Business

Iran to move arbitration court against Pakistan over IP gas pipeline delay

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Digital Desk

2 years ago

ISLAMABAD: Iran informed Pakistan of moving the International Court of Arbitration next month against Islamabad for not completing the construction of the pipeline under the Iran-Pakistan gas project within the extended deadline.

The project which was bound to be completed in 2014 has been facing 10 years delay over proposed US sanctions on the project. Under the revised contract in September 2019, it was decided that Iran would not approach any international court if there was a delay in the construction of the pipeline, however, Pakistan would erect its pipeline by 2024.

Pakistan’s deadline to complete the portion of the pipeline in its territory ended earlier in March this year. Iran however facilitated Pakistan and extended the 180-day deadline that is to expire in September 2024, however, authorities again failed to lay down the pipeline.

As the deadline ends next month, Iranian authorities have sent notice to Pakistan about moving to the Paris-based Arbitration Court, designated to resolve disputes between the two nations, which does not acknowledge US sanctions as a valid reason for the delay.

Pakistani authorities showed concerns over Iran’s final notice and have decided to hire 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,” a senior official from the Petroleum Division told the local publication. “We tried hard with Americans seeking US waiver, but the Biden administration is against the IP gas line project.”

Iran earlier issued its second legal notice to Pakistan in November-December 2022 asking Islamabad to construct a portion of the Iran-Pakistan (IP) gas line project in its territory till February-March 2024 or be ready to pay a penalty of $18 billion.

Earlier in February 2019 Tehran had notified Islamabad of its intention to move to an arbitration court and threatened to invoke the penalty clause of the Gas Sales Purchase Agreement (GSPA). Under the penalty clause, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015. And in case Iran moves an arbitration court, Pakistan would have to pay billions of dollars.

Digital Desk