On May 17, 2010 Pakistan approached the Permanent Court of Arbitration (PCA) for arbitration under Indus Waters Treaty (IWT) on the construction of the Kishanganga Hydroelectric Project (KHEP) by India on a tributary of Jhelum River (called Neelum in Pakistan and Kishanganga in India) by diverting its water in the Indian-held Kashmir.

Pakistan raised two major objections: First, if the KHEP’s inter-tributary diversions are permitted by the IWT; and second, if India is allowed to use drawdown flushing to tackle sedimentation.

Pakistan argues the KHEP will significantly reduce the power generation capacity of the Neelum-Jhelum Hydropower Project (NJHEP) being constructed further downstream on the Neelum River and the drawdown flushing to tackle sedimentation will allow India to reduce the reservoir level of dam below dead storage level. Therefore, the dam with this design will allow India to control the volume and timing of the water flow downstream -- which, according to Pakistan’s official stance, is a clear violation of the IWT.

The PCA issued a partial award on February 18, 2013. It decided that since the KHEP is a run-of-river dam, India may divert water from the Kishanganga/Neelum River for power generation. According to the court, India demonstrated a high degree of certainty when it started work on the dam between 2004 and 2006; while Pakistan lagged behind in implementation and planning of the NJHEP. Consequently, the PCA found India had a priority over Pakistan on the use of Kishanganga-Neelum River for hydroelectric power. The PCA, however, decided India is obligated to construct and operate the KHEP in a manner that maintains a minimum flow of water in the river (at a rate to be determined subsequently).

The PCA also decided that except in the case of an unforeseen emergency, the IWT does not permit reducing the water level below the dead storage level in run-of-river dams on the western rivers. Further, the PCA decided that accumulation of sedimentation does not constitute unforeseen emergency that will permit the depletion of the reservoir below dead storage level for drawdown flushing purposes.

At first glance, the partial award legitimised the KHEP. Pakistan failed to prevent the diversion of water from the Jhelum tributary. But Pakistan succeeded in preventing India from using drawdown flushing of sedimentation.

In the Baglihar Dam case, the neutral expert had allowed India to deplete the reservoir below dead storage level but PCA clearly decided that in the KHEP case it was against the IWT.

It was a major setback for India. It requested the PCA in May 2013 to further clarify the decision regarding the design of the run-of-river dam -- asking if the decision was applicable to the KHEP only or to all future projects.

The PCA issued further clarification on December 20, 2013. It said, "The court’s decision on the second dispute will apply to other run-of-river plants to be built, as well as to the KHEP."

In the final award, the PCA decided that India shall release a minimum flow of 9 cumecs into the river below the KHEP at all times. Pakistan had requested the release of a minimum of 18 cumecs to ensure protection of environment downstream while India argued that 4.5 cumecs was enough.

The PCA also suggested that India or Pakistan could seek reconsideration of the decision through the Permanent Indus Commission and the mechanisms of the Indus Waters Treaty after a period of seven years from the first diversion of water from the Kishanganga/Neelum River.

The task before the PCA was to announce the final award -- "to determine a minimum flow that will mitigate adverse effects to Pakistan’s agricultural and hydro-electric uses throughout the operation of the KHEP, while preserving India’s right to operate the KHEP and maintaining the priority it acquired from having crystallized prior to the KHEP."

The court further noted that it would have to give due regard to "the customary international law requirements of avoiding or mitigating trans-boundary harm and of reconciling economic development with the protection of the environment."

The court though suggested an environmental flow of 12 cumecs in the river downstream but examining the hydrological data provided by both countries, it concluded that a flow of 9 cumecs at the KHEP would be sufficient to maintain the natural flows throughout the dry months of December, January and February.

"Although the court considered this approach to be somewhat severe in environmental terms, the court concluded that, in light of the right of India to develop hydro-electric power, and the associated right to operate the KHEP effectively, such an approach represents an appropriate balance between the needs of the environment and India’s right to power generation," reads a press release issued by the PCA on the final award.

"Reviewing the effects of a 9 cumecs minimum flow, the court noted that such a flow would accord India 51.9 per cent of the flow at the KHEP dam site during the month of January and a higher proportion in other months. On average, the minimum flow would reduce electricity generation at the KHEP by 19.5 GWh per month from October to March but would result in an annual reduction of only 5.7 per cent," it further reads.

The final award has initiated a debate in the country. "For Pakistan, after the Baglihar dam decision, this is the second defeat," says Arshad Abbasi, expert on the IWT and trans-boundary water issues between Pakistan and India. "The decision will deprive Neelum River of major water flow and affect the beauty and forestation in the valley. It will decrease power generation capacity of the NJHEP by 30 per cent in winters," he says, pointing out that there is a need to do the professional audit of the lawyers and experts who presented Pakistan’s case at the PCA -- "Majority of them don’t even know the basics about trans-boundary water issues and IWT".

Lahore-based lawyer, Feisal H. Naqvi, who was a part of the legal team on the Baglihar and Kishanganga Dams cases between 2004 and 2009, says the partial and final awards of the PCA are victory for Pakistan. "The diversion of water from one tributary of Jhelum to second is allowed under Annexure D, para 15 of IWT".

For him, the major issue was the design of the dam which would allow India control over the flow of water. "The PCA categorically decided that India would not be allowed to use this design of the KHEP or future projects… The window of opportunity which the Baglihar dam case opened for India to control the flow of water to Pakistan on western rivers has been closed by the PCA decision. With environmental flow of 9 cumecs, the NJHEP would now be able to generate 90 per cent of its capacity -- which means it would lose 10 per cent generation capacity against the projected loss of 16 per cent," he says.

International experts on water see the decision as historic -- because it restores the Indus Waters Treaty as a central and viable instrument for the cooperation on the use of the waters of the Indus Basin. "I do not think that the question ‘did India win’ (which is asked so often in India) or ‘did Pakistan win’ (as is asked so often in Pakistan) is a productive way to view this decision," says John Briscoe, professor at Harvard University who served as Senior Water Adviser for the World Bank in New Delhi on email.

"I see the decision as a win-win, enabling India (with some significant new challenges) to proceed with developing hydropower projects on the Jhelum and Chenab, and Pakistan having its water security on the Indus, Jhelum and Chenab restored," he says.

In addition, he adds, Pakistan will now reasonably be able to ask for basic environmental flows to be restored on the Ravi and Sutlej.

Briscoe thinks the decision ensures Pakistan will not be threatened by the development of a large amount of manipulable storage by India on the Jhelum and Chenab. "This was fundamental in the original Indus Waters Treaty, was put under threat by the ill-advised Baglihar decision, and is again restored by the PCA judgment. For India, the challenge is clear and substantial -- to be more imaginative in the way in which it deals with silt management, and environmental flows," he says.