India and Iran have agreed not to resort to commercial foreign arbitration for settling disputes between users and operators at Chabahar Port. This decision is a significant step toward finalizing a long-term deal for the development of the strategic port.
The Ministry of Port and Shipping is expected to send a team to Iran in September to negotiate the rules of engagement and the mode of arbitration. This move is aimed at reaching an agreement that allows both countries to operate the port on a long-term basis.
Previously, negotiations for a long-term contract had been hindered by disagreements over the arbitration clause. Under Iran’s Constitution, referring disputes to foreign courts would require a constitutional amendment, which was seen as impractical and time-consuming. India and Iran have now agreed to pursue arbitration under rules established by the UN Commission on International Trade Law (UNCITRAL), a route that does not necessitate specific courts in certain jurisdictions.
Chabahar Port, situated in South-eastern Iran, holds strategic importance for India as it provides an unhindered sea route to India’s West coast and access to Central Asia. India had committed funds for the port’s development, and efforts to finalize a long-term agreement have gained momentum despite challenges posed by sanctions and regional geopolitics.
The positive development comes amid growing interest from China in investing in Iranian ports and coastal infrastructure. India’s focus on Chabahar Port aims to strengthen its strategic advantage in the region and enhance its connectivity to Central Asia, bypassing China’s Gwadar port in Pakistan.
The operation of Chabahar Port has been overseen by India Ports Global Limited (IPGL), and its operations have proven viable with increasing cargo traffic. The potential for further growth exists if the port is linked to the rail network, and India is also involved in the construction of the Chabahar-Zahedan railway line.
Overall, the agreement to avoid foreign commercial arbitration for Chabahar Port disputes is a significant step forward in solidifying India’s presence and strategic interests in the region.
