The Kosi High Dam study agreement, signed with India during the first official visit to India by our then Prime Minister, G.P. Koirala, without prior consultation in Nepal, had created great confusion. It took several years to convince India of the Nepalese perspective of the Kosi High Dam Project, including the navigation channel through North Bihar, and the implementation of the Sun-Kosi Dam project in front of the Kosi Dam project, as these two projects would be mutually exclusive if the Kosi Dam project were implemented first. 17. ARBITRATION. – In the event of questions, disagreements or objections which are in any way related to this Agreement, to the importance or functioning of a part thereof or to the rights, obligations or commitments of one of the Parties, unless they are decisions on the matter, which have been provided for differently until now, each of these matters shall be submitted to conciliation, one by the Government and to appoint the other by the Union, whose decision is final and binding, provided that the two arbitrators, in the event of disagreement, refer the case to an arbitrator appointed jointly by the two arbitrators before referring the matter to the request for a preliminary ruling. (ii) The Government shall be entitled to the payment by the Union of royalties for stone, gravel and lest, originating in the territory of Nepal and used for the future construction and maintenance of the dam and other related works, at rates to be settled below by agreement. Some aspects of the 1954 agreement caused tensions between India and Nepal, the most important of which was the issue of compensation. India was responsible for the compensation of the country acquired in Nepal and for all damage caused by the construction of the dam. He was also responsible for the design, construction and operation of the project.

Nepal claimed that the agreement was distorted in terms of the benefits enjoyed by both countries. . . .