Iran to take Pakistan to Paris Arbitration Court over stalled gas pipeline project

The project has been facing a 10-year delay since 2014 due to proposed US sanctions

Web Desk

27 Aug, 2024

Pakistan

Iran has served its ‘final notice’ to Pakistan, informing that it will move the Paris Arbitration Court in September 2024 against Pakistan for not constructing the pipeline under the IP (Iran-Pakistan) gas project within the extended 180-day deadline.

The project has been facing a 10-year delay since 2014 due to proposed US sanctions. The Gas Sales Purchase Agreement (GSPA) was signed in 2009 under French law, and the Paris-based Arbitration Court is the designated forum to resolve disputes between the two countries. Crucially, the French arbitration court does not recognize US sanctions as a valid justification for the delay.

According to senior official sources, the Inter-State Gas Systems (ISGS) of Pakistan and the National Iranian Gas Company (NIGC) had signed a revised contract in September 2019, under which Pakistan was required to complete the pipeline construction in its territory by 2024. However, the authorities failed to do so, even after Iran extended the deadline.

The top decision-makers of the Pakistani government are reportedly upset over the final notice received from Iran. The authorities are now hiring a foreign law firm to prepare Pakistan’s case to be presented at the Arbitration Court.

“We are simply unable to go with the project due to US sanctions,” senior government officials told The News. “We tried hard with Americans seeking US waiver, but the Biden administration is against the IP gas line project.”

Under the original agreement, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015, under the penalty clause. If Iran moves the arbitration court, Pakistan could face a massive financial penalty running into billions of dollars.

The project was meant to be completed by December 2014 and become operational from January 1, 2015, with Iran laying the pipeline on its side and Pakistan building the portion in its territory. However, the 10-year delay has jeopardized the entire endeavor.

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