Does Article IX of the Indus Water Treaty Constitute a Multi-Tiered Arbitration Clause? Reflecting on the Permanent Court of Arbitration’s Award on the Competence of the Court in the Indus Waters Treaty Arbitration (Pakistan v. India)

Read part 1 here.

Part – II

V. Status of Article IX of the IWT

A. Wording of the Treaty

From Part – I (Section IV), it can be derived that in order to understand whether Article IX constitutes a multi-tiered dispute resolution clause, the wording of the clause must be given prime importance.

Article IX(1) of the IWT establishes the PIC, which consists of a commissioner from each State, in order to facilitate its implementation. The wording states: “shall first be examined”, which mandates the PIC to be the first body to look into the issue. Article IX also establishes a hierarchical system for resolving disputes, which would therefore be classified as a multi-tiered dispute resolution clause. A “question” between the Parties pertaining to the elucidation or implementation of the IWT or the presence of specific facts, if not resolved by the PIC, results in a “difference” per Article IX(2) which has two sub-parts. Sub-part (a) states:

“Any difference which, in the opinion of either Commissioner, falls within the provisions of Part 1 of Annexure F, shall, at the request of either Commissioner, be dealt with by a Neutral Expert.”

Sub-part (b) states:

“If the difference does not come within the provisions of Paragraph (2) (a), or if a Neutral Expert, in accordance with the provisions of Paragraph 7 of Annexure F, has informed the Commission that, in his opinion, the difference, or a part thereof, should be treated as a dispute, then a dispute will be deemed to have arisen which shall be settled in accordance with the provisions of Paragraphs (3), (4) and (5):

Provided that, at the discretion of the Commission, any difference may either be, dealt with by a Neutral Expert in accordance with the provisions of Part 2 of Annexure F or be deemed to be a dispute to be settled in accordance with the provisions of Paragraphs (3), (4) and (5), or may be settled in any other way agreed upon by the Commission.”

Part 1 of Annexure F refers to technical issues that might arise. Keeping in mind the use of the word “shall”, this means that differences pertaining to technical aspects outlined in Part 1 of Annexure F must be resolved through the involvement of a Neutral Expert at the first instance. In the event that a distinction does not pertain to the specified technical aspects, or if the Neutral Expert deems it suitable, a “dispute” emerges, which can be referred to arbitration per Article IX(5).

Pakistan has themselves mentioned in their Request for Arbitration, that the current issue pertains to technical questions, especially questions concerning the method for calculating the maximum Pondage and for determining the design and placement of the power intakes, sediment outlets, and spillways for passage of floods (para. 19) which come under the technical issues listed in Annexure F of the IWT.

B. Reasoning of the PCA to Accept Competence

In objection [2], India has argued that Pakistan cannot unilaterally seek recourse of the court when it has not exhausted the “first stages of dispute resolution” (para. 156). Further, only an independent expert can determine that a “difference” has risen to the stage of a “dispute”, incorporates the engagement of the neutral expert as a “seminal component” of the dispute resolution process (para. 157). Pakistan has argued that the neutral expert is not required to determine the existence of a “dispute” based on the Kishanganga Dam Arbitration (para. 480); wherein the PCA had taken up competence based on the fact that both parties agreed there was a “dispute” and neither party requested for the appointment of a neutral expert. The PCA started their analysis by stating that the same issue has come up in the Kishanganga Dam Arbitration, wherein this issue was rejected (para. 187), notwithstanding the different circumstances which existed during that dispute as mentioned in the aforementioned statement. The PCA agreed that Article IX of the IWT constitutes a “graded dispute resolution mechanism”, however not in a “rigid sense” (para. 199). For making this determination, the PCA again relies on the Kishanganga Dam Arbitration. The PCA’s second argument for accepting jurisdiction is that the wording of Article IX(2) states that, “shall, at the request of either Commissioner, be dealt with by a Neutral Expert.” The PCA emphasizes on the requirement of the request for appointment of the neutral expert coming from either commissioner; and states that India’s objection “fails on the face of factual record” since India did not respond to Pakistan’s commissioner when they requested for the appointment of a neutral expert. This reasoning does not follow considering that the PCA is insisting that the request of either commissioner is required for the setting up of a neutral expert and the same was present. Pakistan’s commissioner had made the request for the appointment of a neutral expert. The time taken by India to respond to this request (1 year, 1 month and 8 days), has no consequence mentioned within the treaty terms. The PCA has gone against their own assertion of the requirement of a request from either commissioner not being present (para. 203). The PCA argues that India has assumed a commissioner cannot withdraw their request for appointment of a neutral expert, however even the PCA assumes that arbitration can be initiated before the settling of disputes by a neutral expert, basing their reasoning on the Kishanganga Dam Arbitration, which dealt with different circumstances (para. 206).

VI. Conclusion

Both India and Pakistan accept that the PIC has failed to resolve the current issue and formal diplomatic talks have not yielded any solution. Since the current issue involves technical aspects under Annexure F of the IWT, it should first be referred to a neutral expert and only after that be referred to arbitration if the dispute still remains unresolved. Both countries had followed the same procedure during the Baghlihar Dam issue and had resolved the same through a neutral expert. In the previous Kishanganga Dam Arbitration, an arbitral tribunal was directly constituted bypassing the neutral expert since Pakistan and India (partially) had agreed that the dispute did not pertain to matters under Annexure F of the IWT. In this case, since the World Bank has already appointed a neutral expert and Article IX of the IWT mandates technical aspects to be considered by a neutral expert before referring the dispute for arbitration, that should be the manner in which the dispute resolution process moves ahead.

The main aim of dispute resolution mechanisms within treaties, as the name suggests, is to resolve disputes. India has already declared in their letter to the World Bank that it will not accept any award given by the PCA in this case. This brings us to the dangerous trend in international law wherein nations are refusing to accept the jurisdiction of international adjudicatory bodies. With China refusing to follow the PCA ruling in Philippines v China and multiple African nations refusing to accede to the jurisdiction of the International Criminal Court, it is a time wherein international adjudicatory bodies must be careful while exercising jurisdiction or have their order serve as dead letters of the law. Especially in this case, wherein there exists a multi-tiered arbitration clause, the PCA should have had the neutral expert examine this issue and declined to accept jurisdiction before that. In such an instance, if the neutral expert could not solve the matter and then it was referred to arbitration, India would have accepted the jurisdiction of the PCA and adhered to their awards, which would have led to the settlement of the dispute.

Ahan Gadkari is a Final Year BA LLB Candidate at Jindal Global Law School.

Read more on this topic in the Asian Journal of International Law.