Arbitration India

Pakistan Bears Full Costs of Indus Waters Treaty Arbitration After India Withdrawal

By ADR Journal Editorial Desk Published 1 source Arbitration India Pakistan Permanent Court Arbitration Public Sector Disputes Treaty Disputes India

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TL;DR

  • Pakistan is currently paying both its and India's shares of arbitration costs under the Indus Waters Treaty case.
  • India withdrew from the Permanent Court of Arbitration (PCA) and Neutral Expert proceedings after the April 2025 Pahalgam terror attack.
  • Pakistan's total spending exceeds $600,000 due to covering both party obligations.
  • India considers the PCA proceedings illegal and has not participated in recent hearings.

Overview

Following India's withdrawal from ongoing Indus Waters Treaty arbitration proceedings after the April 2025 Pahalgam terror attack, Pakistan has taken over full responsibility for arbitration costs at the Permanent Court of Arbitration. The report indicates that India has neither participated in recent sessions nor contributed to related expenses, leaving Pakistan to pay both its own and India's share to keep the process going.

What Happened

After the Pahalgam terror attack in April 2025, India stopped participating in Indus Waters Treaty dispute resolution processes at both the Permanent Court of Arbitration (PCA) and the Neutral Expert level.

Pakistan re-initiated proceedings at the PCA, which subsequently declared itself competent to hear the case in June 2025, despite India's objections.

The PCA noted that India had neither engaged in the constitution or meetings of the court nor contributed any funds for the arbitration process, resulting in Pakistan covering arbitration expenses for both sides, amounting to over $600,000.

Pakistan continues to pay these costs, with the average for PCA hearings estimated at $300,000 per party, whereas India asserts that the process is illegal and has withheld participation and payment.

India did participate in Neutral Expert proceedings-and paid its share-until July 2025, subsequently withdrawing and seeking a pause after the Pahalgam incident. Pakistan reports that it also paid for costs following India's withdrawal.

Context

The Indus Waters Treaty, signed in 1960, governs the use and management of cross-border river waters between India and Pakistan. Disputes under the treaty can be referred to a Neutral Expert or the Permanent Court of Arbitration as provided in its text.

Concurrent proceedings were underway, but India objected to the PCA process and ultimately stayed away from both mechanisms, intensifying financial responsibility for Pakistan.

Why It Matters

  • This situation highlights the financial and procedural challenges of treaty-based arbitration when a party refuses to participate but the process continues.
  • Pakistan bearing costs for both sides may have diplomatic and practical implications for future treaty arbitrations involving funding and compliance.

Sources

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