A Court of Arbitration (CoA) under the aegis of the Permanent Court of Arbitration (PCA) at The Hague recently held that it is competent to arbitrate Pakistan’s concerns over two hydroelectric power plants being developed by India over the Indus River system even after India kept the Indus Water Treaty (IWT) in abeyance.
India, which has kept the Indus Water Treaty (IWT) in abeyance since the Pahalgam terror attack earlier this year, has rejected the decision, reiterating its stand that it does not recognise the arbitral body. But the decision has been welcomed in Pakistan, which called on India to resume the normal functioning of the Treaty.
So, how did the CoA come to deal with the IWT dispute? And why does India reject the recent ruling? We take a closer look.
When and why was this Court of Arbitration set up?
The CoA was established following Pakistan’s concerns over India's construction of the Kishanganga and Ratle hydroelectric projects on the Indus River system. The 1960 IWT, brokered by the World Bank, governs water sharing between India and Pakistan. Under its provisions, disputes are to be resolved through bilateral talks, a neutral expert or, ultimately, a CoA.
Pakistan formally requested the constitution of a CoA in 2016, arguing that India’s projects violated treaty terms by affecting downstream flows.
India objected, insisting that a neutral expert should handle the matter. Regardless of the concerns, the PCA proceeded with forming the CoA, citing its mandate under the Treaty.
India boycotted the proceedings, calling the CoA "illegal" and arguing that simultaneous processes under different mechanisms would breach the Treaty.
Nevertheless, in July 2023, the PCA ruled that it had jurisdiction to consider the dispute.
What is the CoA's new ruling?
After the terror attack in Jammu & Kashmir’s Pahalgam, India placed the IWT in abeyance. In a supplemental award dated June 27, the Court considered the effect of India's decision on its jurisdiction. The CoA unanimously ruled that India’s position on abeyance of the Treaty does not limit the competence of the Court over the dispute raised by Pakistan. It added that the IWT does not provide for unilateral abeyance or suspension.
“Rather, the Treaty provides for its continuation in force until terminated by mutual consent by India and Pakistan. Such text definitively indicates an intent by the drafters not to allow for unilateral action to alter the rights, obligations, and procedures established by the Treaty, including the Treaty’s dispute settlement procedures,” the Court said.
It observed that as per customary international law, events occurring after the initiation of proceedings have no effect on jurisdiction and, therefore, once established (as done by its previous decision), jurisdiction cannot be defeated.
The CoA concluded that India’s decision to freeze the Treaty does not deprive the CoA of competence to arbitrate the dispute.
“[The CoA] FINDS that the Court of Arbitration has a continuing responsibility to advance its proceedings in a timely, efficient, and fair manner without regard to India’s position on “abeyance”, and that a failure to do so would be inconsistent with its obligations under the Treaty.”
How did India and Pakistan react to the award?
India’s Ministry of External Affairs (MEA) rejected the ruling outrightly, saying it has “never recognised the existence in law of this so-called Court of Arbitration”, and that the constitution of the CoA is itself a breach of the IWT.
“…consequently any proceedings before this forum and any award or decision taken by it are also for that reason illegal and per se void,” the MEA said.
India justified its decision to place the Treaty in abeyance by arguing that it was an exercise of the country’s sovereign rights under international law.
“This latest charade at Pakistan’s behest is yet another desperate attempt by it to escape accountability for its role as the global epicenter of terrorism. Pakistan's resort to this fabricated arbitration mechanism is consistent with its decades-long pattern of deception and manipulation of international forums.”
Pakistan, on the other hand, welcomed the decision. Its Ministry of Foreign Affairs said that the award is a vindication of Islamabad's position that the IWT remains valid and operational, and that India cannot take unilateral action on it.
“We urge India to immediately resume the normal functioning of the Indus Waters Treaty, and fulfil its treaty obligations, wholly and faithfully,” Pakistan said.
What next?
While Pakistan has stated that it is willing to discuss all outstanding issues with India including Jammu & Kashmir, the IWT, trade and counterterrorism, India has said that the IWT will remain suspended until Pakistan "irrevocably abjures its support for cross-border terrorism.”
The CoA is now set to consider the substantial issue of India’s construction of the two hydropower projects on the Indus River system. However, even if the CoA rules in favour of Pakistan, India is unlikely to adhere to the judgment since it has questioned the Court’s legality from the start.
[Read CoA's detailed order]