Fact Sheet: The Indus Waters Treaty 1960 and the Role of the World Bank

June 11, 2018

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 has 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."

The Treaty allocates the Western Rivers (Indus, Jhelum, Chenab) to Pakistan and the Eastern Rivers (Ravi, Beas, Sutlej) to India. At the same time, the Treaty allows each country certain uses on the rivers allocated to the other.

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 an ad hoc arbitral tribunal called the “Court of Arbitration.” 

As a signatory to the Treaty, the World Bank’s role is limited and procedural. In particular, its role in relation to “differences” and “disputes” is limited to the designation of individuals to fulfill certain roles in the context of Neutral Expert or Court of Arbitration proceedings when requested by either or both of the Parties.  

Disagreement over two hydroelectric power plants:

The disagreement between India and Pakistan concerns the design features of the Kishenganga (330 megawatts) and Ratle (850 megawatts) hydroelectric power plants. The former was inaugurated in 2018 while the latter, based on information available, is under construction. The World Bank is not financing either project. 

The two countries disagree over whether the technical design features of these two hydroelectric plants contravene the Treaty. The plants are located in India on tributaries 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 with some exceptions. Under the Treaty, India is permitted to construct hydroelectric power facilities on these rivers, subject to constraints including design specifications as provided for in Annexures to the Treaty

Different Treaty mechanisms sought by India and Pakistan:

In 2016, Pakistan asked the World Bank to facilitate the setting up of an ad hoc 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.

The Treaty does not empower the World Bank to decide whether one procedure should take precedence over the other. The World Bank sought to fulfill its procedural obligations with respect to both the Court of Arbitration and the Neutral Expert. At the same time, the World Bank actively encouraged both countries to agree amicably on a mechanism to address the issues.

Working with India and Pakistan:

On December 12, 2016, the then World Bank Group President Jim Yong Kim announced that the World Bank would pause before taking further steps in each of the two processes requested by the Parties. The announcement by the Bank was taken in order to provide both countries time to explore an amicable solution.

The World Bank then worked diligently with both countries to seek a mutually acceptable outcome. Multiple high-level meetings were convened, and a variety of proposals were discussed. However, five years of joint efforts did not yield a solution.  On March 31, 2022, the World Bank decided to resume the process of appointing a Neutral Expert and a Chairman for the Court of Arbitration.

On November 21, 2022, the World Bank held two separate hand-over meetings with the Neutral Expert and the Chairman of the Court of Arbitration. The meetings followed the appointments made pursuant to the Treaty by the World Bank in October 2022 of Mr. Michel Lino, as the Neutral Expert, and Prof. Sean Murphy, as Chairman of the Court of Arbitration.

The two mechanisms are independent. The Treaty vests the authority in both mechanisms to determine their own jurisdiction and competence as well as the power to decide on their rules of procedure. The World Bank remains engaged solely to reimburse the remuneration and expenses of the Neutral Expert from amounts that are paid by India and Pakistan and held in a trust by the Bank, in accordance with the Treaty. 

The World Bank remains committed to act in good faith and with complete impartiality and transparency while continuing to assist the countries and fulfilling its responsibilities under the Treaty.

The Neutral Expert Process:

The Neutral Expert determines the procedures under which to operate in line with the provisions of the Treaty, which requires that s/he shall afford each Party an adequate hearing and that in making his/her decision, s/he shall be governed by the provisions of the Treaty. The Neutral Expert shall, as soon as possible, render a decision on the question or questions referred to her/him. The decision is binding.

The duration of the Neutral Expert process cannot be predicted, as every case is different. The Neutral Expert process in the Baglihar case, which was decided in 2007, took about one and half years.

The Court of Arbitration Process:

Subject to the provisions of the Treaty, the Court of Arbitration determines its procedure, including the time within which each Party must present and conclude arguments. These decisions are taken by majority of those present and voting. Each arbitrator, including the Chairman, have one vote. In the event of a tie of votes, the Chairman has the casting vote.

The duration of the Court of Arbitration process cannot be predicted since every case is different. The Court of Arbitration process in the Kishenganga case, which was decided in 2013, took around 3 years.

Last Updated: Jun 21, 2023