Iran has issued a ‘final notice’ to Pakistan, indicating that it will initiate legal proceedings against Pakistan in the Paris Arbitration Court in September 2024.
This action is in response to Pakistan’s failure to complete the construction of the pipeline for the Iran-Pakistan (IP) gas project within the extended 180-day deadline.
The IP gas project, which has been plagued by delays since 2014, was originally intended to be completed by December 2014. The Gas Sales Purchase Agreement (GSPA), signed in 2009 under French law, designates the Paris-based Arbitration Court as the venue for resolving disputes between the two nations.
Notably, this court does not accept US sanctions as a valid excuse for the delay.
In September 2019, the Inter-State Gas Systems (ISGS) of Pakistan and the National Iranian Gas Company (NIGC) agreed to a revised contract stipulating that Pakistan must finish the pipeline construction on its side by 2024.
Despite Iran’s extension of the deadline, Pakistan has not met its obligations.
The final notice from Iran has reportedly caused frustration among Pakistan’s top officials, who are now engaging a foreign law firm to prepare their defense for the upcoming arbitration.
According to senior officials, US sanctions have hindered their ability to move forward with the project. “We tried hard to get a waiver from the US, but the Biden administration remains opposed to the IP gas line project,” an official told The News.
Under the terms of the original agreement, Pakistan faces a daily penalty of $1 million to Iran starting from January 1, 2015. Should Iran proceed with arbitration, Pakistan could face substantial financial penalties amounting to billions of dollars, further complicating the already delayed project.
