Pakistan hires two law firms to fight Iranian lawsuit over pipeline delay

Pakistan has hired two U.S.-based law firms to represent it at the International Court of Arbitration as it fights Iran's attempt to force the neighboring country to honor its part of a gas pipeline deal or face a hefty fine.

Tehran and Islamabad signed a gas sales and purchase agreement (GSPA) in June 2009 for a cross-border pipeline that would deliver up to one billion cubic feet of gas per day from Iran's South Pars field to energy-starved Pakistan.

However, Pakistan has not started construction of the pipeline on its territory, primarily to avoid incurring US sanctions.

In August, Pakistani media reported that Tehran had served Islamabad with a final notice before turning to the Paris-based arbitration body.

The two law firms; Wilkie Farr and Gallagher and White & Case will represent Pakistan in arbitration, a senior source in Pakistan's attorney general's office confirmed to VOA on Wednesday. The official spoke on condition of anonymity because he was not authorized to speak to the media.

Islamabad reportedly faces a fine of up to $18 billion for delaying the project.

background

In 2011, Iran announced that it had completed construction of a 900-kilometer pipeline on its side of the border between the two countries.

Two years later, then-Iranian President Mahmoud Ahmadinejad and Pakistani President Asif Ali Zardari inaugurated the $7 billion project on Iranian territory.

In 2014, Pakistan requested a ten-year extension of the project to avoid paying a penalty of up to $1 million per day from 2015.

In March 2024, near the end of the extension period, Pakistan's outgoing interim government hastily approved construction of an 80-kilometer section of the pipeline from the border with Iran to the key southwestern port city of Gwadar in Balochistan province.

However, construction has yet to begin.

Last month, Pakistan's Petroleum Minister Musadik Malik told parliament that international sanctions were preventing the cross-border pipeline from proceeding.

“This is an extremely complicated matter and involves international sanctions,” the minister said.

He dismissed reports that the country could face an $18 billion fine, but did not give a figure.

Hours before the minister's remarks, US State Department spokesman Matthew Miller reiterated Washington's warning against doing business with Tehran.

“We will continue to enforce our sanctions against Iran. We also advise anyone considering a business deal with Iran to be aware of the possible implications,” the spokesman said at a regular news conference.

Iran is under US sanctions because of its nuclear and missile programs.

Pakistan has at times signaled that it will defy U.S. warnings, but appears not to have done so operationally or publicly.

Although Pakistan can build a pipeline within its border, it needs sanctions relief from Washington to buy gas from Iran. Islamabad did not receive the waiver.