Pakistan was recently notified by Iran through a legal notice threatening to take Pakistan to arbitration in Paris for failing to uphold its part of the Iran-Pakistan Gas Sales Purchase Agreement, 2009. This Agreement obligated to construct its portion of a cross-border natural gas pipeline.[1] The Agreement, governed by French law, designates the Paris-based Arbitration Court as the forum for resolving disputes between the two countries. Notably, while Iran completed its 684-mile section of the pipeline in 2012, Pakistan has yet to acquire land for its 485-miles segment.[2] Pakistan’s primary concern is the risk of US sanctions, but it also faces potential arbitral penalty in case it fails to abide by its side of the bargain.[3]
In pertinent to remind ourselves that the US has had strained relations with Iran for decades, leading to debilitating sanctions on the country. The US has consistently threatened to sanction any third-state attempting to establish or maintain economic or trade relations with Iran. However, some states aligned with Washington have managed to secure waivers, allowing them to engage in business with Tehran.
Pakistan, given its economic vulnerability and chronic dependence on foreign sources of financing, such as the IMF, cannot afford to jeopardize its funding channels. With US-Iran relations remaining tense, regional instability in the Middle East and Iran’s alleged role in the Gaza conflict, it is highly unlikely that Pakistan would be able to secure a waiver from US sanctions.
Despite these challenges, proponents of the pipeline argue that the project would bring a sustainable energy supply for Pakistan, a country facing severe energy shortages. Projections indicate Pakistan will exhaust its proven gas reserves within 12 years, while the pipeline could supply an estimated 750 million to 1 billion cubic feet of natural gas per day.
Given this backdrop, it is imperative to assess the threat of US sanctions against Pakistan under international law. This analysis examines the legality of third-party sanctions, the legitimacy of US sanctions on Iran and Pakistan, and Pakistan’s potential legal arguments regarding these sanctions and its obligations under the Agreement with Iran.
Legality of Sanctions under International Law
The United Nations (UN) Security Council (SC) is empowered under Article 39 of the UN Charter to determine the existence of any “threat to the peace, breach of the peace, or act of aggression” and make “recommendations, or decide what measures shall be taken in accordance with Articles 41 and 42, to maintain or restore international peace and security.”[4]
Under Article 41, the SC may decide to adopt measures not involving the use of armed force to give effect to its decisions, and it may call upon the Members of the UN to apply such measures. The said measures may include “complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations.” This clearly indicates the SC’s power to impose international sanctions to preserve international peace and security, including targeted sanctions on individuals deemed terror threats.
However, international law provides limited clarity on unilateral sanctions imposed by individual states against other states or entities including international organizations, groups, or individuals. The International Law Commission (ILC) has instead focused on “retorsions” and “countermeasures”.[5] Retorsions are unfriendly but lawful measures taken against another state, such as severing diplomatic ties. They refer to “discourtesy or unfriendliness vis à vis another state,” but are consistent with the international obligations of states exercising the same. Although retorsions are legal, they may sometimes carry punitive elements and may not necessarily be reversibile.[6] The challenge lies in determining whether the relevant “unfriendly measure” would amount to a breach of international obligations of the acting state.[7] Reference in this regard will have to be made to the applicable treaty and international customary law.
By contrast, measures adopted by the acting state amounting to an internationally wrongful act may be classified as “countermeasures.” Countermeasures involve acts that would otherwise violate international law but are justified as responses to an earlier wrongful act by another state. Under Article 22 of the ILC Draft Articles of Responsibility of States for Internationally Wrongful Act (ARSIWA) 2001, a state will not be held responsible for not conforming with an international obligation towards other state “if and to the extent that the act constitutes a countermeasure.”[8] The International Court of Justice (ICJ) in the Gabcikovo-Nagymaros Project judgment affirmed that the countermeasures must justify an otherwise unlawful conduct “taken in response to a previous international wrongful act of another State and… directed against that State…” subject to the conditions stipulated in ARSIWA.[9] Countermeasures are deemed as remnants of the 19th century doctrine of (peacetime) reprisals. Reprisals were defined in the Nauliala Arbitration decision as:
“…acts of self-help by the injured State, acts in retaliation for acts contrary to international law on the part of the offending State, which have remained unredressed after a demand for amends.”[10]
Sanctions can also be classified as primary and secondary. Primary sanctions “…prohibit citizens and companies of the sanctioning country from engaging in certain activities with their counterparts from the sanctioned country.” For example, upon Russia’s annexation of Crimea, the US government prohibited new investment by US persons .[11] Secondary sanctions seek to pressurize third party states to completely stop or limit diplomatic or economic activity with the sanctioned country by threatening the third party state with adverse consequences related to access to essential goods and services, trade embargo, access to financial markets, or diplomatic and economic isolation.[12]
This article focuses on the legality of secondary US sanctions in the context of Pakistan’s decision to proceed with the gas pipeline project with Iran.
Legality of US Secondary Sanctions in terms of Pakistan
Sovereignty and Non Intervention
US secondary sanctions violate the principle of state sovereignty, as articulated in UN General Assembly Resolution 2131 (XX):
“No State has the right to intervene, directly or indirectly, for any reason whatever, in the internal or external affairs of any State. Consequently, armed intervention and all other forms of interference attempted threats against the personality of the State or against its political, economic and cultural elements, are condemned.”[13]
The principle of non-intervention is further emphasized as a corollary of sovereign equality of states. The UN General Assembly Resolution 2625 (XXV) recognizes the duty of states to not intervene in matters within the domestic jurisdiction of any state.[14] The ICJ in the Nicaragua judgment recognised the principle of ‘non-intervention’ as customary international law. The court indicated that the principle of non-intervention involved “the right of every sovereign State to conduct its affairs without outside interference.”[15] As such, any sanction or threat of sanction that would dictate or coerce a state’s foreign policy, as of Pakistan in relation to the gas pipeline agreement, would violate the customary principle of non-intervention.[16]
Sanctions as Countermeasures
If secondary sanctions are classified as countermeasures, they must be regulated under ARSIWA. Article 49 of ARSIWA limits countermeasures to acts aimed at inducing compliance with obligations owed to the injured state. It limits countermeasures to non-performance, for the time being, of international obligations of the state taking measures towards the responsible state. Additionally, countermeasures are required to be taken in a way that permits resumption of performance of the obligation in question.[17] Countermeasures must also be proportional to the injury and directed solely at the state responsible for the wrongful act.
Accordingly, the US cannot justify sanctions against Pakistan as countermeasures because Pakistan has not committed any wrongful act against the US. Threatening Pakistan with sanctions for a lawful agreement with Iran contravenes Article 49 (2) which limits countermeasures to ‘non-performance’ of ‘international obligations’ by the responsible state. As such, Pakistan cannot be held responsible for allegedly unlawful acts committed by another state.
Furthermore, countermeasures are required to be “commensurate with the injury suffered, taking into account the gravity of the internationally wrongful act and the rights in question” under Article 51. Therefore, countermeasures must be based on the principle of proportionality. The Air Service Agreement arbitration held that, “…all counter-measures must, in the first instance, have some degree of equivalence with the alleged breach; this is a well-known rule…”[18] The ICJ in Gabcikovo-Nagumaros (para 85) affirmed that countermeasures must be “commensurate with the injury suffered taking account of the rights in question.”[19] Proportionality is concerned with the relationship between the internationally wrongful act and the countermeasure.
It is crucial to emphasise that Pakistan’s compliance with its international agreement with Iran and construction of the gas pipeline to address its energy crisis does not in any foreseeable manner constitute an internationally wrongful act against the US or cause an injury to the US in strictly legal terms. Therefore, any secondary sanctions or countermeasures would not be commensurate to the injury suffered.
Jurisdiction
Under customary international law regarding ‘jurisdiction’, states have legislative or ‘prescriptive jurisdiction’ through which they makes laws to regulate affairs within their territory or, sometimes, abroad. Prescriptive jurisdiction requires a clear ‘jurisdictional nexus’ involving a territorial link or nationality.[20]
In this regard, US lacks prescriptive jurisdiction over Pakistan’s pipeline project because it does not involve public or private US entities or territory. In case the US claims that it is protecting its essential interests under the protective principle of state jurisdiction, it still cannot force another country to advance US foreign policy agenda. Moreover, it is difficult to see how the gas pipeline would have a “direct and illicit” effect in the US. An international precedent for this reasoning is the 1982 Dutch court decision in Compagnie Europeenne des Petroles S.A. v. Sensor Nederland B.V. where the court refused to allow enforcement of US secondary sanctions against a Dutch subsidiary of a US company.[21]
Conclusion
Pakistan stands at a crossroads in the Iran-Pakistan gas pipeline project, as it faces arbitral action from Iran on one hand and the threat of US sanctions on the other. The foregoing analysis demonstrates that while the US may assert secondary sanctions against Pakistan to pursue its foreign policy objectives, it would likely violate the established principles of international law, including principles of sovereignty, non-intervention, countermeasure proportionality under ARSIWA, and state jurisdictional limits. Moreover, the pipeline does not constitute a wrongful act against the US or harm its interests as neither US territory nor nationals are involved. This renders any secondary sanctions against Pakistan disproportionate as well as beyond US jurisdiction under international law.
In light of Pakistan’s energy crisis, inflated fuel prices, and worsening foreign reserves, state authorities must diplomatically and legally contest any threat of sanctions on appropriate forums while pursuing solutions that prioritize national interests.
References
[1] Kugelman, M. (2024, September 04). Iran Puts Pakistan on Notice: Tehran wants Islamabad to hold up its end of the deal on a much-delayed gas pipeline—but it doesn’t seem likely. Retrieved from foreignpolicy.com: https://foreignpolicy.com/2024/09/04/iran-pakistan-pipeline-gas-arbitration-economy-sanctions/
[2] Ibid
[3] Ebrahim, Z. T. (2024, April 20). Analysis: To build or not to build — the Iran pipeline concundrum. Retrieved from dawn.com: https://www.dawn.com/news/1828518
[4] United Nations Charter (full text) 1945. (n.d.). Retrieved from un.org: https://www.un.org/en/about-us/un-charter/full-text
[5] Ruys, T. (2016). Sanctions, Retorsions and Countermeasures: Concepts and International Legal Framework. Research Handbook on UN sanctions and international law. p.5 and 11
[6] Ibid, p.5
[7] Ibid
[8] Draft articles on Responsibility of States for Internationally Wrongful Act. (2001). Retrieved from legal.un.org: https://legal.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf
[9] GabCikovo-Nagymaros Project (Hungary/Slovakia), Judgment, ICJ Reports 1997, p. 7 (p.9)
[10] Naulilaa Incident Arbitration (Portugal v. Germany), (1928) 2 R.I.A.A. 1012
[11] Moehr, O. (2018, February 06). Secondary Sanctions: A First Glance. Retrieved from atlanticcouncil.org: https://www.atlanticcouncil.org/blogs/econographics/ole-moehr-3/ ; Sanctions Programs and Country Information. (n.d.). Retrieved from ofac.treasury.gov: https://ofac.treasury.gov/sanctions-programs-and-country-information
[12] Ibid
[13] General Assembly Resolution 2131 (XX) Of 21 December 1965 Declaration on the Inadmissibility of Intervention in the Domestic Affairs of States and the Protection of their Independence and Sovereignty
[14] General Assembly Resolution 2625 (XXV) Declaration on Principles of International Law concerning Friendly Relations and Co-operation among States in accordance with the Charter of the United Nation
[15] Militarv and Puramilitary Activities in und aguinst Nicaragua (Nicaragua v. United States of America). Merits, Judgment. I.C.J. Reports 1986, p. 14. (Para.202)
[16] Gehani, B. (2023, August 27). Extraterritorial unilateral sanctions, third states and collateral damage. Retrieved from rsilpak.org: https://rsilpak.org/2023/extraterritorial-unilateral-sanctions-third-states-and-collateral-damage/;
[17] Noor Fatima Iftikhar, M. R. (2022, April 06). Charting Sanctions: Legality, Efficacy and Impact. Retrieved from rsilpak.org: https://rsilpak.org/2022/charting-sanctions-legality-efficacy-and-impact/
[18] Air Service Agreement of 27 March 1946 between the United States of America and France. (1978, December 09). Retrieved from jusmundi.com: https://jusmundi.com/en/document/decision/en-air-service-agreement-of-27-march-1946-between-the-united-states-of-america-and-france-decision-saturday-9th-december-1978. (para.83)
[19] GabCikovo-Nagymaros Project (Hungary/Slovakia), Judgment, ICJ Reports 1997, p. 7 (para.85)
[20] Hernández, G. (2022). International Law. Oxford Universityh Press.(p.196)
[21] Compagnie Europeenne des Petroles S.A. v. Sensor Nederland B.V. case brief. (1982). Retrieved from lawschoolcasebriefs.net: https://www.lawschoolcasebriefs.net/2012/01/compagnie-europeenne-des-petroles-sa-v.html
The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any other organization with which he might be associated.
