Iran seeks inclusion of force majeure clause in IPI project

Iran has sought an amendment to the gas sale agreement for the IPI pipeline project involving India and Pakistan in an apparent bid to ensure legal cover for itself in the event of disruption of fuel supplies due to any armed conflict it may face.

Iran has informed Pakistan that the term "act of war" under "excusing event" should be replaced by a suitable substitute like "situation of armed conflicts or war" in the draft agreement for the project, Pakistani official sources told the Daily Times newspaper.

The move is apparently to seek a force majeure clause in case the seller country, Iran, is faced with an armed conflict or a war.

Legal experts have recommended that Pakistan could consider this amendment as it covers armed conflicts between states rather than groups within a state and it has a material impact on gas supplies or off takes by the seller or the buyer.

A meeting of a sub-committee of Pakistan's Economic Coordination Committee on gas import projects agreed to this proposal and recommended that the government should negotiate with Iran on the basis of suggestions made by legal experts.

After agreeing on a gas price formula on October 23, 2007, Pakistan and Iran had agreed in principle to sign the gas sales and purchase agreement for the USD 7.4 billion project in the next two months.

However, many amendments, proposed by Iran and India, have delayed the signing of the agreement for an indefinite period.