • India is preparing to file a dispute against the US at the WTO over the visa fee charged by the latter for Indian software companies. The claim: “discrimination” against the Indian software companies which are being asked to pay higher H1B and L1 visa fee for their employees than the American firms for bringing more number of skilled immigrants to their country at lesser costs:  Economic Times.
  • The US called upon India to accede to the government procurement agreement — a plurilateral WTO agreement.
  • The US and EU have come out against the local content requirements in India’s Jawaharlal Nehru Solar Mission, which requires requires solar mission investors to use Indian manufactured solar modules and source 30 percent of their inputs from India: Hindustan Times. The Indian government is already reported to be preparing its strategy in case a dispute is filed at the WTO.

International River Water Disputes

EU Emissions Scheme

  • The Indian government has confirmed that it will be directing Indian airlines not to participate in the EU’s controversial aviation emissions rule. (Recall that China has already boycotted the EU scheme, as well): ICTSD.

India-Pakistan Trade

UN Special Rapporteur on AFSPA in Kashmir

  • After a visit to Kashmir, rhe UN Special Rapporteur on extrajudicial, summary or arbitrary executions stated that the Indian Armed Forces (Special Powers) Act has become a symbol of “excessive state power” and has “no role to play in a democracy”: NDTV, Hindustan Times. The official press release can be found here.

BRICS

  • The past week saw the leaders from Brazil, Russia, India, China and South Africa assemble in Delhi for the fourth BRICS Summit. The theme of the summit was “BRICS Partnership for Global Stability, Security and Prosperity”.
  • The countries were called upon to support a common developing country candidate as the successor of DG Lamy.
  • In addition, the heads of state of the BRICS countries signed two agreements supporting trade in local currencies between them. The two agreements are: (i) the Master Agreement on Extending Credit Facility in Local Currencies; and, (ii) the BRICS Multilateral Letter of Credit Confirmation Facility Agreement. More details can be found in a MEA document here.
  • In culmination of the summit, the BRICS countries issued the “Delhi Declaration“. Here are some excerpts from the Declaration:
  • On the Doha Round at the WTO:

16. We will continue our efforts for the successful conclusion of the Doha Round, based on the progress made and in keeping with its mandate. Towards this end, we will explore outcomes in specific areas where progress is possible while preserving the centrality of development and within the overall framework of the single undertaking. We do not support plurilateral initiatives that go against the fundamental principles of transparency, inclusiveness and multilateralism. We believe that such initiatives not only distract members from striving for a collective outcome but also fail to address the development deficit inherited from previous negotiating rounds. Once the ratification process is completed, Russia intends to participate in an active and constructive manner for a balanced outcome of the Doha Round that will help strengthen and develop the multilateral trade system.

  • On Syria:

21. We express our deep concern at the current situation in Syria and call for an immediate end to all violence and violations of human rights in that country. Global interests would best be served by dealing with the crisis through peaceful means that encourage broad national dialogues that reflect the legitimate aspirations of all sections of Syrian society and respect Syrian independence, territorial integrity and sovereignty. Our objective is to facilitate a Syrian-led inclusive political process, and we welcome the joint efforts of the United Nations and the Arab League to this end. We encourage the Syrian government and all sections of Syrian society to demonstrate the political will to initiate such a process, which alone can create a new environment for peace. We welcome the appointment of Mr. Kofi Annan as the Joint Special Envoy on the Syrian crisis and the progress made so far, and support him in continuing to play a constructive role in bringing about the political resolution of the crisis.

  • On Iran:

22. The situation concerning Iran cannot be allowed to escalate into conflict, the disastrous consequences of which will be in no one’s interest. Iran has a crucial role to play for the peaceful development and prosperity of a region of high political and economic relevance, and we look to it to play its part as a responsible member of the global community. We are concerned about the situation that is emerging around Iran’s nuclear issue. We recognize Iran’s right to peaceful uses of nuclear energy consistent with its international obligations, and support resolution of the issues involved through political and diplomatic means and dialogue between the parties concerned, including between the IAEA and Iran and in accordance with the provisions of the relevant UN Security Council Resolutions.

Nimoo-Bazgo — Another Kishanganga?

If recent news reports are to be believed, Pakistan is now looking to initiate another arbitration proceeding over the Nimoo-Bazgo hydroelectric power project, situated around 70 KMs from Leh in the state of Jammu and Kashmir, for allegedly violating the Indus Water Treaty. The report notes:

The decision to approach the ICJ [sic] on the Nimoo-Bazgo project was made after Pakistani officials made their first visit to the project site and concluded it was allegedly in “total violation” of the Indus Waters Treaty of 1960, a senior unnamed member of Pakistan’s Indus Waters Commission told the media.

The Pakistani delegation that visited the Nimoo-Bazgo and Chutak projects has submitted its report to the Water and Power Ministry for further action.

 

The unnamed official claimed India would be able to complete the Nimoo-Bazgo project by July 2012 and thus “suffocate” the water flow in the Indus.

 

The design of its gated spillways and the depth of the dam allegedly breaches the Indus Waters Treaty. The Pakistani side has raised five objections to the design of the project. 

Meanwhile, over in Pakistan, the diatribe against the Indus Water Treaty, and India’s actions continues:

The Indus Water Treaty is an Indian water weapon against the country and it had been signed just to please the United States, said Engr Bashir A Malik, former chief technical advisor of United Nations and World Bank.

Pakistan-Romania BIT

A recent news report notes that Pakistan and Romania are in the process of concluding a BIT:

Governor of Brasov and member of the Chamber of Commerce and Industry Brasov County, Carol Ambrus said Romania is interested to invest in the coal and mining sector of Pakistan and there is also a need to identify and explore opportunities in the field of sunflower seeds, copper cathodes, organic chemicals and dyes, textile and textile goods, agriculture products, leather goods, IT and in other sectors.
[Board of Investment] BOI Chairman Saleem Mandviwalla said BOI is looking forward to a bilateral investment treaty with Romania as soon as possible. He informed the delegation that there were more than 700 Pakistani companies operating in Romania and both the countries signed their first trade agreement in 1964. Despite the 47-years trade relations history, much effort is needed to boost bilateral exchange, economic cooperation and enhance investment. He said Romania can avail attractive investment opportunities in the coal mining sector as Pakistan’s coal potential estimated at 185 billion tons and current consumption of coal is 11.0 million tonnes per annum against annual production of 5.0 million tons. The supply and demand gap of about 6.0 million tons of coal is being met through imports.

Breaking News: PCA stays construction of Kishanganga power project?

This just in: contrary to previous reports (as previously noted on ILCurry here), some reports that appeared today in Pakistani news-media (Associated Press of Pakistan, The Express Tribune, The Dawn) suggest that the PCA has issued an interim order restraining India from proceeding with the construction of the Kishanganga power project.

Frankly, I am thoroughly confused as the PCA website doesn’t provide a copy of the interim order, or a relevant press release. I hope things will get a little clearer in the days to come and will keep you posted on the latest. In the meanwhile, here is what the Associated Press of Pakistan reports on the PCA’s ruling:

The Court of Arbitration unanimously ruled that:
1)    India shall not proceed with the construction of any permanent works on or above the Kishanganga/Neelum River bed at the Gurez site that may inhibit the restoration of the flow of the river to its natural channel;
2)    Pakistan and India shall arrange for periodic joint inspections of the Dam site at Gurez in order to monitor the implementation of the Court’s Order;
Pakistan had submitted an application for interim measures to the Court of Arbitration.
In its application, Pakistan had sought:
a)    A stop work Order;
b)    An Order that any steps India has taken or may take in respect of the KHEP (Kishanganga Hydro Electric Project) are taken at its own risk without prejudice to the possibility that the Court may order that the works may not be continued, be modified or dismantled;
c)    That India be Ordered to inform the Court and Pakistan of any imminent and actual developments on the Kishanganga Dam that may adversely affect the restoring of the status quo ante or that may jeopardize Pakistan’s rights and interests under the Treaty;
d)    Any further relief the Court considered necessary.

Regarding Pakistan’s legal representation, the APP report notes that the Special Assistant to the Prime Minister of Pakistan on Water Resources and Agriculture along with legal experts from Pakistan and abroad “prepared a tremendous case“. Compare this to the description of the Special Assistant to the Prime Minister that appeared a few weeks ago in Pakistani news media labeling him as the “villain of the piece“:

The villain of the piece appears to be the special assistant to the prime minister, Kamala Majidullah, who has been leading the legal team pleading our case. The competence of Majidullah for this task has been questioned in the past by experts and researchers who have had something to say about the environmental impact of the Kishanganga dam on our own Neelum Valley project. The COA raised the highly pertinent point to Majidullah as to why he did not raise objections to Kishanganga when he had the opportunity to do so back in January this year – to which there was no satisfactory reply. In other words, for lack of a little fast footwork, Pakistan had missed the window of opportunity to register an objection to an Indian project that is clearly to its detriment. The COA has questioned why Pakistan failed to register objections in January but was putting it forward now.

Whatever be the truth of the matter, and the content of the PCA’s interim order, two things are clear:

(i) Considering the contradictory reports both with regard to the actual interim order and the role of the Special Assistant within the span of a month, the news media seems to be thoroughly confused and does not appear to have conducted a thorough unbiased factual check (unbiased at least with regard to the role of the Special Assistant) before publishing reports on an issue which, at the very least, is highly contentious, and quite sensitive keeping in mind the relations between India and Pakistan. Such reporting certainly does not go a long way in promoting a better, and unbiased, understanding of the issues between the two countries.

(ii) The contradictory reports serve as an example and reminder of the need for greater transparency in international arbitration. The Kishanganga arbitration is completely public (i.e. between two states, as opposed to a mixed arbitration like investor-state) and is of enormous importance to the people of the affected region, if not the entire population of both the countries and peace and security in South Asia. As such, in my opinion, there is no reason whatsoever for such opacity in the actual proceedings. Such information vacuum only provides space for irresponsible, biased, and inflammatory speculation to thrive. In such times, I think both India and Pakistan can do without that.

Update (27 September 2011): The Interim Order of September 23 is now available on the PCA website here. To settle the tug-of-war between the Pakistani and Indian media, in short, the Tribunal has issued some interim measures – “albeit not in as far-reaching a form as requested by Pakistan” – (para.136) to “avoid prejudice to the final solution” to the dispute as may be prescribed by the final award (Id.). Whereas this may help clear the fog a little, a cursory glance over the 50-page-Order reveals that there are many other interesting points and issues. A summary of the Interim Order shall follow shortly. Thank you Parties (and the PCA) for publishing the Order!

ICSID Panels of Arbitrators and Conciliators – South Asian Appointments

An ICSID News Release notes:

Today, Mr. Robert B. Zoellick, … announced a new list of Chairman’s designations to the ICSID Panels of Conciliators and of Arbitrators. These designations were made pursuant to Article 13(2) of the ICSID Convention, which allows the Chairman to name 10 arbitrators and 10 conciliators of different nationalities to each Panel. Members of the Panels are available for appointment by disputing parties or by the Centre in proceedings at ICSID.

As the Release notes, a list of the Members, as well as their short biographies can be found on the ICSID website (here and here, respectively).

Re: South Asian arbitrators, the new arbitrator designated to the Panel by the Chairman of the ICSID Administrative Council is Muhammad Makhdoom Ali Khan, a senior advocate from Karachi and Pakistan’s former Attorney General (2001-2007). Mr. Ali Khan replaces India’s Fali S. Nariman, a senior advocate at the Supreme Court of India and a preeminent Indian arbitrator and counsel. Over the past ten years, Mr. Nariman has been an arbitrator in six disputes (five concluded and one pending), including Wintershall, which adopted a restrictive approach in determining the applicability of the MFN clause to dispute settlement provisions of investment agreements. It is also pertinent to note that India cannot designate arbitrators as other Contracting States, such as Pakistan, can since it has not ratified the ICSID Convention. Mr. Nariman was designated by the Chairman of the ICSID Administrative Council (the head of the World Bank). Mr. Nariman, thus, was perhaps India’s strongest link with the ICSID process.

ILCurry congratulates Mr. Nariman for his contributions to the ITA system, and wishes Mr. Ali Khan the best for the duration of his designation.

Kishanganga Update: Pakistan Denied Stay

According to several news reports (here, here and here) Pakistan’s request seeking a stay against India’s construction of the Kishanganga power project has been rejected by the PCA tribunal hearing the matter. One report notes:

“The COA denied the stay order to the low riparian country, putting Pakistan the question as to why it has changed its earlier stance as in January when the court met for the first time it did not ask for the stay,” a senior official, who was part of court proceedings, told The News on the condition of anonymity.

It goes on to blame Kamal Majidullah, special assistant to the Pakistani PM and Pakistan’s agent in the arbitration, for the denial of stay:

When contacted, Arshad Abbasi, an eminent water expert, said: “This utter failure that may lead to lose the legal battle on this vital case is all because of incompetence and ignorance of Kamal Majidullah, who did not apply for a stay order against the construction at the Kishanganga project site in January”.

Another Pakistani news report also notes:

The villain of the piece appears to be the special assistant to the prime minister, Kamala Majidullah, who has been leading the legal team pleading our case. The competence of Majidullah for this task has been questioned in the past by experts and researchers who have had something to say about the environmental impact of the Kishanganga dam on our own Neelum Valley project. The COA raised the highly pertinent point to Majidullah as to why he did not raise objections to Kishanganga when he had the opportunity to do so back in January this year – to which there was no satisfactory reply. In other words, for lack of a little fast footwork, Pakistan had missed the window of opportunity to register an objection to an Indian project that is clearly to its detriment. The COA has questioned why Pakistan failed to register objections in January but was putting it forward now.

 

FDI News: India

“Pakistani companies may soon be able to invest in India as the government plans to strike off the country from a negative list that debarred investments from across the border.”

“FDI inflows to India declined 31% to $25 billion in 2010, a UN report said on Wednesday. This is worse than even Pakistan, where also FDI fell, but just 14% to $2 billion in a year when FDI to all other major destinations rose. In the same year, inflows to mainland China rose 11% to $106 billion and that to Hong Kong (China) an even sharper 32% to $69 billion. Bangladesh, which is yet to rid itself of the least developed country (LDC) tag, enhanced its status as a low-cost production location, especially for low-end manufacturing, by posting a 30% increase in FDI inflows to $913 million.”

On the last report, it would be nice to have a specific study on whether BITs/ISDS provisions in FTAs could help India. Any leads?