A Study Of The Arbitration Law Regime In Pakistan

1. ABSTRACT

   The arbitration law pertaining to domestic arbitration in Pakistan is now very well settled with consistent sanction from the superior courts in the last six decades. Following the ratification of the New York Convention in 2006, international arbitration has been codified in a way that not only provides certainty to the process but also enables international investors to find themselves in a familiar arbitrational jurisdiction. The article also briefly discusses legislative developments with respect to the legal framework of commercial arbitration and canvasses some of the landmark cases reported in various law journals in Pakistan.

2. ABBREVIATIONS

   ADR: Alternative dispute resolution AIR: All India Reporter CLC: Civil Law Cases CLD: Corporate Law Decisions MLD: Monthly Law Digest NLR: National Law Reporter PLD: All Pakistan Legal Decisions SCMR: Supreme Court Monthly Review YLR: Yearly Law Reporter

3. INTRODUCTION

   Alternative dispute resolution ("ADR") has gone through its lows and highs in the legal history of Pakistan. By far the most common amongst the various alternative dispute resolution mechanisms in Pakistan is arbitration. While there are different reasons for choosing arbitration over the other ADR mechanisms, such as mediation or conciliation, the striking reason for such choice appears to be the applicable laws of Pakistan. The laws of Pakistan are by now very well settled in respect of arbitration, including aspects such as the conduct of arbitration, appointment of arbitrators, powers of arbitrators, contents of an award and enforcement of such awards. Therefore, the clarity of the procedures enables the parties to confidently choose arbitration in appropriate cases. Whereas mediation and conciliation do find mention in Pakistan laws, as an option to be used by parties to disputes, lack of detailed procedures (prior to, during or after the chosen ADR option) is the primary obstacle in attracting parties to consider these two mechanisms. As for negotiation, another ADR mechanism, it does not really find mention in the laws altogether.

4. CURRENT LEGAL FRAMEWORK FOR ARBITRATION

   4.1 There are currently two main pieces of legislation dealing with arbitration in Pakistan: The Arbitration Act, 1940 ("Arbitration Act") and the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 ("Foreign Awards Act").

   4.2 Although the Arbitration Act is a very old act begging for modernity and alignment with other fast paced international jurisdictions, it still serves as a clear and well settled piece of legislation with consistent chain of precedents backing the interpretational aspects shouldering the changing times particularly in trade and commercial matters. The Act provides for arbitration with the intervention of the court and arbitration without the intervention of the court. The main difference between these two types of arbitration pertains to whether or not both parties to a dispute are willing to resort to arbitration. Arbitration without the intervention of the court takes place where both parties are willing to resort to arbitration without seeking the court to appoint arbitrator(s). Arbitration with the intervention of the court occurs where one party is willing and the other is not so as to enable the willing party to ensure adherence to the pre-agreed arbitration by the unwilling party.

   4.3 The Foreign Awards Act is simply a ratification of the New York Convention, 1958 providing that foreign judgments and awards by or between the nationals of contracting states are to be enforced without questioning the validity of the same except on the grounds explicitly provided for in the Convention.

5. THE ARBITRATION ACT

   5.1 The foundation of arbitration under the Arbitration Act is a pre-agreed arbitration agreement. An arbitration agreement is defined as "a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not". As such, a determinative written agreement is required to refer the "present or future" differences to arbitration. On bare perusal of the Arbitration Act, and in conformance with the interpretations available from case law on the subject matter, it appears that the following contentions are to be met before invoking the arbitration clause by any party to an agreement:

   5.1.1 there must be an agreement containing a clear arbitration clause between the parties, free of uncertainty;

   5.1.2 legal proceedings must have been commenced by one of the parties to the agreement against the other person who is also a party to the agreement;

   5.1.3 legal proceedings are in respect of a matter agreed to be referred to arbitration;

   5.1.4 the party to such legal proceedings, who is also a party to the arbitration agreement, before filing the written statement or taking any other step in the proceedings, has an option to seek stay of the legal proceedings;

   5.1.5 the petitioner was ready and willing to do all things necessary for the proper conduct of the arbitration; and

   5.1.6 the Court, if satisfied that there is no sufficient reason why the matter...