International Arbitration Comparative Guide

• Published date: 26 August 2020
• Subject Matter: Litigation, Mediation & Arbitration, Disclosure & Electronic Discovery & Privilege, Arbitration & Dispute Resolution, Court Procedure, Sovereign Immunity: Public Sector Government, Class Actions, Trials & Appeals & Compensation, Civil Law
• Law Firm: S.U.Khan Associates Corporate & Legal Consultants
• Author: Mr Saifullah Khan and Saeed Hasan Khan

1 Legal framework

1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime - for example, does it govern oral arbitration agreements?

The following laws govern arbitration in Pakistan:

• the Arbitration Act, 1940;
• the Arbitration (International Investment Disputes) Act, 2011; and
• the Recognition and Enforcement (Arbitration Agreement and Foreign Arbitral) Act, 2011.

The Arbitration Act is the prime statute relating to arbitration in Pakistan. The Arbitration (International Investment Disputes) Act was promulgated to implement the International Convention on the Settlement of Investment Disputes between States and Nationals of other States Act; while the Recognition and Enforcement Act was promulgated to implement the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

Section 2(a) of the Arbitration Act defines an 'arbitration agreement' as "a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not". Therefore, the act recognises only written agreements.

1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?

The Arbitration Act does not differentiate between domestic and international arbitration. The Recognition and Enforcement Act provides for the recognition and enforcement of arbitration agreements and foreign arbitral awards pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. It is primarily a procedural law governing the recognition and enforcement of foreign arbitral awards.

1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?

The Arbitration Act is not based on the UNCITRAL Model Law on International Commercial Arbitration.

1.4 Are all provisions of the legislation in your jurisdiction mandatory?

The following are the mandatory provisions under the Arbitration Act:

• the principles of natural justice - that is, the rule against bias and the right to a fair hearing (Article 10A of the Constitution of Pakistan);
• that an arbitration agreement be in writing (Section 2(a) of the Arbitration Act);
• that an arbitration agreement not be discharged, and the authority of an arbitrator not be revoked, by the death of any party. The arbitration agreement remains enforceable by or against the legal representative of the deceased (Section 6);
• the provisions pertaining to arbitration agreements to which an insolvent is a party (Section 7);
• the power of the court to appoint an arbitrator or umpire (Section 8);
• the provisions pertaining to the appointment of three or more arbitrators (Section 10);
• the power of the court to remove arbitrators or an umpire under certain circumstances (Section 11), and to replace the arbitrators with new arbitrators, including reducing the number of arbitrators from three to one during replacement (Section 12);
• that the award be signed and filed in the court with jurisdiction (Section 14);
• the power of the court to modify or correct the award (Section15);
• the power of the court to remit the award to the arbitrators or umpire for reconsideration of certain matters (Section 16);
• court pronouncement of judgment and decree in terms of the award (Section17);
• the provisions allowing an application seeking intervention of the court in enforcing the arbitration agreement (Section20);
• that the award set out reasons in sufficient detail to enable the court to consider any question of law arising out of the award (Section 26A);
• the power of the court to award interest (Section 29);
• the provision on jurisdiction of the court (Section 31);
• the provision relating to the stay of court proceedings where there is an arbitration agreement (Section 34);
• the provision pertaining to the applicability of the Limitation Act 1908 (Section 37);
• the provision pertaining to disputes as to the arbitrator's remuneration or costs (Section 38);
• the provision pertaining to appeals from orders of the court (Section 39);
• the power of the court to grant interim measures (Section 41); and
• the power of the court to issue summons to the parties and witnesses for appearance before the arbitrator (Section 43).

1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?

No.

1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?

Pakistan is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. It has made the following reservation: "Pakistan will apply the Convention only to recognition and enforcement of awards made in the territory of another contracting State."

1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?

Pakistan is a signatory to International Convention on the Settlement of Investment Disputes between States and Nationals of other States of the International Centre for Settlement of Investment Disputes.

2 Arbitrability and restrictions on arbitration

2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?

Under the Arbitration Act, all civil matters that can form the subject matter of a civil suit are arbitrable (Section 2(c)). This includes all commercial and business disputes, but does not include criminal matters.

Further, civil matters for which any law in force has given exclusive jurisdiction to a special court or tribunal, or that involve a public interest element, are not arbitrable. Accordingly, the following matters are considered not to be arbitrable:

• certain rent matters over which only rent restriction tribunals or rent controllers exercise exclusive jurisdiction (2018 YLR 29);
• financial disputes arising from the Financial Institutions (Recovery of Finances) Ordinance 2001, over which only banking courts exercise exclusive jurisdiction (2016 CLD 920); and
• the winding-up of a company and other company matters over which only the high court, as a company court, has exclusive jurisdiction (PLD 1997 Lahore 443).

Based on the above principles, the following matters are also not arbitrable:

• family matters, including matrimonial matters and those involving the guardianship of a minor;
• matters involving the guardianship of disabled persons and their property, and other matters pertaining to mental health;
• succession matters;
• insolvency;
• matters relating to competition law, over which the Competition Commission of Pakistan has exclusive jurisdiction; and
• matters relating to IP rights (trademarks, copyright, patents and design rights), over which the IP tribunals have exclusive jurisdiction.

2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?

The parties are free to agree on the place of arbitration.

3 Arbitration agreement

3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?

The term 'arbitration agreement' under Section 2(a) of the Arbitration Act means a written agreement to submit existing or future differences, to arbitration, whether an arbitrator is named therein or not. It is an essential ingredient of a valid submission to arbitration that the agreement to arbitrate be contained in a written document agreed by the parties or by their agent, or by agents duly authorised on their behalf (PLD 2003 Supreme Court 808; 1989 CLC 1666 Peshawar).

3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?

It is well established that an arbitration agreement is severable from the agreement of which it forms a part. The doctrine of separating an arbitration clause from the main agreement is well recognised in Pakistani jurisprudence. According to this jurisprudence, the arbitration clause in an agreement is an autonomous clause and survives even if the main contract is declared invalid or void ab initio. In Lakhra Power Generation Company Limited v Karadeniz Powership Kaya Bey (2014 CLD 337 Karachi), the main contract for rental power was declared void ab initio by the Supreme Court. Despite this, the high court held that the arbitration agreement was distinct and separable from the main contract and therefore survived the latter being declared void ab...