As India’s conditional U.S. sanctions waiver for the Chabahar Port project expired on April 26, 2026, a transfer structure was being finalized that embeds a reversion right whose enforceability has not been examined through an investment treaty lens. It should be, and not only because of Chabahar.<\/p>\n
India Ports Global Limited (IPGL), the Indian state entity operating the Shahid Beheshti Terminal under a 10-year contract with Iran’s Ports and Maritime Organization, is transferring its operational stake to an Iranian entity. This is not a permanent exit. It is a temporary handover pending the easing of U.S. sanctions. The transfer agreement reportedly includes a legal guarantee that operational rights will revert to India once sanctions conditions permit.<\/p>\n
The terms that will determine the outcome of any eventual dispute: how “sanctions easing” is defined as the reversion trigger, the governing law of the transfer agreement, the enforcement mechanism available in Iranian jurisdiction, the seat of any future arbitration. These are being fixed in documents being negotiated right now, without investment treaty counsel present.<\/p>\n
Commentary on sanctions and investment arbitration has grown significantly in the wake of the Russia\u2013Ukraine conflict. The EU<\/span>’s 18th sanctions package of July 2025 restricted the recognition and enforcement of ISDS<\/span> claims<\/a> by Russian and Belarusian parties. This was in direct response to the proliferation of investment treaty claims arising from sanctions-disrupted commercial arrangements, including the USD 12 billion claim filed by Belaruskali (Belarus’s state-owned potash producer) against Lithuania at the PCA<\/span> under the 1999 Belarus-Lithuania BIT<\/span>, after Lithuanian Railways terminated a decade-long fertilizer transit contract to Klaip\u0117da Port following EU and U.S. sanctions.[1]<\/sup><\/a><\/p>\n That commentary, however, addresses a structurally distinct scenario: a foreign investor seeking redress against the state that seized or blocked its exit. Chabahar presents the inverse. The investor exiting is not the target of sanctions. It is a non-sanctioned party being forced out by a third state’s measures, creating a conditional right of return whose exercisability depends on future host state sovereign cooperation. The closest adjacent strands do not reach this configuration. Scholarship on secondary sanctions and FET<\/span> obligations examines whether a host state must protect a non-sanctioned investor against third-state pressure. But the investor in that analysis remains present and seeks protection, not exit.[2]<\/sup><\/a><\/p>\n The cases most discussed in sanctions-and-arbitration commentary are Qatar Airways v UAE, Bahrain, Saudi Arabia and Egypt<\/a><\/em>, Dayyani v South Korea<\/a><\/em>, and Belaruskali v Lithuania<\/a><\/em>, which involve sanctioned or blockaded parties seeking redress for host state implementing measures. The literature on exit mechanisms and transfer rights clauses addresses investor-elected exits, not exits compelled by extraterritorial pressure with a structured re-entry condition attached (e.g., on exit mechanisms and transfer rights clauses in investment treaties generally, see UNCTAD<\/span> (2015)<\/a> and the treatment of transfer of funds provisions see Duggal & Alexandros-C\u0103t\u0103lin (n.d.)<\/a>. And that literature typically assumes an umbrella clause elevating contract claims to treaty claims\u2014a provision the 2024 India-UAE BIT does not contain (its investment protection obligations are limited to denial of justice, due process breaches, targeted discrimination, and manifestly abusive treatment), see Norton Rose Fulbright (2025)<\/a>.<\/p>\n The gap is specific. It is not that triangular configurations involving third-state measures are unexamined. It is that the particular triangle here is as follows: non-sanctioned investor exit, reversion right as the mechanism, host state sovereign cooperation as the condition of re-entry, and a BIT architecture narrower than those examined in adjacent scholarship. This specific gap has not been addressed as a discrete analytical category. Chabahar is the first sufficiently documented instance of this structure.<\/p>\n India and Iran are parties to a BIT, signed in 1997 and in force since 2002<\/a>, containing standard protections: FET, meaning an obligation not to treat the investment arbitrarily or discriminatorily, protection against expropriation, and full protection and security.<\/p>\n There is a specific feature of the Chabahar arrangements that makes the BIT the only enforceable legal protection available. The May 2024 long-term contract between IPGL and Iran’s Ports and Maritime Organization notably excised its arbitration clause<\/a>. The clause was described at the time as a major hurdle in the negotiations. Following that, the substitution agreed on was political-level consultation as the dispute-resolution mechanism. The transfer structure now being finalized is, therefore, being built on a contractual foundation that deliberately removed its own enforcement tool. The India\u2013Iran BIT, which neither party has terminated, is the remaining layer.<\/p>\n If Iranian sovereign action\u2014regulatory, administrative, or political\u2014frustrates IPGL’s exercise of the reversion right at the point of attempted re-entry, the conditions for a treaty claim are structurally present. IPGL made an investment. It was contractually promised a right of reversion. That right’s exercisability depends on Iranian sovereign cooperation. If that cooperation is withheld, the treaty’s FET and expropriation provisions become directly relevant.<\/p>\n Two jurisdictional questions would arise before any tribunal could reach the merits\u2014first, whether the reversion right itself constitutes a protected investment under the BIT. The India\u2013Iran BIT 1997<\/a> uses a broad asset-based definition<\/a> (the standard formulation of that period) covering contractual rights and claims to performance having financial value. A reversion right embedded in a long-term port concession arrangement, representing IPGL’s future operating interest, would likely satisfy that definition. The second question is whether the temporary transfer interrupts IPGL’s qualifying interest. On the most defensible reading, it should not: the transfer is time-limited, not a permanent divestment, and IPGL retains the reversion right throughout. Whether a tribunal would accept that framing would depend on the precise contractual architecture of the transfer as finally documented.<\/p>\n In CC\/Devas (Mauritius) Ltd. v. Republic of India<\/a><\/em>, the tribunal found India liable for expropriation and breach of fair and equitable treatment after the cancellation of satellite spectrum licences. Its reasoning was that sovereign action cannot deprive investors of the commercial value of legitimately acquired rights without compensation.<\/p>\n Applicability to Chabahar: if Iranian sovereign action prevents IPGL from exercising a contractually promised reversion right, this reasoning provides the doctrinal template for a treaty claim under the India-Iran BIT.<\/p>\n BITs were built for a bilateral world. Their design assumes that when an investment is disrupted, the disruption comes from the host state. It wasn\u2019t imagined then that a third state’s measures can force a non-sanctioned investor to restructure its presence and create contingent rights whose exercisability depends on future host state cooperation. That configuration did not exist as a pattern when most BITs were negotiated. It is emerging now.<\/p>\n For policy-makers and states parties to BITs, this points to a gap not only in treaty design but in how treaty protections reach the commercial moment when they are most needed. The arrangements that will eventually generate disputes are being constructed at the commercial negotiation stage. Investment treaty law arrives, if at all, after the documents are signed. By then, the key terms have already determined whether a future claim succeeds or fails. Guidance that helps commercial teams identify when a transaction structure may engage BIT protections would address a gap that existing treaty text alone cannot close.<\/p>\n For practising lawyers, the alert is specific. Disputes lawyers advising on cross-border enforcement need to examine whether reversion right structures in sanctions-driven exits carry BIT protection before a sovereign frustration event occurs, not after. Transaction lawyers need to flag, at the drafting stage, whether the reversion trigger is defined with sufficient precision to sustain a treaty claim.<\/p>\n The broader policy question is harder. If investment treaty protection extends to reversion rights structured under sanctions pressure, it creates an incentive for investors to embed conditional re-entry mechanisms in exits that might otherwise be clean. It can be done using the treaty system as insurance against host state cooperation failing to materialize. Whether that outcome reflects an appropriate extension of investment protection, or an unintended expansion of treaty coverage into territory that states did not contemplate when they signed first-generation BITs, is a question the reform debate around the ISDS system has not yet squarely addressed. Chabahar may force it to.<\/p>\n The India\u2013Iran BIT of 1997 is the under-examined instrument in the Chabahar analysis. The scenario it may be called upon to address is as follows: a reversion right created by a sanctions-driven exit structure, built on a contract that removed its own arbitration clause, subsequently frustrated by host state sovereign action. That scenario sits at a structural gap in the existing investment treaty literature. The legal terms being set in these commercial arrangements now will determine what the disputes look like when they file.<\/p>\n Prachi Shrivastava<\/strong> is a lawyer and founding advisor at Lawfinity Solutions, which engages in legal market research tracking cross-border dispute formation patterns in India’s legal ecosystem.<\/p>\n [1]<\/sup><\/a> Council Regulation (EU) 2025\/1494 of July 2025. On the Belarus potash claim, see Hanna, T. (2025). Targeting Russia and Belarus through investment arbitration: The EU’s 18th sanctions package<\/em>. Opinio Juris. https:\/\/opiniojuris.org\/2025\/08\/27\/targeting-russia-and-belarus-through-investment-arbitration-the-eus-18th-sanctions-package\/<\/a><\/p>\n [2]<\/sup><\/a> See generally Ruys, T. & Ryngaert, C. (2020). Secondary sanctions: A weapon out of control? The international legality of, and European responses to, US secondary sanctions. British Yearbook of International Law, 91<\/em>(1), https:\/\/doi.org\/10.1093\/bybil\/braa007<\/a>; and the analysis of FET obligations and secondary sanctions pressure in Cintrano, E. G. (n.d.). Economic sanctions and investment arbitration: Substantive, jurisdictional and enforcement issues<\/em>. Ur\u00eda Men\u00e9ndez. https:\/\/www.uria.com\/en\/publicaciones\/8500-economic-sanctions-and-investment-arbitration-substantive-jurisdictional-and-e<\/a><\/p>\nThe BIT Question<\/strong><\/h2>\n
The Precedent<\/strong><\/h2>\n
The Upstream Problem<\/strong><\/h2>\n
Conclusion<\/strong><\/h2>\n
\nAuthor<\/strong><\/h3>\n