HAGUE | 6TH JULY 2025 – A Court of Arbitration (CoA) under the aegis of the Permanent Court of Arbitration (PCA) at The Hague recently ruled that it has jurisdiction to arbitrate Pakistan’s concerns over India’s hydroelectric power projects on the Indus River system. This ruling came even after India placed the Indus Water Treaty (IWT) in abeyance earlier this year following the Pahalgam terror attack.

INDIA REJECTS RULING, PAKISTAN WELCOMES DECISION

India has strongly rejected the CoA’s decision, reiterating that it does not recognize the arbitral body. Meanwhile, Pakistan has welcomed the ruling and called on India to resume the normal functioning of the IWT.

BACKGROUND: WHY WAS THE COA ESTABLISHED?

The dispute centers around India’s construction of the Kishanganga and Ratle hydroelectric projects. Under the 1960 Indus Water Treaty, brokered by the World Bank, water sharing between India and Pakistan is regulated. The treaty provides for dispute resolution through bilateral talks, neutral expert intervention, or, ultimately, arbitration via a CoA.

In 2016, Pakistan formally requested the formation of a CoA, alleging that India’s projects violated treaty terms by affecting downstream flows. India objected, insisting that the matter should be handled by a neutral expert, and called the CoA “illegal,” arguing that simultaneous proceedings under different mechanisms would breach the Treaty.

Despite India’s objections and boycott of the proceedings, the PCA moved forward, and in July 2023, ruled that it had jurisdiction over the dispute.

WHAT DID THE COA RULE RECENTLY?

After the Pahalgam terror attack, India placed the IWT in abeyance. In a supplemental award dated June 27, the CoA addressed the impact of this decision on its jurisdiction.

The CoA unanimously ruled that India’s stance does not affect its competence to hear the case.

“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.

The CoA further stated that, under customary international law, events occurring after proceedings are initiated do not affect jurisdiction.

“[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 REACT?

India’s Ministry of External Affairs (MEA) rejected the ruling outright:

“…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 argued that placing the Treaty in abeyance was an exercise of its sovereign rights:

“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.”

HOW DID PAKISTAN REACT?

Pakistan’s Ministry of Foreign Affairs welcomed the award, describing it as a vindication of its stance that the IWT remains valid and cannot be suspended unilaterally.

“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 HAPPENS NEXT?

Pakistan has expressed willingness to engage with India on all outstanding issues, including Jammu & Kashmir, the IWT, trade, and counterterrorism. However, India has stated it will keep the Treaty suspended until Pakistan “irrevocably abjures its support for cross-border terrorism.”

The CoA will now examine the core issues concerning India’s construction of the two hydropower projects on the Indus River. Nevertheless, even if the CoA rules in Pakistan’s favor, India is unlikely to comply, given its longstanding position questioning the legality of the arbitration process.