Pakistan Pays India's Share of Arbitration Costs in Indus Waters Treaty Proceedings
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TL;DR
- Pakistan is paying both its own and India's share of arbitration costs in Indus Waters Treaty proceedings.
- India suspended its participation in the arbitration after a terror attack and placed the treaty in abeyance.
- The PCA has continued its proceedings with only Pakistan present and is expected to allocate final costs in a future award.
- Pakistan's expenditure is estimated to have exceeded $600,000 to keep the arbitration and Neutral Expert processes ongoing.
Overview
Pakistan has assumed full responsibility for both its own and India's costs in the ongoing arbitration and Neutral Expert proceedings under the Indus Waters Treaty. This step follows India's suspension of participation and payment after it questioned the jurisdiction of the Permanent Court of Arbitration (PCA) and placed the treaty arrangements in abeyance in 2025.
What Happened
In 2025, following a terror attack in Pahalgam, India suspended its participation in all Indus Waters Treaty proceedings and declared the treaty in abeyance. India also challenged the legitimacy of the ongoing arbitration before the Permanent Court of Arbitration (PCA) in The Hague.
The PCA, after determining it had jurisdiction, proceeded with hearings in India's absence. India has neither participated in tribunal meetings nor contributed to arbitration costs as required by the treaty.
Per the treaty framework, the countries are meant to equally share these costs. Due to India's absence, Pakistan has covered both its own and India's financial obligations for the arbitration and parallel Neutral Expert processes.
Pakistan's reported expenditure on these proceedings has surpassed $600,000, which includes payments for the PCA as well as Neutral Expert meetings.
Context
The Indus Waters Treaty, signed in 1960, governs water sharing between India and Pakistan for rivers in the Indus basin. The Permanent Court of Arbitration has been involved following disputes raised primarily over India's hydroelectric projects, such as Kishanganga and Ratle.
India's boycott, citing parallel Neutral Expert proceedings and questioning PCA jurisdiction, has led to an unusual situation where only one party is funding all arbitration-related expenses for both sides.
The PCA issued an 'Award on Issues of General Interpretation' in August 2025, noting India's absence and lack of financial contributions. Final allocation of overall costs remains pending for a subsequent award, as prescribed in the treaty.
Why It Matters
- Pakistan bearing the full costs while India remains absent highlights procedural difficulties in bilateral dispute mechanisms.
- The situation tests the resilience of treaty-based dispute resolution when one party suspends participation.
- Cost allocation and ongoing proceedings set precedents for future treaty arbitrations where party participation is not guaranteed.