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Fact Sheet: the Indus Waters Treaty 1960 and the World Bank

Origins of the Treaty:

The Indus Waters Treaty was signed in 1960 after nine years of negotiations between India and Pakistan with the help of the World Bank, which is also a signatory. The negotiations were the initiative of former World Bank President Eugene Black. Seen as one of the most successful international treaties, it has survived frequent tensions, including conflict, and provided a framework for irrigation and hydropower development for more than half a century. Former U.S. President Dwight Eisenhower described it as „one bright spot … in a very depressing world picture that we see so often.”

 How the Treaty works:

The Treaty sets out a mechanism for cooperation and information exchange between the two countries regarding their use of the rivers, known as the Permanent Indus Commission, which has a commissioner from each country. The Treaty also sets forth distinct procedures to handle issues which may arise: “questions” are handled by the Commission; “differences” are to be resolved by a Neutral Expert; and “disputes” are to be referred to a seven-member arbitral tribunal called the “Court of Arbitration.”  The World Bank’s role in relation to “differences” and “disputes” is limited to the designation of people to fulfill certain roles when requested by either or both of the parties.

 What the disagreement is about:

India and Pakistan disagree about the construction of the Kishenganga (330 megawatts) and Ratle (850 megawatts) hydroelectric power plants being built by India (the World Bank is not financing either project).  The two countries disagree over whether the technical design features of the two hydroelectric plants contravene the Treaty. The plants are on respectively a tributary of the Jhelum and the Chenab Rivers.  The Treaty designates these two rivers as well as the Indus as the “Western Rivers” to which Pakistan has unrestricted use. Among other uses, India is permitted to construct hydroelectric power facilities on these rivers subject to constraints specified in Annexures to the Treaty.

 Different treaty mechanisms have been sought by India and Pakistan:

Pakistan asked the World Bank to facilitate the setting up of a Court of Arbitration to look into its concerns about the designs of the two hydroelectric power projects. India asked for the appointment of a Neutral Expert for the same purpose. These requests came after the Permanent Indus Commission had been engaged in discussions on the matter for a while. During several months prior to December 12, 2016, the World Bank sought to fulfil its procedural obligations with respect to both the Court of Arbitration and the Neutral Expert. The Treaty does not empower the World Bank to choose whether one procedure should take precedence over the other; rather it vests jurisdictional issues in each of the two mechanisms. At the same time, the World Bank actively encouraged both countries to reach agreement on a mechanism to address the issue.

 Pausing treaty processes and working with India and Pakistan:

On December 12, 2016, World Bank Group President Jim Yong Kim announced that the World Bank would pause before taking further steps in each of the two processes under the Treaty. This was done to safeguard the treaty, since referring the matter simultaneously to the processes sought by each of the parties risked contradictory outcomes and worked against the spirit of goodwill and friendship that underpins the Treaty. The World Bank is assisting the two parties in reaching an agreement on the process for resolving the issue of the two hydroelectric power projects. More generally, it is also working with them on how to ensure that the Treaty remains an effective tool to manage the use of Indus basin rivers.

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