from the Indus Waters Treaty for Cross-Border Dispute Resolution in India
ABSTRACT
This study investigates arbitration as a method for resolving transboundary disputes, focusing on reconciling commercial interests with national sovereignty. Through an analysis of the Indus Waters Treaty (1960) between India and Pakistan, the research illustrates how a hybrid dispute resolution approach—encompassing negotiation, neutral expert determination, and arbitration—has facilitated the management of sensitive issues within a politically delicate context. Employing a doctrinal methodology, the study situates the treaty within the broader framework of international arbitration, considering the influence of institutions such as UNCITRAL, ICSID, and the Permanent Court of Arbitration. The findings suggest that although sovereignty concerns and political tensions often restrict arbitration’s scope, the IWT exemplifies how carefully structured mechanisms can foster stability, enforceability, and legitimacy. Drawing insights from the treaty, the paper contends that arbitration, when complemented by diplomatic and institutional safeguards, can serve as an effective model for resolving contemporary transboundary disputes related to trade, investment, and resource management.
KEYWORDS
Arbitration, Sovereignty, Cross-Border Disputes, Indus Waters Treaty, International Law, Transboundary Resource Management
INTRODUCTION
Globalisation has led to a significant increase in international trade among nations as global dynamics evolve. The convergence of two countries for commercial exchanges can often give rise to disputes. The primary challenge associated with the escalation of cross-border dealings is the potential for disagreements, whether of a political or territorial nature. When two or more nations enter into a treaty or engage in commercial activities, the primary method for resolving disputes is often through alternative dispute resolution (ADR). Arbitration serves as a mechanism whereby disputes are settled outside the judicial system, offering an efficient, impartial, and reliable means for resolving disputes between parties. In the realm of international transactions, international arbitration serves as a vital mechanism for the efficient resolution of cross-border commercial disputes.
India is expanding and solidifying its presence on the global stage by participating as a member in various international institutional arbitrations, thereby broadening its scope both internationally and commercially.
This research paper focuses on the Indus Water Treaty as a case study. Given the enduring geopolitical tensions between India and Pakistan since their independence, it was anticipated that conflicts would arise. Consequently, the treaty includes a specific provision detailing procedures for addressing and resolving disagreements and disputes. The article delineates three primary stages for dispute resolution: bilateral negotiation, appointment of a neutral expert, and arbitration by a court involving the World Bank. Bilateral negotiation entails officials from both nations engaging directly to resolve conflicts; if this approach proves unsuccessful, a neutral expert—appointed by the World Bank—intervenes. The final stage involves arbitration, an alternative dispute resolution mechanism outside the judicial system, which offers a more streamlined process for the parties involved. Traditional judicial processes often entail prolonged durations for dispute resolution, whereas arbitration provides a more efficient and accessible alternative. Various forms of arbitration exist, including commercial arbitration, institutional arbitration, and treaty-based arbitration. While multiple types are available, this case study primarily concerns the aforementioned categories.
Arbitration carried out under treaties such as the Indus Waters Treaty (IWT) represents the concluding phase after bilateral negotiations and the involvement of neutral experts; however, it does not function independently. Instead, its legitimacy is grounded in wider international legal frameworks. These include institutions such as the Permanent Court of Arbitration, the United Nations Commission on International Trade Law (UNCITRAL), and the International Court of Justice. Through these international legal mechanisms, the India-Pakistan dispute is connected to global arbitration standards. In light of recent incidents, such as the Pahlgam attack, and the subsequent suspension and amendments to the IWT, it becomes evident how international legal frameworks and arbitration clauses embedded within treaties have facilitated dispute resolution between the involved nations.
Ultimately, it becomes evident that in recent global events, such as the IWT, arbitration has been considered either the most effective solution or perhaps too sluggish, politically influenced, or outdated to adequately address the contemporary challenges faced by India and Pakistan.
RESEARCH METHODOLOGY
This research paper primarily employs a doctrinal approach, as it allows a systematic study of legal instruments, treaties, and arbitral precedents, making it most suitable for analysing the IWT’s structured dispute resolution framework employed globally. The study also incorporates a historical research perspective by tracing the evolution of statutes over time to address contemporary challenges. Additionally, it features an analytical assessment of the strengths and weaknesses of arbitration in the context of the Indus Water Treaty (IWT), which serves as a primary source of international law. In this context, IWT is not only viewed as a legal framework governing relations between India and Pakistan but also as a broader principle underpinning international arbitration.
REVIEW OF LITERATURE
While prior scholarship on the Indus Waters Treaty (IWT) predominantly focuses on its historical context, water-sharing arrangements, or broader geopolitical tensions (Kumar, 2018; Singh, 2020), few studies analyse the treaty through the lens of arbitration as a hybrid dispute resolution mechanism. Existing works tend to either emphasise technical or legal aspects in isolation (Sharma, 2017; Rana, 2019) or discuss international arbitration in general without connecting it to treaty-based frameworks.
This study differentiates itself by adopting a comprehensive approach that integrates legal, technical, and political dimensions of treaty-based arbitration, illustrating how these elements collectively reconcile sovereignty concerns with commercial and cooperative imperatives. Using the IWT as a case study, it examines three-tiered dispute resolution processes—bilateral negotiation, neutral expert determination, and arbitration—and situates them within global arbitration frameworks such as UNCITRAL, ICSID, and the Permanent Court of Arbitration.
Unlike prior literature, this research explicitly explores the tension between sovereignty and neutrality, demonstrating how arbitration functions both as a stabilising mechanism and as a politically sensitive tool. Furthermore, by drawing lessons for cross-border trade, investment, and resource management disputes, the study offers a broader applicability beyond water governance, highlighting a model for contemporary transboundary arbitration.
Understanding Arbitration: Conceptual Foundations and Forms in Cross-Border Disputes
Disputes and disagreements often serve as major obstacles to the smooth functioning of business operations and contractual arrangements. Their resolution can be pursued through two main approaches: litigation, which is usually lengthy and complex, or alternative dispute resolution (ADR). Alternative Dispute Resolution (ADR) includes methods such as arbitration, mediation, and conciliation, which are intended to resolve conflicts outside the traditional judicial framework. In India, three recognised forms of ADR exist—arbitration, mediation, and conciliation—with arbitration and conciliation governed by the Arbitration and Conciliation Act, 1996. At the international level, cross-border and treaty-based arbitrations often operate under broader frameworks such as the United Nations Commission on International Trade Law (UNCITRAL), the International Centre for Settlement of Investment Disputes (ICSID), and the Permanent Court of Arbitration (PCA).
Arbitration involves the resolution of a conflict through a binding decision delivered by one or more arbitrators, rather than by a judicial court, with such decisions enforceable in a manner comparable to court orders. Enforcement typically arises through an arbitration agreement or the inclusion of an arbitration clause within the primary contractual document. Arbitration can generally be classified into two main categories: ad hoc arbitration and institutional arbitration. Ad hoc arbitration enables the parties to independently establish procedural details, including the choice of venue, the number of arbitrators, and the procedural rules, without the participation of any formal institution.. Conversely, institutional arbitration is conducted under the supervision of established institutions such as the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), the Dubai International Finance Centre (DIFC), and the Dubai International Arbitration Centre (DIAC), which administer and oversee proceedings.
In the context of cross-border interactions, arbitration further manifests substantively in three main forms. Commercial arbitration pertains to disputes between private entities engaged in international trade or business activities, typically governed by established institutional frameworks such as those of the ICC or UNCITRAL. Investment arbitration involves proceedings initiated by a foreign investor against a host state under agreements like Bilateral Investment Treaties (BITs) or other investment protection accords, with the International Centre for Settlement of Investment Disputes (ICSID) serving as a prominent forum. Conversely, treaty-based arbitration is embedded within bilateral or multilateral treaties between sovereign states, whereby disagreements relating to treaty obligations are resolved through arbitration; a notable instance of this is the Indus Waters Treaty of 1960.
International arbitration is a crucial mechanism for resolving transnational disputes, balancing commercial interests with national sovereignty. It offers a neutral, reliable, and enforceable solution, promoting foreign investment and trade. However, sovereign states often resist delegating authority to foreign arbitral tribunals on sensitive matters, such as taxation and security. This tension is exemplified by the Indus Waters Treaty, where arbitration is used to uphold regional stability and promote economic cooperation while also addressing concerns about external interference and the preservation of sovereign decision-making autonomy. Arbitration offers efficiency, expediency, neutrality, and international enforceability, making it advantageous in global commerce and investment contexts. However, it faces challenges such as high financial costs, sovereignty issues, and enforcement limitations. The Indus Waters Treaty illustrates the dual function of arbitration as a means of enabling cross-border cooperation and a potential challenge to sovereign authority..
INDUS WATER TREATY (1960)
The Indus Waters Treaty (IWT), signed on 19 September 1960 between India and Pakistan under the auspices of the World Bank, constitutes one of the most longstanding international frameworks for the management of transboundary water resources. The treaty designated control of the western rivers—Indus, Jhelum, and Chenab—to Pakistan, while granting India utilisation rights over the eastern rivers—Ravi, Beas, and Sutlej. The Indus basin itself originates in the Tibetan Plateau, traverses the disputed territory of Kashmir, and discharges into the Arabian Sea, historically forming the backbone of regional agricultural and irrigation systems that expanded significantly during British colonial rule.
The partition of British India in 1947 disrupted this integrated water management system, particularly after the termination of the 1948 Standstill Agreement, which resulted in India’s temporary suspension of water supplies. Early efforts to resolve these issues included the Inter-Dominion Accord of 1948, followed by proposals from figures such as David Lilienthal and subsequent interventions by the World Bank, culminating the formal approval of the Indus Waters Treaty (IWT) was achieved in the year 1960. The treaty not only apportioned water rights but also established mechanisms for cooperation and dispute resolution between the two nations.
Under Article IX of the Indus Waters Treaty (IWT), a structured hierarchical framework for dispute resolution is explicitly established, intended to systematically address conflicts and prevent their escalation. The initial step involves bilateral negotiations between the Permanent Indus Commissioners of India and Pakistan, who act as the primary institutional representatives facilitating dialogue, exchanging technical data, and seeking amicable resolutions before resorting to third-party intervention. This negotiation phase aims to promote direct communication and mutual concessions, thereby safeguarding national sovereignty and reducing the likelihood of disputes being internationalised.
If bilateral negotiations do not yield an agreement, technical disagreements may be forwarded to a Neutral Expert appointed with assistance from the World Bank. The Neutral Expert’s function is to deliver an impartial evaluation of complex technical issues—such as river flow measurement, dam engineering, or hydroelectric capacity—whose resolution is often central to the dispute. This process was notably invoked in the 2005 Baglihar Dam dispute, where the Indian design on the Chenab River was largely upheld but required modifications to meet treaty stipulations and downstream water requirements. The procedure was similarly employed in the case of the Ratle Hydroelectric Project from 2017 onwards, underscoring the treaty’s ongoing relevance in resolving technical disagreements without escalating to formal arbitration. The Neutral Expert mechanism exemplifies the treaty’s multi-layered, technically driven approach, prioritising resolution through expertise and factual assessment rather than political intervention.
In cases involving legal interpretations or intricate questions of law, disputes may be escalated to arbitration before the Permanent Court of Arbitration (PCA), as exemplified by the Kishanganga Dam case (2010–2013). In that instance, India was granted permission to divert water for hydroelectric purposes under stringent conditions aimed at maintaining adequate downstream flows to Pakistan. This case illustrates how arbitration can reconcile sovereign rights with treaty obligations, providing a neutral and enforceable resolution when bilateral or technical negotiations fail. The arbitration process reinforces the principle that legal mechanisms recognised internationally serve as an impartial means of dispute settlement, thereby bolstering the treaty’s credibility.
Notwithstanding the robustness of this institutional framework, tensions between India and Pakistan have persisted and, at times, intensified. In 2017, Pakistan formally challenged India’s development of the Kishanganga and Ratle hydroelectric projects by invoking the treaty’s arbitration provisions, which prompted renewed involvement by the World Bank. However, these efforts did not result in a definitive resolution, revealing limitations in enforcement mechanisms and highlighting the influence of domestic political considerations on international dispute resolution processes. In 2023, India attempted to unilaterally amend the treaty, a move categorically rejected by Pakistan, further exposing the fragile nature of treaty commitments amid geopolitical tensions.
The situation reached a critical juncture in 2025 when India, following a militant attack in Kashmir attributed to the Pakistan-based Lashkar-e-Taiba, hypothetically suspended the treaty’s provisions. This unprecedented action represented a significant deviation from the customary practice of treaty compliance and exposed the vulnerability of long-standing international agreements to geopolitical and security pressures. The recently reported suspension raised profound concerns regarding regional water security and cooperation, as well as fundamental principles of international water law—including equitable utilisation, the duty to cooperate, and the obligation to prevent harm to other states’ transboundary resources. These developments demonstrate the complex interrelation of technical, legal, and political factors in transboundary water governance and highlight the ongoing challenges faced in maintaining treaty-based arbitration as a neutral and effective mechanism for dispute resolution within politically sensitive contexts.
A fundamental source of tension within the Indus Waters Treaty pertains to the tension between national sovereignty and the use of international arbitration. Historically, India has preferred to resolve disputes through bilateral negotiations facilitated by the Permanent Indus Commission, expressing apprehension about “internationalising” issues that it perceives as sensitive to its strategic autonomy and territorial claims, notably concerning Kashmir. Conversely, Pakistan has been more inclined to involve third-party arbitration mechanisms, whether through Neutral Experts or the Permanent Court of Arbitration, viewing these forums as essential safeguards against India’s upstream dominance.
Domestic political considerations in both nations also influence their respective approaches. For India, resorting to arbitration can be portrayed domestically as a compromise of national sovereignty, whereas Pakistan often presents international arbitration as a means to hold India accountable. This raises broader questions about whether arbitration undermines state sovereignty by externalising disputes, or whether it constitutes a pragmatic compromise that situates bilateral relations within a rules-based international order. The enduring stability of the IWT over decades suggests that this hybrid approach—combining bilateral engagement with international mechanisms—has provided both legitimacy and stability, though recent developments threaten to disrupt this delicate balance.
Lessons from IWT for cross-border arbitration
The Indus Waters Treaty exemplifies how a hybrid dispute resolution framework can provide both adaptability and legitimacy in addressing sensitive transboundary conflicts. By structuring the dispute resolution process into successive stages—initial bilateral negotiations, the appointment of a neutral expert, and ultimately arbitration—the treaty aims to prevent the unnecessary internationalisation of disputes while maintaining arbitration as a credible safeguard. This multi-tiered approach illustrates that arbitration does not need to supplant diplomatic efforts but can instead complement them by offering a systematic mechanism for parties to escalate unresolved disagreements. The involvement of the World Bank as an intermediary further underscores the significance of institutional support in enhancing the legitimacy of arbitration clauses and reassuring both parties of an impartial and fair process.
Simultaneously, the treaty highlights the persistent tension between sovereignty and neutrality. India’s hesitation to submit to international arbitration—particularly given the sensitive nature of Kashmir-related disputes—reflects a broader concern that arbitration might erode national sovereignty by externalising domestic issues. Conversely, Pakistan’s openness to utilising neutral forums demonstrates how less powerful parties often rely on arbitration to counterbalance asymmetries of power. This tension echoes challenges observed in cross-border commercial arbitration, where investors tend to favour neutral international institutions, whereas states aim to retain regulatory autonomy. Despite these tensions, the experience of the Indus Waters Treaty indicates that arbitration, when thoughtfully integrated into treaty provisions, can act as a stabilising mechanism. Even during periods characterised by conflict and political hostility, the treaty’s arbitration provisions have facilitated compliance and prevented complete breakdowns, thereby providing a valuable precedent for future transboundary agreements concerning trade, investment, and resource management.
More broadly, the Treaty’s lessons echo global practices that arbitration, despite frequently being viewed as an infringement on sovereignty, can function as a practical compromise that promotes stability and predictability in transboundary relations. The insights gained from this treaty extend beyond water-sharing conflicts, providing important guidance for the development of arbitration mechanisms in international trade and investment contexts, where the ongoing tension between economic collaboration and national sovereignty continues to influence outcomes.
These insights are not confined to the Indus context; rather, they resonate across global arbitration practices, serving as a mechanism to reconcile sovereignty with the imperative for cooperative engagement.. Globally, similar tensions are evident across various fora. For example, the World Trade Organisation’s Dispute Settlement Mechanism illustrates how states are willing to accept binding resolutions on trade conflicts despite the potential encroachment on sovereignty, in exchange for the predictability and stability that such rules afford to international trade. In the domain of private international law, UNCITRAL-guided commercial arbitration exemplifies how parties engaged in cross-border transactions voluntarily submit to neutral procedural rules and accept binding awards, thus prioritising enforceability and procedural efficiency. Similarly, disputes concerning transboundary resources, such as those adjudicated by the Permanent Court of Arbitration or the International Court of Justice—pertaining to the Nile or Mekong rivers—highlight that arbitration often becomes an essential instrument to prevent escalation when dealing with shared natural resources.
From this comparative perspective, India’s stance appears to be pragmatic yet cautious. While it actively participates in WTO dispute resolution processes and complies with UNCITRAL standards for commercial arbitration, its reluctance to fully accept third-party intervention in disputes under the Indus Waters Treaty reflects a cautious approach towards internationalising disputes that bear significant political and sovereignty implications. This nuanced posture demonstrates a selective engagement with arbitration—embracing it within commercial and economic contexts to reap benefits, yet resisting its application in matters that are closely tied to national security and sovereignty concerns. This selective strategy highlights the dilemma confronting India: whether to broaden its adoption of arbitration as a means to bolster its international credibility or to proceed cautiously in disputes that involve sovereignty concerns.
CONCLUSION
The Indus Waters Treaty demonstrates how arbitration, when embedded within a broader treaty framework, can balance sovereignty concerns with the need for neutral dispute resolution. By combining bilateral negotiations, technical expertise through neutral experts, and recourse to international arbitration, the treaty provides a hybrid model that has preserved stability despite enduring political hostilities. The experience of the IWT highlights both the potential and limitations of arbitration: it offers efficiency, impartiality, and enforceability, yet it remains vulnerable to political influence and sovereignty concerns. In the contemporary global order—where disputes increasingly transcend borders, involving resources, trade, and investment—this model underscores the necessity of integrating arbitration with diplomatic and institutional mechanisms. For India and Pakistan, the treaty’s endurance reflects that even in fragile geopolitical contexts, structured arbitration can prevent escalation. More broadly, it provides valuable lessons for future transboundary agreements, suggesting that arbitration, when thoughtfully designed, can function not as a threat to sovereignty but as a stabilising tool for international cooperation and sustainable peace.
ADITI MUNDANKAR
UNIVERSITY OF MUMBAI