India and Iran drop foreign arbitration clause in Chabahar port issue

The new move to pursue arbitration under rules framed by the UN Commission on International Trade Law will help firm up longer-term agreement and boost investor confidence in Chabahar

August 25, 2023 12:12 pm | Updated 01:00 pm IST - NEW DELHI

A view of Iran’s Chabahar Port.

A view of Iran’s Chabahar Port. | Photo Credit: Special Arrangement

In a move aimed at boosting India-Iran commercial relations, Tehran and New Delhi have agreed to drop the clause for arbitration in foreign courts concerning the Chabahar port, which had been a hurdle for the framing of a long-term agreement around the facility, the Iran Daily has reported. This major development also coincided with the decision of the BRICS grouping to admit Iran along with five other countries.

“We have agreed that disputes at Chabahar will not go for commercial arbitration in foreign courts but take investment arbitration or any other mode of dispute settlement. This would prevent Iran from having to amend its Constitution,” an informed source told the Iran Daily in Tehran. Both sides have agreed to pursue arbitration under rules framed by the UN Commission on International Trade Law (UNCITRAL) which is favoured by India over other international trade arbitration mechanisms. India in the recent past had described UNCITRAL as the “core legal body under the U.N. system in the field of international trade law”.

The development is a major concession to the Ebrahim Raisi government which will now be able to sign a long-term agreement with India concerning the Chabahar port. The Chabahar issue had featured prominently during a telephonic conversation between Mr. Raisi and Prime Minister Narendra Modi on August 18. According to the Ministry of External Affairs, “The two leaders reiterated their commitment to further strengthen bilateral cooperation including to realise the full potential of Chabahar Port as a connectivity hub.” Mr. Raisi met Mr. Modi in Johannesburg on Thursday on the sidelines of the 15th BRICS summit when the two sides expressed commitment to boost ties.

A longer-term term agreement between India and Iran over Chabahar will ensure greater predictability and boost the confidence of stakeholders in the feasibility of the facility which is located in southeastern coast of Iran. The move is being interpreted as a step by India to stay ahead of China which has been showing interest in Iranian ports and infrastructure projects. Apart from India and Iran, the resolution of the contentious issue will also help sanctions-hit Russia which has been eager to reach the Indian Ocean region through the 13-nation International North South Transport Corridor which passes through Chabahar.

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