France-based arbitration: Pakistan hires 3 law firms to argue case against Iran

ISLAMABAD: The government has hired the services of three law firms to fight the case in the Court of Arbitration in Paris moved by Iran against Pakistan for not completing its portion of gas pipeline and failure to have an intake of 750mmcfd gas under the Iran-Pakistan gas pipeline.

Top official sources in the Law Division and Attorney General’s Office said Pakistan hired the services of well-reputed internationallaw firms — White & Case, Three Crowns, Willkie Farr Gallagher — and one main counsel, settled in Australia, who is also famous in the world as one of the leading lawyers in the oil and gas infrastructure sector.

The relevant authorities have briefed the law firms and one main counsel on the Iran-Pakistan (IP) gas pipeline project and the reasons why Pakistan failed to materialie the trans-nations project. “We submitted with the secretariat of France-based Court of Arbitration on October 18, 2024 details about the legal team that would represent Pakistan in the Arbitration Court proceedings,” the sources said.

“Pakistan will now, with the consultation of legal team input, appoint one arbitrator. Likewise, one is to be appointed by Iran, and then both states would jointly nominate the third arbitrator. This is how the Court of Arbitration would be completed for proceeding on the case,” he said.

Once the Arbitration Court gets completed, the case is likely to be decided in one year’s time. Earlier in August 2024, Iran served the final notice on Pakistan informing Tehran is left with no option but to move the Paris Arbitration Court in September 2024 against Pakistan for not constructing the pipeline under the IP gas project during the extended 180-day deadline.

The project has been facing a 10-year delay since 2014 over proposed US sanctions on the project. The GSPA (Gas Sales Purchase Agreement) was signed in 2009 under the French law. The Arbitration Court is the forum to decide disputes that arise between two countries. The French Arbitration Court does not recognise US sanctions.

The Inter-State Gas Systems (ISGS) of Pakistan and National Iranian Gas Company (NIGC) inked the revised contract in September 2019. Under the contract, Iran would not approach any international court if there was a delay in construction of pipeline. Pakistan, however, would erect its pipeline by 2024 after which it would have an intake of 750 million cubic feet of gas from Iran daily.

Under the revised contract, Pakistan was bound to erect the portion of pipeline in its territory till February-March 2024. Iran facilitated Pakistan and extended 180-day deadline that expired in September 2024. The authorities, however, again failed to lay down the pipeline. Then Iran served its final notice.

Under the French law, if Iran does not exercise its right to move Arbitration Court till September 2024, it would lose its right to initiate a legal battle against Pakistan. Iran earlier issued its second legal notice to Pakistan in November-December 2022, asking Islamabad to construct a portion of gas pipeline in its territory till February-March 2024, or be ready to pay a penalty in billions of dollars.

In February 2019, Tehran had notified Islamabad of its intention to move to the Arbitration Court and threatened to invoke penalty clause of GSPA. The GSPA was signed in 2009 for 25 years.

“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 a US waiver, but Biden Administration is against the project and the US congressional panel was told by Assistant Secretary of State Donald Lu in March 2024, ‘We have warned Pakistan of serious consequences if it gets in bed with Iran on the IP gas line project’,” the officials said.

Under the original agreement, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015 under the penalty clause. The project was to be implemented under a segmented approach, meaning Iran had to lay down the pipeline on its side and Pakistan was to build the pipeline in its territory. It was to be completed by December 2014 and become functional from January 1, 2015.

“The authorities in Pakistan had planned to partially implement the IP gas pipeline project by laying down an 81-km pipeline from Gwadar to Iran border to show its seriousness towards the project. But this strategy also could not be implemented,” officials said.