In its analysis, the Court emphasized at the outset that its Partial Award, just as the Indus Waters Treaty itself, does not have any bearing on any territorial claims or rights of the Parties over Jammu and Kashmir. The Court’s findings pertain solely to the Parties’ rights and obligations with respect to the use of the waters of the Indus system of rivers, including with respect to the use of the waters of those portions of the rivers that flow through disputed territory.
THE FIRST DISPUTE
1. The Permissibility of Inter-Tributary Transfers under the Treaty In the First Dispute, the Court was called upon to determine whether India is permitted under the Treaty to deliver the waters of the Kishenganga/Neelum River into the Bonar Nallah in the course of the operation of the KHEP.
As an initial matter,
the Court observed that the Treaty expressly permits the transfer of water by India from one tributary of the Jhelum to another for the purpose of generating hydro-electric power, subject to certain conditions. The Court first found that this right is not circumscribed by the Treaty’s restriction of Indian uses on the Western Rivers (which include the Kishenganga/Neelum as a tributary of the Jhelum) to the drainage basin of those rivers. This restriction relates to where water may be used, and is not violated by the use outside of the drainage basin of electricity generated from the water. The Court then examined the Treaty provision requiring the Parties to maintain the natural channels of the rivers and its effect on inter-tributary transfers. The Court found that this obligation
involves maintaining the river channels’ physical capacity to carry water, and does not require maintaining the timing or volume of the flow in the river. Accordingly, this obligation does not limit India’s right to transfer water for the purpose of generating hydro-electricity.
Having established that India’s right to inter-tributary transfer is not prohibited by other provisions of the Treaty, the Court considered whether the KHEP meets the express conditions on such transfer.
The Court noted that for transfer to be permissible, the KHEP must (1) be a “Run-of-River Plant”; (2) be located on a tributary of the Jhelum; and (3) conform to Paragraph 15(iii) of the Treaty Annexure governing hydro-electric power generation. The Court observed that a “Run-of-River Plant” is a term of art defined by the Treaty and that the KHEP is a Run-of-River Plant within that definition. The Court further decided that on the facts of the case the KHEP should be regarded as located on the Kishenganga/Neelum notwithstanding that the KHEP’s power house is situated at a distance of 23 kilometres from that river.
The Court also found that, by releasing water into the Bonar Nallah after it has passed through the power house, the KHEP complies with the requirement that the “water released below the Plant” be delivered “into another Tributary.” Finally, the Court found that the
KHEP’s inter-tributary transfer is “necessary,” as required by the Treaty, for the generation of hydro-electric power, as power can be generated on the scale contemplated by India in this location only by using the 665 metre difference in elevation between the dam site on the Kishenganga/Neelum and the place where the water is released into the Bonar Nallah.
2 The Interpretation of the Treaty with Respect to “then existing Agricultural Use or hydro-electric use by Pakistan”
In addition to the requirements described above, the Court recognized that Paragraph 15(iii) requires that “then existing Agricultural Use or hydro-electric use by Pakistan” on the downstream reaches of the Kishenganga/Neelum not be adversely affected by the KHEP’s inter-tributary transfer. Pakistan argued that “then existing” uses are to be determined on an ongoing basis, whenever water is transferred from one tributary to another. India, in contrast, argued that such uses must be determined at a fixed point during the design of its hydro-electric project.
In seeking to establish when a “then existing” agricultural or hydro-electric use is to be determined, the Court was guided in the interpretation of the Treaty by Article 31(1) of the Vienna Convention on the Law of Treaties: “[a] treaty shall be interpreted in good faith and in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose.”
The Court first examined the text of Paragraph 15(iii), noting the provision’s focus on the operation of hydro-electric plants and the implication that the determination of “then existing” uses should take place on an ongoing basis throughout the operational life of a plant. The Court then considered the context of Paragraph 15(iii) and noted that the provision falls within a continuum of design, construction and operation.
The Court observed that the provisions of the Treaty must be interpreted in a mutually reinforcing fashion, as it would make little sense for the Treaty to permit a plant to be designed and built in a certain manner, but then to prohibit the operation of that plant in the very manner for which it was designed. Finally, the Court examined the object and purpose of the Treaty and found that the Treaty both gives Pakistan priority in the use of the waters of the Western Rivers (including the Kishenganga/Neelum) and India a right to generate hydro-electric power on the Western Rivers.
Turning to the application of the Treaty to the KHEP, the Court first considered the implications of the approaches advocated by the Parties. The Court observed that under the “ambulatory” approach advocated by Pakistan, a project’s design could be cleared for construction as being consistent with the design specifications of the Treaty, but then be prevented from operating by new uses by Pakistan.
In the Court’s view, the uncertainty created by this approach, and the potential for wastage, would have a chilling effect on the undertaking of any hydro-electric projects by India on the Western Rivers. With respect to the approach advocated by India,
under which Pakistan’s uses would be determined at the moment that India communicates a “firm intention” to proceed with a project, the Court observed that identifying a critical date will often be difficult, but that it may be possible to identify a “critical period” in which design, tenders, financing, public consultations, environmental assessments, governmental approvals and construction come together to indicate a firm intention to proceed with a project. Nevertheless, the Court noted that a solely “critical period” approach could result in a “race” in which each Party would seek to create uses that would freeze out future uses by the other, an outcome the Court rejected.
Having considered the approaches advocated by the Parties, the Court concluded that neither the ambulatory nor the critical period approach were fully satisfactory and that the proper interpretation of the Treaty combines elements of both. The Court considered that it must first establish for each of the KHEP and the NJHEP the critical period in which the Parties not only planned the projects, but took concrete steps toward their realization.
Reviewing the evidence provided by the Parties, the Court concluded that the KHEP reached this period in 2004–2006. In contrast, the Court found that Pakistan demonstrated a comparable commitment to the NJHEP in 2007 and 2008. Given this timing,
the Court decided that India’s right to divert the waters of the Kishenganga/Neelum by the KHEP is protected by the Treaty.
However, the Court also decided that India’s right to divert the Kishenganga/Neelum is not absolute—it is subject to the constraints specified in the Treaty and, in addition, by the relevant principles of customary international law. Paragraph 15(iii) gives rise to India’s right to construct and operate hydro-electric projects involving inter-tributary transfers, but also obliges India to operate those projects in such a way as to avoid adversely affecting Pakistan’s then existing agricultural and hydro-electric uses. Both Parties’ entitlements under the Treaty must be made effective so far as possible. The Court therefore found that
Pakistan retains the right to receive a minimum flow of water 
from India in the Kishenganga/Neelum riverbed at all times. The Court noted that this right also stems from customary international environmental law, and that it considered that the Treaty must be applied in light of contemporary international environmental law principles.
In this context, the Court recalled the commitment made by India’s Agent in the course of the hearing that India would ensure a minimum environmental flow downstream of the KHEP at all times.
3. The Court’s Request for Further Data
Having concluded that the Treaty requires the preservation of a minimum flow of water downstream of the KHEP, the Court determined that the data provided by the Parties are insufficient to allow it to decide the precise amount of flow to be preserved.
The Court therefore deferred its determination of the appropriate minimum flow to a Final Award, and requested the Parties to provide additional data concerning the impacts of a range of minimum flows at the KHEP dam on, (for India), (a) power generation at the KHEP; and (b) environmental concerns from the dam site at Gurez to the Line of Control; and, (for Pakistan), (a) power generation at the NJHEP; (b) agricultural uses of water downstream of the Line of Control to Nauseri; and (c) environmental concerns at and downstream of the Line of Control to Nauseri
on the issue.
