Let flow all the waters? – The Indus Waters Kishenganga Arbitration

The Permanent Court of Arbitration (‘PCA’) is expected to render its decision in the Indus Waters Kishenganga Arbitration (Pakistan v. India) in a few weeks. The arbitration has not made many headlines beyond the two countries concerned,  although it could become a prime example of the peaceful settlement of disputes. This post aims to outline the dispute settlement mechanism of the Indus Waters Treaty (‘IWT’),  to explain the main issues in dispute between the parties and to provide a brief analysis of the Court’s Order on Interim Measures of 23 September 2011.

I. The Treaty

The IWT (signed by India and Pakistan on 19 September 1960; ratified 12 January 1961; entered into force with retroactive effect on 1 April 1960) represents the result of fierce negotiations between the two parties for almost a decade on the basis of a carefully drafted World Bank proposal. Aiming to “attain the most complete and satisfactory utilisation of the waters of the Indus system of rivers” (Preamble, IWT), the IWT allocates the Eastern Rivers (the Sutlej, the Beas and the Ravi), whose basins cover a combined area of 40,7 Million Cubic Meter (MCM) to India (Article II, IWT). The Western Rivers (the Indus, the Jhelum and the Chenab) covering a combined area of 154,2 MCM were in turn allocated to Pakistan (Article III, IWT). It is rather unusual to allocate entire streams instead of determining the respective volumes of water to be allocated based on the parties needs or uses, e.g. in accordance with the diverse factors listed in Article 6 of the UN Convention on the Non-Navigational Use of Watercourses. Compared to conventional allocation mechanisms, the IWT solution avoids most of the issues that usually arise in the context of integrated water basin management by simply allocating entire basins. At the same time this approach does, however, also limit the potential for cooperation in this area. For our purposes, the most distinct feature of the IWT is its elaborate dispute settlement clause (Article IX, IWT).

II. The Dispute Settlement Mechanism of the IWT

The IWT defines three different levels of disputes (questions, differences, disputes) between the parties and provides three corresponding resolution mechanisms (Article IX, IWT). Initially, the Permanent Indus Commission (Article VIII, IWT) consisting of two commissioners, one from India and from Pakistan (Article VIII(3), IWT), is charged (Article IX(1), IWT) with the task to resolve any “question” arising between the Parties relating to the provisions of the IWT or the existence of a fact.

If the Commission is unable to resolve the question, the original “question” becomes a “difference” (Article IX, (2)(a), IWT). If the difference pertains to technical issues (defined in Annexure F, Part I, IWT), a neutral expert is to be appointed. The parties used this mechanism once before to resolve the controversy surrounding the Balgihar Hydroelectric Plant.

If, however, the difference does not fall within the competency of a neutral expert or if the neutral expert informs the Commission that the difference should be treated as a “dispute”, the parties shall resolve the “dispute” in accordance with Articles IX(2)(b) – IX(5) of the IWT.

As soon as a dispute has been identified, the Commission is to forward all relevant facts to the two governments (Article IX(3)). Following receipt of the Commission’s report, or if one Government determines that the preparation of the report is being unduly delayed, one Government may invite the other to resolve the dispute by agreement (Article XI(4)).   

Finally, Article IX(5) also provides for the establishment of a Court of Arbitration (regulated by Annexure G, IWT) upon agreement by the parties (Article IX(5)(a)), upon request by either party if after one month that party determines that the other party is unduly delaying the negotiations (Article IX(5)(c)) or at the request of either party if negotiations pursuant to Article XI(4) appear unlikely to resolve the dispute (Article IX(5)(b)). It was with reference to this last provision (Article IX(5)(b)) that Pakistan submitted a request for arbitration on 17 May 2010 with respect to the Kishenganga Hydro-Electric Project.

III. The Dispute

The Kishenganga Hydro-Electric Project (‘KHEP’) currently under construction in the Baramulla district of the Indian province Jammu and Kashmir, involves the erection of a 37m-high concrete dam in the Gurez Valley, which will divert the Kishenganga river via a 22km long tunnel south into Lake Wular passing through an underground power-house along the way (see map). As a result of the diversion, the Kishenganga waters, which at present flow across the Line of Control to Pakistan (where the Kishenganga becomes the Neelum) and eventually empty into the Jhelum, will still reach Pakistan, but via a very different route (see map). This could be problematic for a number of reasons, but one of Pakistan’s largest concerns is that it is in the process of constructing its Neelum–Jhelum Hydropower Plant (‘NJHP’), which relies in part on the Kishenganga waters. After the diversion planned by India, the Kishenganga waters would reach Pakistan’s Jhelum river downstream of Pakistan’s hydropower plant. 

Legally, Pakistan is attempting to undermine the Indian project on three accounts. First, Pakistan argues that the construction of the Kishenganga dam violates India’s obligation to let “flow all the waters of the Western Rivers” (Article III(2), IWT). Indeed, Article III(2) of the IWT provides that India “shall not permit any interference with [the Western Rivers].” However, the article goes on to specify four exceptions, one of which (Article III(2)d, IWT) refers to India’s ability to generate hydro-electric power within the provisions of Annexure D. Annexure D provides in relevant part: 

“…the works connected with a Plant shall be so operated that…where a Plant is located on a Tributary of The Jhelum on which Pakistan has any Agricultural Use or hydroelectric use, the water released below the Plant may be delivered, if necessary, into another Tributary but only to the extent existing Agricultural Use or hydroelectric use by Pakistan on the former Tributary would not be adversely affected.” (Annexure D, paragraph 15(iii))

So Pakistan’s ability to challenge the KHEP on this ground depends on its ability to prove that the KHEP located on the Kishenganga (a tributary of the Jhelum) adversely affects Pakistan’s existing agricultural and hydroelectric use. It should be noted that the paragraph refers explicitly to existing uses and does not appear to allow for planned future uses to enter into the equation. Apart from its agricultural uses, it will be crucial for Pakistan therefore to establish that its Neelum-Jhelum Project was initiated prior to the KHEP – a fact that is currently disputed – and that the KHEP will be adversely affected.

Second, Pakistan contends that the KHEP violates India’s obligation to “maintain the natural channels of the Rivers” under Article IV(6) of the IWT. Article IV(6) of the IWT reads in full:

“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.”

It is evident that this article constitutes a best effort clause, rather than a rigid legal standard. That does not mean that the KHEP could not potentially violate Article IV(6). However, Pakistan would not only have to prove that India failed to “use its best endeavours”, but also that the KHEP fails to meet the practicability threshold of the provision. Considering that India already modified the KHEP in 2006 in response to Pakistan’s earlier technical concerns, it is not certain that Pakistan’s arguments under this clause will succeed.

Pakistan’s third question asks whether India is permitted to deplete “or bring the reservoir level of a run-of-river Plant below Dead Storage Level in any circumstances except in the case of an unforeseen emergency.” According to Article 2(a) of Annexure D, dead storage level refers to the water level “corresponding to that portion of the storage which is not used for operational purposes.” In other words, dead storage is that volume of water, which is located below the lowest outlet of water for consumptive purposes in a dam. The depletion of a run-of-river plant below dead storage level thus equals the complete discontinuation of the release of any water (except, potentially, “for [outlets for] the purposes of sediment control and evacuation of the design flood”, s.b.).

A depletion below Dead Storage Level does not appear to be in conformity with the IWT. Paragraph 15 of Annexure D, IWT, provides in relevant part:

“… 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.”

So while volume alterations are permissible, a complete discontinuation of the release of any volume of water (below 30%) would not be allowed. This question is of relevance only, however, if the KHEP does in fact lead to a depletion of the reservoir level below dead storage capacity. As long as the KHEP’s water release does not fall below 30% of “the volume received in the river above the Plant during the same 24-hour period”, the KHEP would be within the provisions of the IWT. A different, but related question pertaining to outlets below dead storage levels “for the purposes of sediment control and evacuation of the design flood” was also considered by the Neutral Expert in the context of the Baglihar Plant (see page 13 of the report).

It is thus to be expected that Pakistan’s ability to show that the KHEP will adversely affect Pakistan’s existing agricultural and hydroelectric uses will decide the outcome of the case. It will also be particularly interesting to see to which extent the Court will look beyond the provisions of the IWT itself and refer to general provisions of international law in its decision. The Court’s ability to do the latter at least in future will be crucial to preserve the IWT’s abiltiy to accomodate contemporary, scientific developments to safeguard the IWT’s continued utility.

IV. The Interim Order

Following a site visit in June 2011, the Court of Arbitration issued an order on interim measures on 23 September 2011. Pakistan had sought an interim order inter alia restraining India from proceeding further with the planned diversion of the Kishenganga until such time as the legality of the KHEP has been determined and the assurance that India recognized the “proceed at own risk” principle.

With respect to the first part of Pakistan’s request the Court found that some interim measures were necessary “to avoid prejudice to the final solution of the dispute” (Order on Interim Measures, paragraph 152). In reaching this conclusion the Court applied the standard laid down by paragraph 28 of Annexure G, IWT (which provides that interim measures are permissible to: safeguard the interests of the requesting party, to avoid prejudice to the final solution, or to avoid aggravation/extension of the dispute) instead of following India’s invitation to apply the considerable jurisprudence of the International Court of Justice. In particular, India was ordered to hold the construction of 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.” (Order on Interim Measures, paragraph 152(1)c) However, India was said to be free to continue with all other components of the project including the erection of temporary cofferdams and the construction of the dam’s sub-surface foundations.

These latter activities did not, in the Court’s view, constitute further risks to prejudice the final solution, because India explicitly recognised the applicability of the “proceed at own risk” principle in this case (Order on Interim Measures, paragraph 143).

V. The future

In the last 50 years the multi-layered approach of the IWT’s dispute settlement clause, designed to de-escalate any potential conflict at the earliest possible stage, has proved to be a reliable tool to address the parties’ grievances. However, in light of the ever dryer future of the Indus River System, it seems the hardest test of the IWT is yet to come. Against the background of the exceptional degree of cooperation between the two parties in the history of the IWT and considering that it is a common misconception that water disputes tend to lead to violent, international clashes (in fact, the opposite appears to be true, see Wolf, A. “‘Water Wars’ and Other Tales of Hydromythology.” in Whose Water is It?) there is hope, however, that both parties will continue to settle their water disputes peacefully.

Valentin Jeutner

About Valentin Jeutner

Ph.D. Candidate, Faculty of Law, University of Cambridge

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