Pakistan Enlists U.S. Law Firms to Contest Iran’s Gas Pipeline Arbitration Claim

Pakistan has engaged two U.S.-based law firms to represent it at the International Court of Arbitration (ICA) as it contests Iran’s demand to enforce their bilateral gas pipeline agreement or pay a substantial penalty. 

The two firms will help Pakistan argue against Iran’s claim, focusing on the context surrounding the project’s delays, especially given Pakistan's concerns about international sanctions.

The gas pipeline deal between Pakistan and Iran, formally known as the Gas Sales and Purchase Agreement (GSPA), was signed in June 2009. This project was set to support Pakistan’s energy sector by supplying up to one billion cubic feet of gas per day from Iran’s South Pars Field, one of the largest gas fields in the world. The energy shortage in Pakistan has been a significant hurdle to economic growth and stability, making the promise of Iranian gas an appealing solution to the country’s power supply needs.

Under the agreement, Iran constructed its part of the pipeline infrastructure to the Pakistani border. However, Pakistan has yet to begin construction on its side of the project, citing the need to comply with U.S. sanctions imposed on Iran. These sanctions have discouraged various countries, including Pakistan, from engaging in energy-related transactions with Iran, as such actions could invite secondary sanctions from the United States.

Facing Iran’s push to either see the project through or impose a penalty on Pakistan, Islamabad’s legal representation will likely highlight these complex geopolitical factors at the ICA. Both countries are keen to avoid exacerbating tensions, as a favorable outcome in the arbitration process could set a precedent for other countries navigating similar U.S. sanctions-related issues in energy cooperation.

The case now moves to international arbitration, where Pakistan hopes to defend its decision while seeking to avoid the financial repercussions of an agreement that has proven challenging to fulfill under the current global sanctions framework.

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