The Kishanganga Arbitration: Summary of the Awards of the Tribunal

Readers interested in reading the entire Kishanganga dispute can go through the posts in this blog under the Label Arbitration: Indus Water Treaty Dispute which contains several small as well as lengthy posts on various facets of the decision. This short post is to summarize the outcome of the developments in the arbitration. 

The title, one may note, uses the term "Awards" instead of "Award" as there are a total of three awards in the matter. The three are the Partial Award (Feb 2013), Interpretation Award (Dec 2013) and the Final Award (Dec 2013). The summary of these three awards are given below:

• Since the Kishanganga project is a Run-of-River Plant, India is entitled under the Indus Water Treaty to divert the water from the river for the purpose of generation of electricity. (Partial Award)
• The Treaty does not permit India to reduce the level of the water stored in the Kishanganga dam below the Dead Storage Level of the water level, except in case of Unforeseen Emergency. However, this prohibition is applicable in Run-of-River plants which are either in existence on the date of the Partial Award or are under construction after exchange of designs of such projects to Pakistan and Pakistan has not objected to it. (Partial Award)
• Desilting using the drawdown flushing method does not constitute Unforeseen Emergency for the purposes of the Treaty. (Partial Award)
• While India's right to diver the waters under the Treaty is available, such a right is not absolute. India is obligated to take into consideration the existing uses by Pakistan of the river for hydroelectric and agricultural uses. (Partial Award) 
• Pakistan's uses as provided above are to be considered from two relevant points of time- (1) at the time the Kishanganga project crystallised, and (2) on an ongoing basis throughout the operation of the Kishanganga plant. (Partial Award) 
• Consequently, India has the obligation to maintain a minimum flow of water downstream the Kishanganga project. (Partial Award) 
• India's obligation is to maintain a minimum flow of 9 cubic metres per second of water below the plant at all times at which the upstream flow is 9 cubic metres per second or above. (Final Award) 
• Either party may seek reconsideration of the minimum flow of 9 cubic metres per second as provided above seven years after the diversion of the waters from the Kishanganga river for the purposes of power generation. (Final Award) 
• Such reconsideration may either be through the Permanent Indus Commission or under the mechanisms built in into the Treaty. (Final Award) 
• The prohibition on the reduction of level of water in the Run-of-River Plant below the Dead Storage Level is of general applicability under the Treaty and is not restricted merely to the Kishanganga plant. (Interpretation Award).

The prima facie view on the award is that it seems to balance interests of both parties by protecting India's right to harness the river water system and at the same time protect the interests of the riparian Pakistan.

Final Award in the Kishanganga Arbitration and Related Documents

In the previous post this morning, we had informed of news reports regarding the final decision in the Kishanganga Arbitration. The PCA website has uploaded the Final Award which can be accessed from here. According to the Press Release:

"The Court decided that India shall release a minimum flow of 9 cumecs into the Kishenganga/Neelum River below the KHEP at all times. However, the Court also decided that either India or Pakistan may seek reconsideration of this decision through the Permanent Indus Commission and the mechanisms of the Indus Waters Treaty after a period of seven years from the first diversion of water from the Kishenganga/Neelum River."

Further, it appears that India had sought clarification on the Partial Award as to whether India may deplete the reservoir level of a run-of-river Plant below Dead Storage Level in any circumstances except in the case of an unforeseen emergency was site specific or was applicable in general under the Treaty. The Tribunal held that it was of general application under the Indus Water Treaty.

Kishanganga Award in India's Favour: News Report

A Pakistani news report suggests that the Arbitral Tribunal constituted under the Indus Water Treaty has passed the award in India’s favour, subject to the conditions that half the water from the Kishanganga dam should go to Pakistan and that India cannot maintain water at a very low level in the dam.

The news report can be accessed from here. It may be recollected that the Tribunal had previously passed a partial award in India's favour. The Permanent Court of Arbitration page on the dispute does not contain the details at the time of this post. More once we get the updates.

Added After Posting:

The PCA website has uploaded the Final Award which can be accessed from here. According to the Press Release:

"The Court decided that India shall release a minimum flow of 9 cumecs into the Kishenganga/Neelum River below the KHEP at all times. However, the Court also decided that either India or Pakistan may seek reconsideration of this decision through the Permanent Indus Commission and the mechanisms of the Indus Waters Treaty after a period of seven years from the first diversion of water from the Kishenganga/Neelum River."

Further, it appears that India had sought clarification on the Partial Award as to whether India may deplete the reservoir level of a run-of-river Plant below Dead Storage Level in any circumstances except in the case of an unforeseen emergency was site specific or was applicable in general under the Treaty. The Tribunal held that it was of general application under the Indus Water Treaty.

Bangladesh v. India Arbitration on the Territorial Dispute on the Bay of Bengal

Source

We had given links in our facebook page of news paper reports (here and here) pertaining to the final hearing between Bangladesh and India in the Permanent Court of Arbitration regarding their claims over territorial boundaries in the Bay of Bengal. The Permanent Court of Arbitration page on the dispute can be accessed from here. The said page provides info on the arbitrators and the parties. 

The arbitration was invoked by Bangladesh in October 2009 under the United Nations Convention on the Law of the Sea (UNCLOS).The final hearings commenced on 9 December 2013 and would have ended today (18 December 2013). 

The PCA Press Release on the dispute can be accessed from here. Links to documents related to the dispute as available in the PCA site can be found below:

Rules of Procedure

Procedural Order No. 1, dated August 28, 2013

Procedural Order No. 2, dated November 6, 2013

Procedural Order No. 3, dated November 20, 2013

Procedural Order No. 4, dated December 6, 2013

The dispute has a lot of economic implications to the respective States. A news report in the Telegraph states:

"At stake is the future livelihood of millions of Bengal and Odisha fishermen, for whom the settlement could open up miles of unchallenged open sea that both India and Bangladesh currently prevent each other from using for anything other than transit. As fish near the coast are depleted, fishermen are increasingly finding themselves forced to go further out to sea.

India in 2006 also discovered 100 trillion cubic feet of natural gas in a creek about 50km to the south of the mouth of the Hariabhanga, and within the contested region. This is almost twice what the entire Krishna-Godavari basin at the centre of the corporate battle between the Ambani siblings has been shown to hold to date."

We will keep readers updated on the developments in the arbitration. Further readings on the dispute can be accessed from here here and here.

Chloro Controls is Good Law: Arasmeta Captive Power Co. v. Lafarge India

Recently, a two judge Bench of the Supreme Court of India had the occasion in Arasmeta Captive Power Co. v. Lafarge India (12.12.2013) to deal with the submission by Mr. Ranjit Kumar, senior counsel that since Chloro Controls contradicted with the decision of the larger Bench in Patel Engineering the same must be placed before a larger Bench. This post reviews the said decision.

 

Facts:

Arasmeta Captive Power Co. was engaged in the business of power generation. Lafarge India owned 49% equity in Arasmeta. Appellant No. 2 owned 51% in Arasmeta. Arasmeta had entered into two power purchase agreements (PPA) with Lafarge India for supply of power. The PPA provided for arbitration except in case of excepted matters which were to be referred to an expert. Disputes arose between Arasmeta and Lafarge India. 

Arasmeta wanted the disputes to be resolved by an expert while Lafarge India argued that the same were to be referred to arbitration. Lafarge India therefore filed an application under Section 11 for the constitution of the tribunal. Arasmeta resisted the same and contended that the High Court had to determine whether the dispute was an excepted matter. The High Court concluded that the dispute was not an excepted matter and referred the same to arbitration.

Hence, an appeal by special leave was filed by Arasmeta. 

 

Contentions:

Following were the contentions of Arasmeta in the SLP:

• The dispute between the parties was an excepted matter and was therefore not arbitrable. The dispute had to be resolved by an expert committee constituted as per the agreement.
• Since the dispute was non-arbitrable, the court under Section 11 alone had to decide questions pertaining to arbitrability.
• The analysis by the two judge Bench in Boghara Polyfab and by the three judge Bench in Chloro Controls was not in consonance with that of the five judge Bench in Patel Engineering.
• Shree Ram Mills Case and Boghara Polyfab contradicted with each other and Chloro Controls was wrong to read both the judgements as not being contrary.

Contentions on behalf of Lafarge India were following:

• The question as to whether the matter was an excepted matter or not was to be decided by the arbitrator.
• This is in line with Patel Engineering, Boghara Polyfab and Chloro Controls.
• Considering that the law has been well settled by decided cases, the matter has to be referred to arbitration.

Decision:

The court agreed with the contention of Lafarge India that the decided cases including Boghara Polyfab and Chloro Controls were in consonance with the seven judge bench decision in Patel Engineering. Further, the court held that Chloro Controls was right in reading Boghara Polyfab and Shree Ram Mills as not being contrary. In fact, the Booz Allen decision of the Supreme Court also held that the question on arbitrability as regards Section 8 proceedings should be left to the tribunal. However, the court held that the High Court had erred in holding the dispute as arbitrable and held that the same had to be decided by the arbitral tribunal.

Dhandapani Finance Ltd. v. Laxmi Cranes and Trailers Pvt. Ltd.: Comment

Dhandapani Finance Ltd. v. Laxmi Cranes and Trailers Pvt. Ltd. 2013 (5) CTC 832 (Madras HC, August 2012) is a very interesting case.

Laxmi Cranes had obtained loan from a finance company (Dhandapani). The suit was filed by Laxmi seeking damages for non-release of the crane-related documents despite full payment of the loan taken by them. In the plaint, it was alleged that Dhandapani obtained signature on blank bond papers from the representative of Laxmi Cranes. Dhandapani filed an application under Section 8 to refer the matter to arbitration. Laxmi Cranes resisted the application on the ground that the relief sought for in the Plaint was permanent injunction restraining Dhandapani from interefereing with the business of Laxmi Cranes and such a relief was not arbitrable. Consequently, it was contended that the matter was not arbitrable in view of Sukanya Holdings v. Jayesh H. Panda and Arul Singh v. Sunil Kumar Singh 2008 (2) CTC 856.

The relevant portion of the arbitration clause provided: “22(a). All disputes, differences any/or claim arising out of this Agreement whether during its subsistence of thereafter shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996, or any statutory amendments thereof and shall be referred to the sole Arbitration of an Arbitrator nominated by the Managing Director of the Lender. The Award given by such an Arbitrator shall be final and binding on the borrower to this Agreement. It is a term of this Agreement that in the event of such an Arbitrator, to whom the matter has been originally referred dying or being unable to act for any reason, the Managing Director of the Lender, at the time of such death of the Arbitrator or of his inability to act as Arbitrator, shall appoint another person to act as Arbitrator. Such a person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.” (emphasis supplied)

A Single Judge of the Madras High Court (Subbiah, J.) held the following:

a) Where the subject matter before the court involves arbitrable and non-arbitrable matters, the civil court can proceed with the suit and decide the entire subject matter.

b) In the present case, the relief sought for is permanent injunction restraining Dhandapani from interfering with its business, including injunction against sending of henchmen to seize the cranes, etc.

c) Further, the dispute pertains to release of a document for which the Defendant has already made payment and such a dispute would not come within the scope of the arbitration clause. Hence, the matter falls outside the scope of arbitration.

Comment:

There are only two points worth noting here. First, just because the relief sought is permanent injunction, that alone does not make the dispute non-arbitrable. The right not to be disturbed by the finance company is not even a right in rem. Secondly, the arbitration clause as provided is sufficiently worded and courts these days do not dissect the arbitration clause to see if the dispute is covered within the purview of arbitration. The clause in the current context does not indicate any intent to exclude the above dispute from arbitration. Hence, it is doubtable if such a clause is arbitrable. It appears that the judge has perhaps recognized that in such loan transactions, the lender has a superior bargaining position, especially when the lender has the right to appoint the arbitrator. Nevertheless, the question is whether the judge should distort the law to suit the ends of his conception of justice.

Call for Papers: Indian Journal of International Economic Law

(Formatted)

Call for Submissions

The Indian Journal of International Economic Law is now accepting submissions for its upcoming issue – Volume 6. The Indian Journal of International Economic Law (IJIEL) is an annual law journal published by National Law School of India University, Bangalore (NLSIU) under the patronage of the Indian government sponsored chair on WTO Law. The Journal is an endeavour by the Student Bar Association (SBA), NLSIU to encourage scholarship in the fields of international trade law and international economic law, in recognition of the staggering impact of World Trade Organization (WTO) and cross-border trade and commerce in the world today.

Submissions to the IJIEL are selected for publication on the basis of a peer-review mechanism conducted through an external Article Review Board consisting of scholars and experts in the field of international economic law. The previous issues of the Journal have featured articles by distinguished authors such as Fiona Smith, Faizel Ismail, Enrico Baffi, Lotta Viikari, G.R. Bhatia, Michelle Sanson, Jason R. Bonin and Rafiqul Islam and forewords by Prof. Jagdish Bhagwati and Prof. Stephen Hobe.

The IJIEL accepts academic submissions in the form of articles, notes, comments or book reviews on a host of legal issues in the field of international economic law, which includes multidisciplinary research concerning the WTO, trade laws at various levels of government, financial institutions, regulatory subjects such as taxation and competition policy, various services sectors such as banking and brokerage, linkages to human rights and cultural problems and international commercial arbitration.

The Journal is also oriented towards publishing academic work that considers the aforementioned issues from a comparative perspective and/or the perspective of the developing world.

Papers may be submitted under the following categories:

1. Articles (5000 to 12000 words)
2. Essays for the Law in Focus section (3000 to 5000 words)
3. Case notes and Legislative Commentaries (2000 to 7000 words)

Book reviews are published through solicitations by the editorial board. Articles must deal with a theme of interest or importance comprehensively and are expected to show an extensive coverage of existing literature and a high level of analysis. Submissions in the form of essays for the ‘Law in Focus’ section must concisely analyse contemporary legislations, landmark treaties or other specific issues in international economic law of a contemporary nature.

The Editorial Board invites submissions for Volume No. 6 of 2014. The Journal follows a rolling submissions policy and the deadline for the forthcoming volume is 20^th March, 2014. The submissions received after this date shall be considered for the next volume. The submissions must relate to any of the broad themes mentioned above or any other aspect of international economic law, with a focus on developing country perspective.

Guidelines:

1. All manuscripts must be accompanied by:
1. A covering letter with the name(s) of the author(s), institution/affiliation, the title of the manuscript and contact information.
2. An abstract of not more than 200 words describing the submission
2. No biographical information or references, including the name(s) of the author (s), affiliation(s) and acknowledgements should be included in the text of the manuscript, file name or document properties. All such information may be incorporated in the covering letter accompanying the manuscripts.
3. Submissions are preferred in Times New Roman font, double-spaced. Main text should be in font size 12 and footnotes in font size 10.
4. The IJIEL uses only footnotes (and not end-notes) as a method of citation. Submissions must conform to the Bluebook (19th edn.) system of citation.
5. All contributions submitted to the Journal should be original. Authors are also required to inform the Editorial Board if they have submitted their manuscript to another law journal and if they have received an offer of publication. Authors may request an expedited review on this basis. It shall be within the discretion of the Editorial Board to grant an expedited review.
6. The IJIEL only accepts electronic submissions which may be emailed to ijiel.nls@gmail.com under the subject heading ‘IJIEL Vol. 6 Submission’. All submissions should be made in MS Word format (.doc) or (.docx) and clearly indicate which category they are intended for.

For any clarifications, please contact us at ijiel.nls@gmail.com or ijiel@nls.ac.in.

Shreya Jain                                                    Ayushi Sutaria                                                                                         Chief Editor                                                  Convenor