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.

Kishenganga Award: Analysis: Part I

Over the past several months, we have been following the Kishenganga Arbitration between India and Pakistan in this blog (access the label from here). In the last two posts (here and here), we had noted that the Court of Award had passed a partial award in India's favour and had summarised the decision of the court. We had noted the arguments of both parties in two posts (here and here). In this series of posts, we would be discussing in detail the arbitral award. This post specifically deals with certain preliminary aspects of the Award. Summary of the Award on these aspects are as below:

Arguments of Parties on Issues Pertaining to Sovereignty of Jammu & Kashmir:

• A perusal of the negotiating history of the Indus Water Treaty (Treaty) would show that India and Pakistan exectuted it in the midst of territorial disputes.
• Hence, the Treaty takes this fact into cognizance and clarifies that each party's respective rights or claims would not be affected by the Treaty. Article XI(1) reads:

"Article XI: General Provisions

(1) It is expressly understood that
(a) this Treaty governs the rights and obligations of each Party in relation to the other with respect only to the use of the waters of the Rivers and matters incidental thereto; and
(b) nothing contained in this Treaty, and nothing arising out of the execution thereof, shall be construed as constituting a recognition or waiver (whether tacit, by implication or otherwise) of any rights or claims whatsoever of either of the Parties other than those rights or claims which are expressly recognized or waived in this Treaty.
Each of the Parties agrees that it will not invoke this Treaty, anything contained therein, or anything arising out of the execution thereof, in support of any of its own rights or claims whatsoever or in disputing any of the rights or claims whatsoever of the other Party, other than those rights or claims which are expressly recognized or waived in this Treaty."

• The Treaty does not determine the territorial rights of the parties over the Indus river. It only records the agreement of the parties on the use of the waters of the Indus River Basin.
• In consonance with the Treaty objectives, this Partial Award would also not affect or deal with the territotorial rights or claims of either party. As regards the issue as to the extension of right to use the rivers that flow in the "disputed territory", considering the above objectives of the Treaty the question is not addressed by the Treaty.
• In resolving the disputes between the parties, the text of the Treaty, read in the context and from the perspective of the Treaty's object and purpose, are critical in resolving the dispute.
• From this perspective, it is clear that the Treaty applies to the entire Indus River Basin and not merely to the rivers that flow through each party's territories. Further, if the Treaty was to given such a restricted interpretation, its object of providing a comprehensive solution to the problem of allocation waters in the Basin would not be fulfilled.
• Hence, the Treaty extends to the use of the waters of the Basin even in the "disputed" territories.

 More on other aspects of the Award in the next post on this topic.

Kishenganga Award: A Summary

In the last post, we had stated that the Court of Arbitration has held the Kishenganga Hydroelectric Project (KHEP), a project under construction by India is not violative of the Indus Water Treaty, 1960 between India and Pakistan. The website of the Permanent Court of Arbitration (PCA) has come up with a six page press release and has also published the 250 odd paged Partial Award by the Tribunal.

We will come up with a detailed analysis of the award subsequently. The Award can be summarised in the following points (See the PCA press release):

• The planned diversion of waters from Kishenganga river for generation of hydroelectricity constitutes a Run-of-River plant and is not prohibited nor does it violate the Indus Water Treaty.
• The planned diversion of the water comes within the ambit of "necessary" under the Treaty (see the post on India's arguments)
• The Treaty provides that "the then existing" agricultural or hydroelectric use of Pakistan must be taken into consideration when India attempts to do an inter-tribunal transfer. The phrase "the then existing" refers to the period when there is a firm intent to proceed with the project. In the current case, the firm intent as regards KHEP was 2004-2006 while for NJHEP of Pakistan, the critical period was 2007-2008. Hence India's right to divert the waters of Kishenganga was protected by the Treaty.  
• Nevertheless the right is not absolute. India is obligated under the said treaty to maintain a minimum water flow at a rate to be determined in the Final Award to be rendered by the Tribunal subsequently.
• The Treaty does not permit India to reduce the water in the reservoid below the "Dead Storage Level" under the Treaty. Hence, India has to employ some other method of sediment management in the reservoir. However, this will not affect the employment of draw-down flushing in reservoirs Run-of-River plants already in operation or under construction and not objected to by Pakistan.
• Data is required on the impact of a range of minimum flows at KHEP dam on (a) power generation at KHEP, (b) environmental concerns arising from the dam site at Gurez to the Line of Control, (c) power generation at NJHEP, (d) agricultural uses of water downstream the Line of Control to Nauseri, and environmental concerns  downstream the Line of Control to Nauseri. On receipt of data and analysis. the Final Award would be published by the end of 2013.

India Wins the Kishenganga Arbitration

In our previous post, we had informed that the Award in the Kishenganga arbitration between India and Pakistan was to be passed on 18 February. It appears that the said award has been passed by the Court of Arbitration in the presence of the ambassadors of India and Pakistan- Bhaswati Mukherjee and Fauzia Mazhar Sana respectively at The Hague.News reports suggest that India has won the Kishenganga arbitration although the details of the award are yet to be known. Access the news reports from here, here and here.

The major points of the Award appear to be the following:

• Construction of the Kishenganga Hydroelectric Project (KHEP) does not violate the Indus Water Treaty 1960
• Adoption of draw-down flushing technique (see here for an explanation of this technique) for sediment management in the KHEP will violate the Indus Water Treaty

More on the Award as and when we get to know further details. Previous posts on the arbitration can be accessed from this label.

Kishanganga Arbitration: Award to be Passed

In the last two posts in this blog (here and here), we had blogged about the hearing on merits in the Kishanganga Arbitration between India and Pakistan under the Indus Water Treaty. According to this news report in the Hindu, the Court of Arbitration is expected to pass the arbitral award on the 18th of this month. We will keep a close watch on the developments and inform the readers.  

Part II: Kishanganga Dispute: India v. Pakistan: Hearing on Merits

In the previous post in this blog, we had noted that the final arguments in the Kishanganga Dispute between India and Pakistan were concluded and the Award was expected any time soon. We had also dealt with the arguments of Pakistan in the matter. India was represented by Mr. Dhruv Vijay Singh (Secretary to the Government of India, Ministry of Water Resources) and Mr. Fali S. Nariman and Pakistan was represented by Mr. Kamal Majidulla (Special Assistant to the Prime Minister for Water Resources and Agriculture) and Professor James Crawford. Pakistan produced Mr. Syed Muhammad Mehr Ali Shah as expert regarding the potential hydrological impact of the KHEP on the reach of the Kishenganga/Neelum River downstream as well as the anticipated impact of the KHEP on the production of electricity by the Neelum-Jhelum Hydro-Electric Project (the “N-JHEP”), Dr. Jackie King and Mr. Vaqar Zakaria with respect to the expected environmental impact downstream of the KHEP and Dr. Gregory Morris on sediment management in relation to hydroelectric plants, including the KHEP. India presented its experts,  Mr. Jesper Goodley Dannisøe and Dr. Niels Jepsen for testifying on the potential environmental impact of the KHEP and  Dr. K.G. Rangaraju testified on the sediment control in response to Dr. Morris’ views. In this post, we summarize the arguments of India in the arbitration.

• The Treaty must be interpreted from the perspective of its object and purpose as disclosed by the Treaty's Preamble. As per the Preamble, it is the parties' desire in signing the Treaty to “attain the most complete and satisfactory utilisation of the waters of the Indus system of rivers.” This objective would be met if India is allowed to go ahead with the KHEP while Pakistan is also benefitted to use the Kishanganga river for hydroelectricity generation.
• While Article III of the Treaty obligates India to "let flow" and "not permit any interference with" the Western Rivers (the Indus, the Chenab, the Jhelum and their tributaries, including the Kishenganga/Neelum), Article III(2) of the Treaty creates an exception: India could use the Western River waters for certain purposes such as for hydroelectic generation but through"run-of-river" projects. KHEP falls within this exception.
• India has a right to transfer water between the tributaries of Jhelum for hydroelectric generation as prior to inking the Treaty, India had planned to construct a hydroelectric project similar to at the location of the KHEP. India would not have inked the Treaty had it precluded such a project.
•  Para 15(iii) of Annexure D to the Treaty gives the right to India to judge whether it is necessary to divert the waters of Kishanganga.  It is necessary to do so in order to generate hydroelectricity. The said provision reads:

"Provided however that :

[…]

(iii) where a Plant is located on a Tributary of The Jhelum on which Pakistan has any Agricultural use or hydro-electric use, the water released below the Plant may be delivered, if necessary, into another Tributary but only to the extent that the then existing Agricultural Use or hydro-electric use by Pakistan on the former Tributary would not be adversely affected.

"  

• Further Para 15(iii) of Annexure D protects Pakistan's "then existing" downstream agricultural and hydroelectric use by Pakistan. India is to take into account the downstream uses only up to a cut-off point, i.e., up to design finalisation. An interpretation which provides for India to continuously adjust its design would negate India's right to use the river waters in the Jhelum and result in wastage of vast amounts of resources.
• From 1989, when Pakistan was first informed of the KHEP till 2006 when the final design was notified to Pakistan, India had expressed its willingness to take into account the downstream uses of Pakistan and had repeatedly sought data but Pakistan failed to substantiate its uses and relied solely on verbal assurances that the project was "in hand" and "under construction" without demonstrating any commitment to realisation. Also, the agricultural uses of residents of Neelum valley are not dependent on the waters of Kishanganga/ Neelum.
• Even if the Neelum-Jhelum Hydroelectric Project of Pakistan was a "then-existing" use, it would not be affected by the KHEP as the latter will divert less than 1% of the total volume of waters of the Western rivers and during the high flow season, N-JHEP will receive volume of water in excess of its maximum discharge capacity and during lean season N-JHEP could be operated through several tributaries flowing into Kishanganga/ neelum between KHEP and N-JHEP sites. During the lean season, N-JHEP would receive more water than the KHEP itself. Any adverse effect on the generation of N-JHEP would be mitigated by the releease of water during lean season from the Dudhnial storage work that Pakistan intends to construct between KHEP and N-JHEP.  In fact, due to the diversion of Kishanganga, Pakistan would benefit due to increased flow and consequent increased power generation in the Kohala HEP. Thus, any adverse effect on the N-JHEP would be offset by benefit in the Kohala HEP.
• Neither the provisions of the  Treaty nor Article IV(6) theren, quoted below provided basis for reading in any international environmental obligation into the Treaty. Hence, the alleged breach of such an obligation is not a proper subject matter for determination by the Tribunal: "Each Party will use its best endeavours to maintain the natural channels of the Rivers, as on the Effective Date, in such condition as will avoid, as far as practicable, any obstruction to the flow in these channels likely to cause material damage to the other Party."
• In any case, India complied with Article IV(6) of the Treaty and the domestic environmental laws and customary international environmental laws as regards the project and international engineering standards applicable to the design and operation of hydroelectric projects. In fact, in 2000 a comprehensive environmental impact assessment showed that KHEP will not have any signficant adverse effect on the Kishanganga/ Neelum river. A minimum “environmental flow” of at least 3.9 m3/s would be released at all times below the KHEP dam
• As regards the use of draw-down flushing technique for sediment managment (see the previous post on the said technique), the said dispute is not arbitrable as the matter is to be referred to a neutral expert appointed as per the Treaty. In fact, the Neutral Expert in Baghlihar Dam Dispute between India and Pakistan had confirmed that the said technique was allowed under the Treaty (Note: see the executive summary (pdf) of the decision of the Neutral Expert, especially last para in page 12 ).
• In view of the following facts (a) draw-down flushing is essential for the sustainability of the KHEP and can be done by effectively lowering the level below the Dead Storage Level (b)  it would take a very short period of time to re-fill the reservoir after lowering of water level, (c) the relatively small reservoir capacity of KHEP,  the KHEP would have minimal effect on Pakistan.

Both parties completed their closing arguments on 31 August 2012. The Press Release by the Permanent Court of Arbitration on the arguments can be accessed from here (pdf).

Kishanganga Arbitration: Pakistan v. India: Hearing on Merits

Image from here

Previously, we had blogged about the arbitration between India and Pakistan under the Indus Water Treaty, 1960 (the previous sixteen posts can be accessed from this label). The hearing on merits took place in August 2012. The PCA Rules of Procedure provides: “[t]he Court shall endeavour to render its Award within 6 months of the close of the hearings." Hence, the award could be expected to be published by the end of February 2013. Two issues appear to be the crux of the case of Pakistan:

"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”]"

India proposed to construct a dam (KHEP) across the Kishanganga/ Neelum, a tributary of Jhelum river.The dam's design was to divert the river from the dam site (located at higher elevation) to another tributary of Jhelum, Bonar Madmati Nallah (located at lower elevation). From the difference in elevation, water current was to be created and hydroelectricity (330 megawatts) was to be generated through rotation of turbines by the diverted water. Since the diversion would bring a lot of sediments into the KHEP reservoir due to the design, a technique known as draw-down flushing technique is proposed to be used by India.Accumulation of sediments in the reservoir lessens the storage capacity of the reservoir. It is estimated that the annual loss of storage capacity in reservoir due to sediment accumulation if 0.46% in India and 1% worldwide (Liu, J., Liu, B.Y., and Ashida, K., "Reservoir Sedimentation Management in Asia", Advances in Hydro-Sciences and Engineering, 5th International Conference on Hydro-Science and Engineering, Warsaw, Poland, 2002). Hence, several methods are employed to manage sediments, which are:

• Water shed management
• Sediment flushing
• Sluicing
• Density current venting

Of these methods, sediment flushing is the most widely used for its economy and effectiveness. Two methods of sediment flushing are commonly used- complete draw-down flushing and partial draw-down flushing. In complete draw-down flushing, the reservoir is emptied before the flood season through low level outlets located near the reservoir bed. This creates a river-like situation where there is water flow along with sediment flow through the outlets. in KHEP the employment of draw-down techniques would bring the storage level in the reservoir below the Dead Storage Level as defined in Para 2(a), Annexure D of the Treaty are reproduced below:

“Dead Storage” means that portion of the storage which is not used for operational purposes and “Dead Storage Level” means the level corresponding to Dead Storage.

This, according to Pakistan is impermissible under the Treaty.

Contentions of India and Pakistan are summarised below:

Pakistan (Petitioner):

• A treaty was necessary between the parties as mutual co-operation at that historical juncture was impossible. Hence, the Treaty inked was by both parties after "painstaking negotiations" of ten years.
• The fundamental premise of the historic Indus Water Treaty is that India should not interfere with flow of the Western Rivers of Indus System which has been allocated to Pakistan. India's plan to divert Kishanganga/ Neelum is in breach of this fundamental premise of the Treaty.
• Through the Treaty, both parties have been apportioned the rivers of the Indus System and the rights and obligations of both parties are strictly delineated. Hence, the Treaty should be interpreted in its ordinary meaning and in case of ambiguity, interpretation should take into consideration the precise delineation of the rights and obligations under the Treaty.
•  Article III of the Treaty obligates India to "let flow" and "not permit any interference with" the Western Rivers (the Indus, the Chenab, the Jhelum and their tributaries, including the Kishenganga/Neelum). this obligation constitutes the essential element of the delineation in the Treaty. The purpose of the obligation is to prevent India from "manipulating" the water flow to Pakistan's detriment.
• The only exception as regards the Western Rivers is provided in Article III(2) of the Treaty. As per this provision, India could use the Western River waters for certain purposes such as for hydroelectic generation but through"run-of-river" projects. The Treaty strictly regulates the right to use the Western Rivers for such purposes, including through Annexure D which creates restrictions on hydroelectric generation.
• Particularly, the Treaty does not permit intra-tributary transfer of water and such an act is contrary to the general obligation to "let flow" and "not permit any interference with" the Western Rivers.
• India is specifically obligated under Para 15, Annexure D of the Treaty (quoted below) to deliver into the river below the hydroelectric plant the same quantity of water it received during the 24 hour period.

"Subject to the provisions of Paragraph 17, the works connected with a Plant shall be so operated that (a) the volume of water received in the river upstream of the Plant, during any period of seven consecutive days, shall be delivered into the river below the Plant during the same seven-day period, and (b) in any one period of 24 hours within that seven-day period, the volume delivered into the river below the Plant shall be not less than 30%, and not more than 130%, of the volume received in the river above the Plant during the same 24-hour period..."

• The exception to the above rule contained in Para 15(iii) to Annexure D permits diversion from one tributary to another but only when such diversion is "necessary". This however does not mean that India can permanently divert the waters from one territory into another simply to create a potential for hydroelectric generation. "Necessity" can only mean diversion from time to time and that too for emergency purposes such as "emergency exit".

"Provided however that :
[…]
(iii) where a Plant is located on a Tributary of The Jhelum on which Pakistan has any Agricultural use or hydro-electric use, the water released below the Plant may be delivered, if necessary, into another Tributary but only to the extent that the then existing Agricultural Use or hydro-electric use by Pakistan on the former Tributary would not be adversely affected."

• The above said provision also prioritises downstream agricultural or hydroelectric use by Pakistan and requires India to adjust its use so that it shall not affect the use by Pakistan. If KHEP is built, Pakistan will be adversely affected. During lean season, the project would divert the entire waters of Kishanganga/ Neelam and up to its design capcaity of 58.4m^3/s during peak season. This would result in significant loss in power generation and revenue for downstream N-JHEP of Pakistan and any other future power project. Pakistan has been informing India of this since the commencement of KHEP.
• Article VI(6) of the Treaty reproduced below obligated India to conduct downstream impact assessment of the KHEP which India failed to do. Expert evidence showed that reduced flow in Kishanganga would have an adverse environmental impact on the downward reaches of the river.

"Each Party will use its best endeavours to maintain the natural channels of the Rivers, as on the Effective Date, in such condition as will avoid, as far as practicable, any obstruction to the flow in these channels likely to cause material damage to the other Party."

• Employment of draw-down flusing for sediment management is prohibited by the Treaty. Further, such a method would give India control over the timing and volume of flow of water downstream of the dam which is not permissible under the Treaty. Further such technique will have adverse environmental impact downstream of the dam. Hence, India should employ alternative sediment management methods.

More on hearings in the next post.

Another Arbitration under the Indus Water Treaty 1960 betweeen India and Pakistan?

India has been planning to build a barrage across the mouth of the Wular Lake for almost three decades. The chief aim of the project has been to regulate the water storage and to maintain a proper depth in the Lake. This, according to news reports, would aid tourism and navigation across the Lake. The work on the project seems to have commenced in 1984. Pakistan seems to have objected to the project in 1986 resulting in suspension of works in 1987. Although India re-commenced work on the Lake, the work was stopped again in 2007 when Pakistan imposed suspension as a pre-condition for discussions on the project. Both countries have held about eight rounds of negotiations but nothing concrete has so far fructified. Pakistan's apprehension has been that the project is a storage project thereby bringing the Indus Water Treaty into play. River Jhelum, it may be noted, feeds the water to Wular Lake.Pakistan apprehends that the project would disrupt the canal projects of Pakistan.  India's contention is two-fold: (1) Indus Water Treaty permits building structures for "non-consumptive use of navigation"; (2) the project is beneficial to Pakistan as there would be adequate water supply during the lean winter period.

India has been sharing technical details of the project but news reports suggest that India is frustrated over the response or the lack of it from Pakistan on the project. Therefore, India seems to have conveyed the message to Pakistan that it would go for arbitration in the project considering the prolonged delay in both countries arriving at a consensus. It may be noted that Pakistan had stated that the issue had to be resolved through a neutral expert or through arbitration in 1986.

Some news reports on the topic are listed below:

• Tulbul: India may seek arbitration
• International Arbitration to Resolve Tulbul Dispute: India
• India, Pakistan resume talks on Tulbul project
• Tulbul project: India-Pak talks today
• Tulbul project: India to provide more data to Pakistan

Indian Arbitration in Many Dimensions

The title to this post, followers of arbitration would recognise, is a "rip-off" from a very interesting piece on arbitration by Jan Paulsson titled "Arbitration in Three Dimensions". For quite some time, arbitration in India has perhaps been the most widely used alternative to litigation so much so that in many sectors litigation has become an alternative to arbitration. Although India is still a nascent jurisdiction as regards arbitration, the variety of situations in which it is employed is quite surprising. This post, however, is not aimed at pointing out those various situations. This post's aim is merely to note the recent developments on arbitration in India. One would, however, hardly disagree with this blawgger after perusing through the post that arbitration for whatever reason has become a very important mechanism to settle disputes arising out of various fields in or related to India.

Petroleum:

The Oil & Gas industry, as the petroleum industry is called, is one of the most dynamic and quarrelsome industries. India is no exception to this. Reliance has invoked arbitration under its Production Sharing Contract for the KG-DWN-98/1 Block in the Krishna Godavari basin against the Government of India. The arbitration is aimed at preempting the government from disallowing recovery of costs incurred in the development of the Block. News reports suggest that the amount in stake might be around USD 1.24 billion (roughly around 6585 crores). High stakes indeed! The links to several news items on this can be accessed from here.

Kishanganga Arbitration:
Followers of this blog are well aware of the developments taking place in the arbitration between Pakistan (Claimant) and India (Respondent) conducted under the aegis of the Permanent Court of Arbitration for resolving disputes arising under the Indus Water Treaty. We, alongwith several Indian blawgs such as Lex Arbitri, have been closely following the arbitration (the posts in this blog on the Kishanganga arbitration can be accessed from the blog label "Arbitration: Indus Water Treaty Dispute"). Readers may be well aware that the Arbitral Tribunal in the case passed interim measures ordering India to not proceed with activities that it considered to be permanent. The interim order passed by the Tribunal can be accessed from this link (pdf). The interim order presents an interesting read.

Another India - Pakistan Arbitration?
While the Kishanganga arbitration is pending between both the countries, another issue between the two countries has cropped up- this one concerning granting of carbon credits to India in respect of the Nimoo Bazgo Power Project without getting Pakistan's consent on the transboundary environmental impact. Pakistan is alleging that India had obtained the carbon credits by using fake documents to show Pakistan's consent for the project. India applied for carbon credits in respect of the project in 2006 and obtained the same in 2008. According to news reports, a Former Indus Water Commissioner of Pakistan was incompetent and did not pursuing the matter when India had applied for the carbon credits. The Pakistan government had decided to arrest the said bureaucrat. Meanwhile the said bureaucrat is said to have fled to Canada. News reports on this issue can be accessed from here, here and here.

Reconsidering Bhatia International:
A Constitution Bench headed by CJI SH Kapadia is re-considering the questions visited by the Three Judge Bench of the Supreme Court in Bhatia International. Indian Corporate Law Blog has got an excellent post on what happened in the first week of the hearing. It would seem that the significant point raised in favour of Bhatia International  is the absence of substantive review of arbitral awards in most jurisdictions. The court has to consider this point in the background of party autonomy, international trade and the fact that substantive review is near-absent in the supposedly "advanced" arbitral jurisdictions. Another important factor that is significant is that such substantive review is optional even under the existing scheme. Writings on this development can be found here, here and here.

Developments in the Indian Court of Arbitration for Sports:
The December decision of the General Body of the Indian Olympic Association (IOA) to dissolve the Ethics and the Indian Court of Arbitration for Sports (ICAS) become controversial when the Secretary General of the IOA expressed his displeasure on it. Consequently, the IOA decided to retain these two committees. Check out the news reports from here and here. In a previous post in this blog, we had reported that an Indian Court of Arbitration for Sports (ICAS) was formed. A news report suggests that the Indian Court of Arbitration for Sports (ICAS) will consist of three additional retired judges- Supreme court Judge (Retd) HS Bedi, High Court Judges (Retd) SK Agrawal and Manju Goel.

Jindal-Bolivia Arbitration:
Indian steel company Jindal Steel and Power limited had entered into a mining agreement with the Government of Bolovia. It appears that Jindal has invoked arbitration under the aegis of the International Court of Arbitration of the ICC against Bolovia. A comprehensive post on the issue can be found in the International Law Curry blog. This post also discusses in brief investment arbitrations in which India/ Indian national is a party. Don't miss this brief but interesting post! The post refers to an investment dispute raised by an Indian national (lawyer) against the UK.

News & Opinions on Arbitration

In this article, Yogesh Sapkale and Rushab Dhandokia of Money Life interview Mr. Joseph Massey, Chief Executive & MD, MCX Stock Exchange on resolution of disputes concerning stock exchanges (generally investor-broker disputes). In the interview, Mr. Massey argues that conciliation and mediation are becoming more popular than arbitration.

It is raining ADR in Money Life. In this article, Rushab Dhandokia interviews Achintya Mukherjee, a consumer activist on ADR in telecom sector.

This news item reports the criticism by the Committee on Environment in the Legislative Assembly, J & K for not taking adequate protection in protecting the environment while undertaking the Kishanganga Hydel Power Project (KHPP). We did a post a few months back on the environmental impact of the (KHPP).

Ramaswamy Iyer, the famed water expert, has written an excellent piece in the Hindu on the Mullaperiyar controversy between Kerala and Tamil Nadu.

MJ Antony’s article in the Business Standard titled “The Downside of Arbitration” deals primarily with costs in arbitration.

Intl. Arbitral Tribunal asks India to Stop the Kishanganga Project

Pakistani media has reported that the Seven member International Arbitral tribunal -constituted by India and Pakistan to decide on whether construction of the Kishanganga Hydro Project by India amounted to violation of the Indus Water Treaty, 1960- has issued an unanimous order asking India not to continue with the construction of the Kishanganga Project. It may be noted that Pakistan had applied to the Tribunal only in July for an interim injunction attracting severe criticism from Pakistani media for the delay in applying. Considering the belated stage at which interim injunction was sought, Pakistani media was pessimistic about Pakistan's chances in obtaining an interim order in its favour. In fact, in our last post, we had cited news reports in the Pakistani media reporting that the application for injunction was refused by the tribunal. Nevertheless, the Tribunal seems to have asked India to take the said interim measure.

Interim Injunction of this sort is generally issued only if there is a prima facie case, according to well settled principles of law. It remains to be seen how the tribunal will decide the dispute. More on this once the Indian news reports come in.

Added After Posting: The Hindu has a news report that seems to describe the the interim order issued by the seven member Arbitral Tribunal at the Hague in further detail. According to the news report, the Tribunal has injuncted India from constructing any permanent structure on the river bed that may inhibit the river's full flow. It appears from the news report that this order was only a sort of a conservatory measure. Building of a permanent structure might permanently inhibit the river flow even if the award is ruled in Pakistan's favour. Therefore, the interim order is probably aimed at preventing such a situation. It is important to note that the interim order does not prohibit India from undertaking works in the project which do not permanently inhibit the river flow. According to the order, India is free "to continue with all works relating to the Kishenganga Hydro-Electric Project” barring “any permanent works on or above the Kishenganga-Neelum riverbed at the Gurez site that may inhibit the restoration of the full flow of that river to its natural channel”such as "construction of the sub-surface foundations”, erecting temporary cofferdams, operating the by-pass tunnel, temporarily drying out the riverbed of the Kishenganga-Neelum at the Gurez valley, excavating the riverbed, etc. The news report states that the Tribunal intended to give its final award by the end of 2012 or by early 2013.

Kishanganga Dispute: Pakistan Fails to Get Interim Stay

In our last post on the Kishanganga Dispute, we had stated that Pakistan had sought interim stay of the Kishanganga Hydroelectric Project being undertaken by India in the Indus River Basin. Pakistan's application for interim stay was heard by the Seven member Arbitral Tribunal during the 25-27 August 2011 hearings. Pakistan's main ground for interim stay seems to be that the Kishanganga project would hamper its own Neelum Jhelum Hydroelectric Project. According to news reports, the application for interim stay has been rejected by the Tribunal. However, the arbitral tribunal asked India to submit a report on the environmental effects of the dam by September 7. We'll keep the readers posted on further developments.

Indus Water Treaty Dispute Update: Pakistan Applies for Interim Stay

News papers have reported that Pakistan has sought interim stay on the construction activities of the Kishenganga Hydro Electric project on the Sutlej river till the final disposal of the case. The uninitiated may check out the blog posts from label titled "Arbitration: Indus Water Treaty Dispute". The Kishanganga Project is scheduled to be commissioned by January 2016.

News reports suggest that the application for interim stay would be heard by the seven member arbitral tribunal during the August 25-27 August this year. 

Pakistani newspapers report infighting among the members of its legal team. Allegations such as favoritism in the appointment of lawyers have been made. Also, the papers report difference of opinion in obtaining interim stay of the Kishanganga project even during the first hearing. In fact, people watching the arbitration closely were slightly surprised when Pakistan did not seek an interim stay of the project during the first hearing of the arbitration.

We'll keep readers updated on the hearings.

Roundup of Prominent Developments in India and Abroad on Arbitration

Union of India v. Krafters Engineers (Supreme Court of India)

In Union of India v M/s Krafters Engineers, the Supreme Court of India clarified the law on the power of the arbitrator to award interest when the contract prohibits it. See the comments in the Indian Corporate Law Blog and the Lex Arbitri Blog.

Jivraj v Hashwani (UK Supreme Court) Nurdin Jivraj v Sadruddin Hashwani is an important case decided (pdf) by the UK Supreme Court. The issue was whether an arbitration clause requiring that the arbitrators should be from a particular religious community was valid. The English Court of Appeal had previously held that such a requirement violated the English Employment Equality (Religion or Belief) Regulations 2003 and was therefore void. The Court of Appeal had also held since the arbitration clause became substantially different if the void portion of the arbitration was severed, the entire arbitration clause was void. The UK Supreme Court overturned the decision of the Court of Appeal and held that the Employment Equality (Religion or Belief) Regulations 2003 was not applicable as arbitrators were not employees under the Regulations but were independent providers of service. Comments on the judgement can be found in UKSC Blog, Kluwer Arbitration Blog, Indian Corporate Law Blog and Lex Arbitri Blog.

Barclays Bank v Nylon Capital (English Court of Appeal on Expert Determination)

 
In this case, the English Court of Appeal had to decide on the question as to whether the court should stay proceedings brought for a declaration as to the interpretation of an agreement for the reason that the issue falls within the domain of the expert appointed as per the expert determination clause in that agreement. The said clause provided that the expert shall determine the matters in dispute between the parties and such determination may include dispute as to the interpretation of any provision of the agreement or even his jurisdiction. Such determination was to be final and binding on the parties. The court decided as follows:

• Even if the agreement confers jurisdiction on the expert to decide a question pertaining to the jurisdiction of an expert, the court is the “final decision maker” on the question.
• In construction of arbitration clauses, there is a presumption that sensible businessmen intended that any dispute arising out of an agreement should be decided by the arbitral tribunal. However, there is no such presumption as regards expert determination clauses. Therefore, the question as to whether a matter was to be referred to an expert or not is a matter of construction of the expert determination clause with “no presumption either way”.
• It is an established principle that courts would not interfere with the determination of experts except in narrow circumstances. Courts would interfere where the expert determines the issue referred to him in a manner contrary to the mandate conferred upon him by the parties. Whether the expert had acted contrary to his mandate is a question of law.
• Unlike an arbitrator who is bound to proceed with fairness, an expert can determine how he can proceed, subject, of course, to any stipulation in the agreement.
• Where the court is asked to determine whether a dispute is within the expert’s jurisdiction and if the agreement provides that such a question should be decided by the expert, the court should decide, first, if there is a dispute; second, the court should decide if it is in the interests of justice and convenience that it should decide the dispute.
• When an expert determines questions pertaining to his jurisdiction, such determinations are not final even if the parties agree. Such determinations can always be challenged.
• Where a party challenges the jurisdiction of the expert to determine a dispute, the said party could approach the court and the court would determine the issue of jurisdiction of the expert.

Use of And/ Or in Legal Documents:

Indian Corporate Law Blog had a small post a few days back providing the link to an article on the use “And/ Or” in legal writing.

Kishanganga Arbitration:

Lex Arbitri has a post on the latest developments in the Kishanganga arbitration between India and Pakistan.

Updates on the Gas Allocation Issue and the Indus Water Treaty Dispute

The Gas Re-Allocation Issue
Over the past few months, Directorate General of Hydrocarbons (DGH) has been asking Reliance Industries Limited (RIL) to increase its gas production in the KG D6 Field. The direction from the DGH to RIL is in the wake of a slump in the production from the said Field and the increasing demand from the industry. Due to this, the MoPNG had no other alternative but to allocate the gas from the Field to the “core” sectors and deny supply to non-core sectors such as the steel industry etc. Several steel companies such as Essar Steel Limited, Welspun Maxsteel and others had challenged MoPNG's Direction before the Delhi and the Bombay High Courts. We had covered this in three posts (here, here and here). We had noted in our latest post that the MOPNG was firm in its position on gas allocation exclusively to the core sectors.

In one of our previous posts, we had noted that the Delhi High Court refused to grant an interim stay on the MoPNG direction to allot the gas exclusively to core sectors (Direction). It may also be noted that Welspun Maxsteel and others have filed a petition before the Bombay High Court challenging the same direction. It would be prudent for the matter to be transferred to either of the two High Courts.

In the proceedings before the Delhi High Court, one of the grounds for challenging the Direction was that the MoPNG was not competent to alter the allocation of gas done by the Empowered Group of Ministers (EGoM). Consequently, the counsel of Essar Steel reportedly prayed the court to order the matter to be decided by the EGoM. The Business Standard reports that even the court was of the opinion that it was better if the EGoM made a decision. An EGoM meeting was scheduled to be held on 9 June 2011. However, the meeting was cancelled. Ultimately, the Additional Solicitor General agreed to have the matter decided by the EGoM. The order of the Delhi High Court dated 3 June 2011 notes: “Mr. A.S. Chandhiok, learned ASG states that the stand of the EGOM in the matter will be made explicit by an affidavit to be filed on its behalf on or before 4th July 2011.”

Kishanganga Dispute between India and Pakistan
A 10 member court of arbitration, alongwith observers from India and Pakistan would inspect the Kishanganga project on 18 June. We have been providing updates on the issue. All the posts on this issue can be accessed from this label.

Kishanganga Dispute between India & Pakistan: An Update

A Pakistani new report suggests that Pakistan has been given time till July 15, 2011 by the seven member international arbitral tribunal to submit its claim statement (the news paper refers it to reply but we understand that India has not yet filed any application for Pakistan to reply to. Therefore, we presume that the reference in the news paper is actually to the claim statement/ memorandum). India, according to the said news report, has been given six months' time from the submission of the claim for the submission of the reply statement.

Latest Developments on the Indus Water Treaty

A Staff Report prepared for the use of the Committee on Foreign Relations, US Senate was published almost a month ago. The report titled “Avoiding Water Wars:Water Scarcity and Central Asia’s Growing Importance for Stability in Afghanistan and Pakistan” dealt with the tricky topic of water scarcity in Afghanistan and Pakistan. We summarize below certain salient points in the Report that are relevant to the Indus Water Treaty:

a) Water scarcity in Afghanistan and Pakistan has immense impact on regional stability and US Foreign Policy.

b) The US has a lot of experience on transboundary water sharing agreements and should build institutions that deal with international water law, dispute resolution, mediation, and arbitration and support institutions that support transboundary water sharing agreements [read World Bank].

c) The Indus River is most significant for Pakistan’s agricultural sector because Pakistan’s agriculture almost exclusively relies on the said river.

d) Since water regulation in India is within the domain of the States, there has been limited co-ordination between different States and this has diminished the surface and groundwater.

e) Though the Indus Water Treaty, 1960 has governed the sharing of the Indus Basin between India and Pakistan for more than half a century, experts question its effectiveness due to the tensions between India and Pakistan over the Kashmir region.

f) “Others” question the effectiveness of the Indus Water Treaty in the light of India’s need to harness the Indus basin and Pakistan’s increasing demand for water or its agricultural purposes.

g) Studies show that no single dam built by India in the Kashmir region has the effect of limiting Pakistan’s access to the Indus waters, “the cumulative effect of these projects could give India the ability to store enough water to limit the supply to Pakistan at crucial moments in the growing season”.

h) The Indus Water Treaty is threatened by lack of trust between India and Pakistan. “Any perceived reduction in water flows magnifies this distrust, whether caused by India’s activities in the Indus Basin or climate change”.

i) The Indus Water Treaty has been criticized by experts “for its inflexibility to adjust to changes in water levels". Experts question whether the treaty signed more than half a century back would adapt to new issues like increasing demand for the use of the waters for irrigation and access to hydroelectric power. If the Treaty breaks down, it might have a significant impact on the regional stability.

j) Experts have expressed concerns that India has not made available data on the water volume of the river Indus thereby increasing the mistrust Pakistan has on India. It is recommended that efficiencies should improve thereby decreasing water demand and flexibilities should be created to respond to changes in water volume etc.

The Report can be accessed from here.

Several Pakistani news papers have cited this report to argue that India is trying to gain control over the Indus basin (see, for example, this news report). India, on its side, has allowed Pakistan to survey hydroelectric projects in India so that Pakistan could verify if there was any violation of the Indus Water Treaty (See this link).

Some Academic Discussions on the Indus Water Treaty

In this post, we bring to the notice of the readers two articles in the Economic and Political Weekly (EPW) on the Indus Water Treaty (IWT) and the present arbitration proceedings between India and Pakistan on the Kishaganga issue. In the December 11-17 edition of the EPW, John Briscoe (according to the author description in the article, he teaches Environmental Engineering at the Harvard University) writes in an article titled “Troubled Waters: Can a Bridge Be Built over the Indus?” writes that it requires “far-sighted political leadership” in Pakistan and (especially) in India to keep intact the troubled edifice of the IWT. Briscoe starts off with a lengthy disclaimer that he does not represent the interests of the World Bank or the US or any other institution but are the personal views of a “university professor”. In sum, Briscoe criticises the Indian position on the Indus basin.

A month later (January 15), in the same journal, Ramaswamy R. Iyer (affiliated to the Centre for Policy Research) refutes the contention of John Briscoe and defends the Indian position on the subject in an article titled "Briscoe on the Indus Treaty: A Response". Both the articles are worth checking out. They may be accessed (with subscription) from here and here.

Also, check out this news item in the Outlook which reports that the Kishanganga dispute may be settled “outside arbitration”.