India and Iran Drop Arbitration Clause for Chabahar Port

• 28 Aug 2023

Recently, in a move to enhance India-Iran trade ties, both sides decided to eliminate the arbitration clause for foreign courts pertaining to the Chabahar port.

Key Points

• Bypassing Commercial Arbitration: To expedite matters at the Chabahar port, Iran and India have chosen to bypass commercial arbitration in foreign courts.Instead, they will engage in investment arbitration or other alternative modes of dispute resolution.
• Investment Arbitration and Alternative Dispute Resolution: This approach prevents Iran from the need to modify its constitution.
• Both parties have opted for arbitration following the guidelines set forth by the UN Commission on International Trade Law (UNCITRAL), a preference India holds over alternative international trade arbitration mechanisms.
• UNCITRAL's Guiding Role in Arbitration: A protracted agreement between India and Iran regarding Chabahar holds the promise of heightened predictability, instilling confidence among stakeholders regarding the port's viability situated on Iran's southeastern coast.
• China's Growing Interest in Iranian Ports: This move is being interpreted as India's strategic maneuver to stay ahead of China, which has exhibited increasing interest in Iranian ports and infrastructure ventures.
• Beneficial Impact on Russia's Sanctions: The resolution of the Chabahar issue not only benefits India and Iran but also offers relief to Russia, currently facing sanctions.
• Russia's Access to Indian Ocean via Transport Corridor: Russia seeks access to the Indian Ocean region through the International North South Transport Corridor, a trade route spanning 13 countries and transiting through Chabahar.
• Positive Implications for Regional Dynamics: This joint decision not only advance the cooperation between India and Iran but also positively impacts broader regional dynamics.