Iran has issued final notice to Pakistan for failing to lay a gas pipeline under the agreement between the both states.
According to reports, Iran has issued a final notice to Pakistan, stating that Tehran has no choice but to approach the Paris Arbitration Court under French law next month, September 2024. This action is due to Pakistan’s failure to construct the pipeline on its territory under the IP Gas Project within the extended 180-day deadline for gas acquisition.
According to Pakistani media, the project has faced a 10-year delay since 2014. The Gas Sales Purchase Agreement (GSPA) was signed in 2009 under French law, and the Paris-based arbitration court is the forum designated to resolve disputes between the two countries.
The French arbitration court does not recognize U.S. sanctions. In September 2019, Pakistan’s Inter State Gas Systems (ISGS) and the National Iranian Gas Company (NIGC) signed a revised agreement. Under the revised agreement, if there was a delay in pipeline construction, Iran would not approach any international court. However, Pakistan was bound to lay its part of the pipeline by 2024, after which it would receive 750 million cubic feet of gas daily from Iran.
Under the revised agreement, Pakistan was obligated to complete its portion of the pipeline between February and March 2024. However, Iran provided Pakistan with a facilitation by extending the 180-day deadline, which ends in September 2024. Despite this, Pakistan has once again failed to lay the pipeline.
As a result, Iran has issued its final notice. Iranian officials had previously issued a second legal notice to Pakistan in November-December 2022, urging Pakistan to construct its portion of the Iran-Pakistan (IP) pipeline project by February-March 2024 or be prepared to pay a penalty of $18 billion.
Earlier, in February 2019, Tehran sent a notice to Islamabad, warning that it would approach the arbitration court if the pipeline was not laid on Pakistani soil within the stipulated time, and threatened to invoke the penalty clause of the Gas Sales Purchase Agreement (GSPA).
Senior Pakistani officials have stated that the current government’s top decision-makers are deeply concerned about this final notice. In response, relevant officials from the Petroleum Division have started strategizing on how to respond to the notice, which was received 10 days ago.
Officials are also in the process of hiring one of the foreign legal firms to handle Pakistan’s case in the arbitration court.