| Arbitration is a legal method of dispute settlement which requires the prior consent of each party to the dispute. This is usually done through a special agreement between the parties called a compromise.514 Arbitration is provided for in Article 33 of the UN Watercourses Convention and complemented by the Annex to the Convention which sets out the rules for the establishment and operation of an Arbitral Tribunal (Article 33 (10)(b) and (Annex Articles 1-14) as included in the opposite column.
It is important to note that parties are not bound to use the particular arbitral formula of Article 33 and are instead able to utilise other procedures if ‘the parties to the dispute otherwise agree’ (Article 33(10)(b)). These other options could include use of the procedures of the Permanent Court of Arbitration (PCA), which is not a ‘court’ but rather a special mechanism, the primary purpose of which is to assist states in settling their international controversies.515 The PCA was established in 1899 under the Hague Convention No 1 for the Pacific Settlement of International Disputes and is able to provide its services to all arbitration cases submitted to it by agreement of the parties to a dispute. It has recently updated its procedures to respond to current international practice and a particularly relevant outcome is the 2001 Optional Rules for Arbitrating Environmental Disputes which provides more detailed provisions than the arbitration procedure in the Convention.516 One significant distinguishing factor between the ICJ and the PCA is that both international organisations and companies can be parties to PC proceedings under the 2001 Optional whereas only states can be parties to proceedings before the ICJ.517 There have been numerous international arbitrations of water disputes since the late 19th Century, a select list of more recent cases include: the 1941 Trail Smelter Arbitration518 ; the 1947 Lac Lanoux Arbitration between Spain and France 519; the 1968 Gut Dam case between the United States and Canada520 ; the 1994 Landmark 62-Mount Fitz Roy case between Argentina and Chile521; the 2004 arbitration between Netherlands and France pursuant to a nearly 70 year dispute; and the 1976 Convention on the Protection of the Rhine Against Pollution by Chlorides and the Additional Protocol of 1991522. Most recently, in 2011, the PCA delivered an Order on Interim Measures regarding the Indus Waters Kishenganga Arbitration (Pakistan v. India), which is examined in the opposiet column with a specific focus on the process of dispute resolution.523
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Permanent Court of ArbitrationEstablished in 1899 located in The Hague 2001 Optional Rules for Environmental Disputes are non-mandatory PCA website: http://www.pca-cpa.org/ UNWC Annex Articles 1-14 on ArbitrationArticle 1 Unless the parties to the dispute otherwise agree, the arbitration pursuant to article 33 of the Convention shall take place in accordance with articles 2 to 14 of the present annex. Article 2 The claimant party shall notify the respondent party that it is referring a dispute to arbitration pursuant to article 33 of the Convention. The notification shall state the subject matter of arbitration and include, in particular, the articles of the Convention, the interpretation or application of which are at issue. If the parties do not agree on the subject matter of the dispute, the arbitral tribunal shall determine the subject matter. Article 3
Article 4
Article 5 The arbitral tribunal shall render its decisions in accordance with the provisions of this Convention and international law. Article 6 Unless the parties to the dispute otherwise agree, the arbitral tribunal shall determine its own rules of procedure. Article 7 The arbitral tribunal may, at the request of one of the parties, recommend essential interim measures of protection. Article 8
Article 9 Unless the arbitral tribunal determines otherwise because of the particular circumstances of the case, the costs of the tribunal shall be borne by the parties to the dispute in equal shares. The tribunal shall keep a record of all its costs, and shall furnish a final statement thereof to the parties. Article 10 Any party that has an interest of a legal nature in the subject matter of the dispute which may be affected by the decision in the case may intervene in the proceedings with the consent of the tribunal. Article 11 The tribunal may hear and determine counterclaims arising directly out of the subject matter of the dispute. Article 12 Decisions both on procedure and substance of the arbitral tribunal shall be taken by a majority vote of its members. Article 13 If one of the parties to the dispute does not appear before the arbitral tribunal or fails to defend its case, the other party may request the tribunal to continue the proceedings and to make its award. Absence of a party or a failure of a party to defend its case shall not constitute a bar to the proceedings. Before rendering its final decision, the arbitral tribunal must satisfy itself that the claim is well founded in fact and law. Article 14 1. The tribunal shall render its final decision within five months of the date on which it is fully constituted unless it finds it necessary to extend the time limit for a period which should not exceed five more months. 2. The final decision of the arbitral tribunal shall be confined to the subject matter of the dispute and shall state the reasons on which it is based. It shall contain the names of the members who have participated and the date of the final decision. Any member of the tribunal may attach a separate or dissenting opinion to the final decision. 3. The award shall be binding on the parties to the dispute. It shall be without appeal unless the parties to the dispute have agreed in advance to an appellate procedure. 4. Any controversy which may arise between the parties to the dispute as regards the interpretation or manner of implementation of the final decision may be submitted by either party for decision to the arbitral tribunal which rendered it. Indus Waters Kishenganga Arbitration (Pakistan v. India)Background This overview focuses on some key features of the arbitration process rather than the legal merits of the dispute or the parties’ arguments. In 2008 a dispute arose over India’s construction of the Kishenganga Hydroelectric Project (KHEP). The KHEP aims to divert water from the Kishenganga River (also known as the Neelum River) to a tributary of the Jhelum River in Kashmir through a by-pass tunnel. Pakistan is also building a dam (known as the Neelum-Jhelum Hydroelectric Project (NHJEP). Pakistan raised technical and legal objections to Kishenganga and claimed that it is a violation of the 1960 Indus Waters Treaty. It claimed that the diverted water would reduce downstream flows and hydropower generation capacity in NHJEP as well as other issues. India counter-argued that the flows into Pakistan will not be reduced and the KHEP will have no impact because NJHEP is not an existing project. Some observers suggest the parties are building their respective projects with the hope of claiming ‘prior appropriation’ and ‘existing use’ to the water of the tributary (Uprety and Salman at 647). Contentious points The Treaty allocates the waters of the eastern rivers of the Indus basin – Sutlej, Beas and Ravi – to India, while Pakistan has unrestricted use of the western rivers, Indus, Jhelum and Chenab (Article III). The questions at the centre of the dispute from Pakistan’s view point are: a) Whether India’s proposed diversion of the river Kishenganga (Neelum) into another tributary breaches India’s legal obligations owed to Pakistan under Article III (2) of the Treaty to let all the waters of the Western rivers flow (and not permit any interference with those waters) and Article IV(6) – maintenance of natural channels. b) Whether under the Treaty India may deplete or bring the reservoir level of a run-of-river storage plant below Dead Storage Level? Arbitration Process and Provisional Measures In May 2010 Pakistan instituted arbitral proceedings against India under Article IX and Paragraph 2(b) of Annexure G to the Indus Waters Treaty 1960. Article IX of the Treaty provides for a system for the settlement of differences and disputes that may arise in relation to the Treaty. Article IX states: (4) Either Government may, following receipt of the report referred to in Paragraph (3), or if it comes to the conclusion that this report is being unduly delayed in the Commission, invite the other Government to resolve the dispute by agreement (5) A Court of Arbitration shall be established to resolve the dispute in the manner provided by Annexure G (a) upon agreement between the parties to do so; or (b) at the request of either party, if, after negotiations have begun pursuant to Paragraph (4), in its opinion the dispute is not likely to be resolved by negotiation or mediation; or (c) at the request of either party, if, after the expiry of one month following receipt by the other Government of the invitation referred to in Paragraph (4), that Party comes to the conclusion that the other Government is unduly delaying the negotiations. Paragraph 2 of Annexure G of the Treaty provides as follows: The arbitration proceeding may be instituted [...] (b) at the request of either party to the other in accordance with the provisions of Article IX (5) (b) or (c). Such request shall contain a statement setting forth the nature of the dispute or claim to be submitted to arbitration, the nature of the relief sought and the names of the arbitrators appointed under Paragraph 6 by the Party instituting the proceeding. In its Request for Arbitration, Pakistan stated parties had failed to resolve the dispute concerning the KHEP by agreement pursuant to the terms under Article IX (4) of the Treaty. This is the first time a dispute under the Indus Treaty has been referred to arbitration. A Court of Arbitration composed of seven members was constituted pursuant to Article IX (5) and Annexure G. The Permanent Court of Arbitration acts as Secretariat to the Court of Arbitration pursuant to Paragraph 15(a) of Annexure G. The first meeting of the Court of Arbitration was held in January 2011 where the Court made personnel appointments with the consent of the parties. In June 2011 the Tribunal conducted a site visit to both the Neelum-Jhelum Dam in Pakistan and KHEP in India. In June 2011 Pakistan requested the Court to lay down interim measures for a specified time period necessary to safeguard interests and avoid prejudice to the final solution and aggravation or extension of the dispute (Annexure G, para 28). Essentially Pakistan sought an interim order which would restrain India from proceeding with the diversion of the Kishenganga River until the legality of the diversion had been determined by the Court of Arbitration (paras 52 and 53). India requested the court to reject this application. For an overview of the process of communication exchange between the parties including the Procedural Orders of the Court – see paras 28-51 of the Interim Order. On 23 September 2011, the arbitral tribunal ordered interim measures pending its final decision on the merits of the case – in order to avoid prejudice to the final solution. The Tribunal ordered India to halt any ‘permanent constructions or works within the river bed that would cause irreparable reduction in water flow’ until the final decision was reached on the merits of the case – this includes the construction of a portion of the KHEP which presents a real risk of ‘prejudice to the final solution’. However, the Court also ordered that India would be allowed to continue construction on the diversion tunnel and hydro-electric facilities, as well as any temporary coffer dams within the Kishenganga River, at its own risk, pending a final decision. Finally the Court requested the two countries to submit a joint report setting forth the areas of agreement and any points of disagreement that may arise regarding the implementation of its order (para 152). It is expected the Court will deliver its final Award in December 2012/January 2013.
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