On 18 February 2013, the international arbitration tribunal (the “Tribunal“) constituted under the terms of the Indus Waters Treaty between the Government of India and the Government of Pakistan (the “Treaty“), rendered a Partial Award (the “Partial Award“) in the Indus Waters Kishenganga Arbitration (the “Arbitration“). The Tribunal held that whilst India was entitled to divert water from the Kishenganga/Neelum River (the “River“) for the purpose of generating hydro-electric power, this entitlement was not absolute, but subject to the requirements of the Treaty and customary international law. Consequently, India was obliged to provide Pakistan with a “minimum flow of water” in the River, at a rate to be determined by the Tribunal in its’ Final Award. The Tribunal’s Partial Award also resulted in the lifting of its Order on Interim Measures of 23 September 2011 – for which see further the Volterra Fietta Client Alert of 10 October 2011.
The Treaty was signed by India and Pakistan on 19 September 1960, entering into force with retroactive effect on 1 April 1960. The Arbitration concerns a dispute between India and Pakistan (together, the “Parties“) regarding the interpretation and implementation of the Treaty in relation to the construction and operation of the Kishenganga Hydro-Electric Project (the “Project“) located on the River. The Project is designed to generate hydro-electric power by diverting water from a dam site on the River, through a network of tunnels, to another river of the Indus system. The Arbitration “marks the first instance that a court of arbitration has been constituted since the Indus Waters Treaty was concluded over half a century ago” (paragraph 126).
The Tribunal was requested by Pakistan to determine two particular issues:
(a) Whether India’s proposed diversion of the River as part of the Project was prohibited under the Treaty (the “First Dispute“); and
(b) Whether India could deplete or bring the reservoir level of a “Run-of-River Plant” (a power plant with limited or no water storage in a reservoir) below “Dead Storage Level” (the portion of water not used for operational purposes) in any circumstances except in the case of an unforeseen emergency (the “Second Dispute“).
Pakistan contended that the Project’s proposed diversion of water from the River violated India’s obligation under Article III of the Treaty to “let flow” the waters of the Indus, Jhelum, Chenab and their tributaries (the “Western Rivers“) and constituted an “interference” with those waters. However, in the Tribunal’s view, Article III of the Treaty restricted what India could do with the waters of the Western Rivers, “not with the products generated from their use” (paragraph 369). According to the Tribunal, there was “no indication in the Treaty that a geographic restriction on the use of electricity or any other product of the use of the waters was intended” (paragraph 369). Further, the Tribunal noted that the right to generate hydro-electric power (if conducted in accordance with Annexures D or E of the Treaty) was an express exception to India’s obligation to “let flow” the Western Rivers.
The Tribunal emphasised, however, that India’s right to divert water was subject to the constraints specified by the Treaty and relevant principles of customary international law (paragraph 445). For example, in the words of the Tribunal, “[t]here is no doubt that States are required under contemporary customary international law to take environmental protection into consideration when planning and developing projects that may cause injury to a bordering State” (paragraph 449). Thus, the Tribunal held that Pakistan “retains the right to receive a minimum flow of water from India in the Kishenganga/Neelum riverbed (paragraph 446). Indeed, there was no disagreement between the Parties that the maintenance of a minimum flow downstream of the Project was required (paragraph 455). However, on the basis of the evidence before it, the Tribunal felt itself unable to make a specific finding on this issue. Thus, the Tribunal requested further written submissions from the Parties and deferred its’ determination on this issue until the rendering of its’ Final Award.
India challenged the admissibility of the Second Dispute on two grounds: first, that Article IX of the Treaty required the appointment of a neutral expert to make an initial determination of whether an issue arising between the Parties should be referred to a neutral expert (i.e., a highly qualified engineer) or a court of arbitration; and second, that the subject-matter of the Second Dispute involved “highly technical issues of a kind prescribed in the Treaty to be dealt with by a Neutral Expert”. The Tribunal dismissed both of India’s objections.
First, in the Tribunal’s opinion, Article IX did “not serve to impose – for its own sake – an additional procedural hurdle to access to a court of arbitration” (paragraph 481). Further, it was undisputed that neither of the Parties had requested the appointment of a neutral expert. Second, the Tribunal held that there was nothing in the Treaty which required a technical question (listed in Part 1 of Annexure F) to be decided by a neutral expert, rather than a court of arbitration, except where a Party had so requested. In the Tribunal’s view, the “very composition of a court of arbitration also points to its competence in technical matters” (paragraph 486). Thus, the Tribunal held that the dispute brought before it could not be deemed inadmissible on the basis that it involved a technical question. With regards to the merits of the Second Dispute, the Tribunal observed “[a]lthough ultimately legal in nature”, the Second Dispute required “an understanding of how sediment is deposited in reservoirs and the techniques that are available to control its accumulation” (paragraph 495). The Parties disagreed as to whether India was permitted under the Treaty to periodically lower the water level in the reservoir at a “Run-of-River Plant” (a category of plant which the Project fell within) on the Western Rivers for the purposes of sediment control through the procedure known as drawdown flushing.
Regarding the reservoir at a “Run-of-River Plant”, Annexure E of the Treaty stipulates that the “Dead Storage shall not be depleted except in an unforeseen emergency”. It was undisputed between the Parties that sediment accumulation would not constitute such an emergency (paragraph 514). In light of this prohibition in the text of the Treaty and having considered technical evidence on this point, the Tribunal held that India would not be permitted to carry out drawdown flushing. The Tribunal observed, however, that this technique was only one of a number available to India for sediment control; other feasible alternatives, such as sediment sluicing, were also available (paragraphs 518-522). Thus, in the Tribunal’s view, “the constraints imposed by the Treaty [did] not condemn the [Project]… to an impractical and uneconomically short project life” (paragraph 517).
The Partial Award permits India to proceed with the construction of the Project, subject to maintaining Pakistan’s right to receive a minimum flow of water under both the Treaty and international law. Nevertheless, Pakistan has apparently expressed fears that the Project could allow India to “turn off the taps” as it pleases.
The Arbitration has attracted a great deal of publicity in both India and Pakistan, partially because of the Parties’ overlapping territorial claims over Kashmir, the territory in which the Western Rivers run. The Tribunal was, however, keen to point out that its’ Partial Award did not “have any bearing on the rights or claims that either Party may maintain to sovereignty over the territory of Jammu and Kashmir” (paragraph 362). The Tribunal was also careful to highlight that its’ Partial Award would not apply retrospectively to “any Run-of-River Plants already in operation on the Western Rivers” (paragraph 523).
The Tribunal’s Final Award, addressing the minimum volume of water which must be maintained by India in the Western Rivers, is expected in December 2013.