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Law of Arbitration in Pakistan

The document discusses the law of arbitration in Pakistan. It outlines the main pieces of arbitration legislation in Pakistan and summarizes the key features and provisions of the Arbitration Act of 1940, including the different types of arbitration, arbitration agreements, appointment of arbitrators, court intervention, and waiving the right to arbitrate. The document also discusses policies around referring disputes to arbitration when an arbitration agreement exists.
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0% found this document useful (0 votes)
43 views

Law of Arbitration in Pakistan

The document discusses the law of arbitration in Pakistan. It outlines the main pieces of arbitration legislation in Pakistan and summarizes the key features and provisions of the Arbitration Act of 1940, including the different types of arbitration, arbitration agreements, appointment of arbitrators, court intervention, and waiving the right to arbitrate. The document also discusses policies around referring disputes to arbitration when an arbitration agreement exists.
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Law of Arbitration in Pakistan

Law of
Arbitration in
Pakistan

[A Research Article]

Zafar Iqbal Kalanauri


Mediator & Advocate Supreme Court of Pakistan
Law of Arbitration in Pakistani

There are currently two main pieces of legislation dealing with arbitration in Pakistan: The
Arbitration Act, 19401 and the Recognition and Enforcement (Arbitration Agreements and Foreign
Arbitral Awards) Act, 20112. Although the Arbitration Act, 1940 (a pre-partition enactment, which
still continues in force) 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 judicial 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. 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.

The Statute

The law of arbitration in Pakistan is contained in the Arbitration Act, 1940. Its main features are
summarized as under:
The Act provides for three classes of arbitration:–
(a) arbitration without court intervention (Chapter II, sections 3-19);
(b) arbitration where no suit is pending, (but through court) (Chapter III, section 20) and
(c) arbitration in suits (through court) (Chapter IV, sections 21-25).
The Act also contains further provisions, common to all the three types of arbitration (Chapter V,
sections 26-38).

Arbitration Agreement

Whatever be the class of arbitrations there must be an arbitration agreement. As defined in the
Arbitration Act, 1940, it means a written agreement to submit present or future differences to
arbitration, whether an arbitrator is named therein or not [section 2 (2)].

Arbitrators

The number of arbitrators can be one, two, three or even more. In the case of an even number of
arbitrators, an umpire is to be appointed according to the procedure given in the Act (First
Schedule). Where the arbitration agreement does not specify the number, the arbitration shall be
by a sole arbitrator (First Schedule).
An arbitrator may be named in the arbitration agreement or may be left to be appointed by a
designated authority (First Schedule).
Where the arbitration agreement is silent about the mode of appointment of arbitrators and the
parties cannot agree about the choice of the arbitrator, the Act gives power to the court to make
1
http://www.wipo.int/edocs/lexdocs/laws/en/pk/pk066en.pdf
2
http://www.wipo.int/edocs/lexdocs/laws/en/pk/pk069en.pdf
the appointment, after following the prescribed procedure (sections 8-10).
An arbitrator who does not diligently conduct the proceedings, or who is guilty of misconduct,
can be removed by the court after due inquiry (section 11).

Death of a party does not terminate the arbitration proceedings, if the cause of action survives
(section 6).
The arbitrator has got certain statutory powers, including the power to administer oaths to
witnesses, power to “state a case” for the opinion of the court etc.

Court Intervention

If a party to an arbitration agreement refuses to go to arbitration, the other party can seek
intervention of the court to compel a reference to arbitration (section 20).

Waiving rights under Arbitration clauses

An arbitration agreement may cease to apply if the parties agree on its termination. It may also be
terminated as any other agreement, i.e. in accordance with general contract law principles. It may
therefore be terminated or made ineffective simply by the conduct of the parties (impliedly or
tacitly), partly or wholly. The parties may agree that the arbitration agreement shall not apply to a
certain dispute or that it shall cease to apply entirely. A common example is that a plaintiff and a
defendant (by not objecting) tacitly agree to submit a dispute to an ordinary court of law although
an arbitration clause in a contract between the parties provides for arbitration. In such a case, the
arbitration agreement is made ineffective in respect of the dispute at hand by the conduct of the
parties.
Furthermore, and which is the subject matter of this article, pursuant to the general principles of
law, a party may also unilaterally lose its right to rely on an arbitration agreement by waiving it,
while the other party retains its right pursuant to the arbitration agreement. Having lost this right, a
party may be in a difficult position if it intends to take legal action against the counterparty.
In general, if a party to an arbitration agreement commences proceedings in the courts in respect
of a matter to which an arbitration agreement is applicable, this is likely to be treated as a breach
of the arbitration agreement which will constitute a waiver of the right to arbitrate. Up until the
point at which the defendant responds to the issue of proceedings it appears that the waiver is
revocable. The potential breach of the agreement by the claimant would be repudiatory. A
repudiatory breach requires the defendant to elect to accept the repudiation, and thereby discharge
the agreement, or to affirm the agreement and require it to be observed. In the absence of any
other correspondence, until the defendant responds to the court proceedings, it will neither yet
have accepted the repudiation, thereby discharging the agreement to arbitrate, nor affirmed the
agreement to arbitrate
Therefore, in the absence of a response in the court proceedings from the defendant (or other
relevant correspondence), the plaintiff, who had commenced court proceedings, could commence
an arbitration. However, once the defendant has responded to the court proceedings, the plaintiff’s
waiver of its right to arbitrate will become either:
(a) irrevocably waived, if the defendant takes a step in the proceedings to answer the substantive
claim, thereby accepting the repudiation and waiving its own right to arbitrate by discharging
the arbitration agreement; or
(b) redundant, if the defendant makes a successful application under section 9 of the Arbitration
Act 1996 to seek a stay of proceedings and have the matter referred to arbitration.
Policy

The foundations of Section 34 of the Arbitration Act, 1940 can be seen in Article 8 UNCITRAL
Model Law3 and Article II New York Convention 19544. Both of these operate to create an
obligation upon a court in which proceedings have been commenced by a party, in breach of an
arbitration agreement, to refer the parties to arbitration, if so requested by the other party, unless
the court finds that the agreement is “null and void, inoperative or incapable of being performed”
(Article 8 UNCITRAL Model Law and Article II New York Convention 1954). Section 9(4) of
the Arbitration Act 1996 picks up this wording and imposes a mandatory stay on proceedings
unless the court is satisfied that “the arbitration agreement is null and void, inoperative, or
incapable of being performed”. It is therefore clear that the English courts, in line with the Model
Law and New York Convention 1954, give great importance to what has been agreed between the
parties and will do their utmost to give effect to an agreement to arbitrate.
However, the obligation under the Arbitration Act to order a mandatory stay arises only if the
party who has not commenced court proceedings (i.e. the defendant in the court proceedings)
wishes the matter to be referred to arbitration. The defendant is free to allow the court
proceedings to continue in disregard of the arbitration agreement.

Waiving Right to Arbitrate

The existence of an agreement to arbitrate will not prevent either party from commencing judicial
proceedings in court. However, the issue of proceedings in court by one party will usually amount
to a waiver of that party’s right to have the same dispute determined by arbitration if the defendant
is content to have proceedings in court. This is also supported by section 34 of the Arbitration Act
which provides that: “a party to an arbitration agreement against whom legal proceedings are
brought (by way of claim or counterclaim) in respect of a matter, which under the agreement is to
be referred to arbitration, may… apply to the court in which the proceedings have been brought to
stay the proceedings so far as they concern that matter”. However, a party’s right to seek a stay is
lost if that party takes a step in the proceedings to answer the substantive claim. To constitute ‘a
step in the proceedings depriving a party of its right to arbitrate, the action of this party must be
one which impliedly confirms the correctness of the proceedings and the willingness of the [party]
to go along with a determination by the Courts of law instead of arbitration. Therefore, conduct
which illustrates an intention to abandon the right to arbitration will be construed as taking a step
in the proceedings, for example, filing a defense.

Legal Effect of Waiver

When a party waives its right to have a dispute determined by arbitration by initiating proceedings
it waives this right in respect of all matters that can be properly brought before the court in relation
to that particular dispute. Where the plaintiff commenced proceedings in court in breach of an
arbitration agreement, and the defendant subsequently filed a written statement thereby waiving
his right. Subsequently, the claimant received permission to amend the particulars of claim so as to
include issues which were closely related to the action. The defendant contended that these
additional issues should be referred to arbitration and applied for a stay of court proceedings in
respect of these issues. The issue was whether the amendments to the particulars of claim formed
part of dispute of which the court was already seized, or whether they were discrete matters in

3
https://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf
4
http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/New-York-Convention-E.pdf
respect of which section 34 of the Arbitration Act entitled the defendant to apply for a stay of the
proceedings, in respect of those issues, and insist that they be arbitrated. The Court held that the
additional issues were in respect of the matter raised by the original proceedings in relation to
which the defendant had already waived his right to apply for a stay of proceedings under section
34 by taking a number of steps in the proceedings.

Is the Waiver Irrevocable?

The waiver will only be irrevocable if the defendant in the court proceedings accepts the plaintiffs’
repudiatory breach of the agreement to arbitrate by taking steps in the proceedings. The Lahore
High Court considered an application by a plaintiff to stay its own suit, and the defendant's
application, in favour of arbitration. The agreement between the parties contained a clause
submitting all disputes to arbitration. When a dispute arose, the claimant sought an interim
injunction compelling compliance with the agreement. The application was made in a part claim
form rather than making an application for interim measures in support of arbitration. The
application was refused. Some months later, the plaintiff served a notice of arbitration. The
defendant responded by serving its defense and counterclaim in the court proceedings and
challenging in correspondence the plaintiff's right to pursue arbitration. The plaintiff applied to
stay its claim and the defendant's counterclaim. The court granted a stay of the counterclaim, and a
stay of the suit. Although it was "highly arguable" that the issue of the part claim amounted to a
breach of the arbitration agreement, the defendant had not done anything which would amount to
an acceptance of that breach, so as to bring the arbitration agreement to an end. However, had the
plaintiff’s issue of the claim form been accepted by the defendant, this would have amounted to an
acceptance of the plaintiff’s repudiatory breach, and the plaintiff would therefore have lost the
right to resort to arbitration. The Court held that assertions made by the defendant in
correspondence prior to the commencement of court proceedings, that there was no contract
between the parties, amounted to a repudiation of the agreement to arbitrate. Consequently, the
plaintiff’s subsequent commencement of proceedings amounted to an acceptance of this
repudiatory breach thereby terminating the agreement to arbitrate. Therefore, it can be seen that
law focuses less on the concept of waiver as such (and whether it could ever be revocable). Rather,
law uses ordinary contract law principles to identify repudiation (repudiatory breach) of the
agreement to arbitrate. Only if the repudiation is accepted will the parties both be discharged from
further performance of the agreement to arbitrate. Acceptance of a repudiation is by that means
irrevocable in its consequence. It can be undone only by both parties agreeing again to arbitrate.

Procedure

The Arbitration Act, 1940, is totally inadequate, in regard to matters of procedure. Of course the
arbitrator must observe the essentials of natural justice, failing which, the arbitrator’s award can
be set aside for misconduct (section 30). But various stages of the process are not dealt with in the
Act.
In practice, arbitration is conducted on the basis of (i) the pleadings (statement of claim and
statement of defense), whereupon (ii) issues may be framed (if necessary), followed by (iii)
affidavits, (iv) oral evidence, and (v) arguments.
The Award

The award must be pronounced within the time limits laid down in the arbitration agreement or
(failing such agreement), within 4 months of the commencement of hearing. However, the time
limit can be extended by the court in certain circumstances (section 28, and First Schedule).
The award has to be in writing and signed by the arbitrator. If there are more than one arbitrator,
the majority view prevails. The Act itself does not provide that the arbitrator shall give reasons for
the award. When the award is a non-speaking award, the scope for interference by the court with
the award becomes somewhat limited.

Court control over the Award

An award cannot be enforced, by itself. Judgment of the court has to be obtained in terms of the
award (section 17).
In the scheme of the Arbitration Act, 1940, the court may:–
(a) pass judgment in terms of the award (section 17), or
(b) modify or correct the award (section 15), or
(c) remit the award (on any matter referred to arbitration), for re-consideration by the arbitrator or
umpire (section 16), or
(d) set aside the award (section 30).
In short, the court may (i) totally accept the award, or (ii) totally reject it, or (iii) adopt the
intermediate course of modifying it or remitting it.

Modifying the Award

Modification of award by court


The Court may, by order, modify or correct an award: –
(a) where it appears to the court that a part of the award is upon a matter not referred to arbitration
and can be separated from the other and does not affect the decision on the matter referred, or
(b) where the award is imperfect in form, or contains an obvious error which can be amended
without affecting such decision, or
(c) where an award contains a clerical mistake or an error arising from an accidental slip or
omission (section 15).

Remitting the Award

The court may remit the award (or any matter referred to arbitration):
(a) here the award has left undetermined certain matters or where it determines matters which are
not referred to arbitration, and which cannot be separated from the rest or
(b) where the award is so indefinite, as to be incapable of execution or
(c) where an objection to the legality of the award is apparent on the face of it (section 16).

Setting aside the Award

The court can set aside the award, only on one or more of the following grounds, namely:–
(a) that the arbitrator or umpire has misconducted himself or the proceedings;
(b) that the award has been made after issue, by the court, of an order superseding the arbitration;
or
(c) that an award has been improperly procured or is otherwise invalid (section 30).
Misconduct of the Arbitrator (Setting aside the Award)

One of the principal grounds for setting aside the award under the Act of 1940 is the ground of
misconduct. Section 30 of the Act expresses it in rather cryptic terms by phrasing it in this manner
"the arbitrator has misconducted himself or the proceedings". No exhaustive definition of
"misconduct" in this context can be given because misconduct is as large as life itself.
Because of the endless variety of situations in life, treatment of the subject in an exhaustive
manner is likely to degenerate into a mere catalogue of instances. It will be more useful if selected
instances of misconduct are collected and are classified under a few convenient groups. In
arranging the cases under such group, one should bear in mind the fact that misconduct may arise
from the arbitrator's conduct of the case, the arbitrator's relations with the parties, the arbitrator's
mode of arriving at the decision (in regard to the materials relied on by the arbitrator or the tests
applied), and the arbitrator's mode of formulating his award.

Specific Heads of Misconduct

Here are some specific heads of misconduct which recur frequently in practice:–
Ø proceeding ex parte, without justification (and analogous acts);
Ø private inquiries by the arbitrator; absence of the arbitrator;
Ø delegation by the arbitrator, or the arbitrator associating strangers with the arbitration; use of
wrong criteria by the arbitrator;
Ø use of wrong material (by the arbitrator); irregularities in the award;
Ø Proceeding ex parte and analogous acts are misconduct for an
arbitrator: –
Ø to hear only one party in the absence of the other; or
Ø to fail to give notice of hearing; or
Ø to amend the issues behind the back of the parties, thereby causing prejudice.
But it is not misconduct on his part to amend the issue at the time of writing an award, if no
prejudice is caused to the parties.

Competent Court

The court competent to exercise various powers under the Arbitration Act, 1940, is the civil court,
which would be competent to entertain a civil suit, if a suit were to be filed on the cause of action
which forms the basis of the arbitration.

Private Inquiries

An arbitrator must decide on the evidence on record, and not on material obtained otherwise. It is
misconduct on his part: –
Ø to import his personal knowledge into the decision;
Ø to hold a private conference with a party;
Ø to hold a private meeting behind the back of the party; to make a private inquiry behind the
back of the party;
Ø to listen to confidential information, adverse to a party, even if the arbitration agreement
gives him full latitude, (though the position may be different, if the parties had the
opportunity of checking and contradicting the information so proposed to be utilized);
Ø to communicate with one party, behind the back of the other party.
Absence of Arbitrators

Where there are more than one arbitrator, they must all act together. The award is bad, if one
arbitrator is absent. The position may be different if what was done during the absence of one
arbitrator is done all over again by all the arbitrators, or if the act performed in the absence of one
arbitrator is only ministerial, such as looking into an account book.

Joint Deliberations

All arbitrators must deliberate jointly. However, the parties may waive the irregularity. Delegation
by arbitrator, or associating strangers with the arbitration. An arbitrator cannot
delegate his functions to another person. It follows, that if the award is given by a person to whom
the arbitrator delegates his functions, the award is a nullity. There is, however, an exception to this
rule, where the delegation is: –
(i) with the consent of all the parties, or
(ii) a purely ministerial act.
An arbitrator cannot associate a third person with the decision-making process. Here again, there
is no misconduct, if there was consent of all the parties, to such a course being adopted.
Use of Wrong Criterion by Arbitrator
Sometimes, an arbitrator, while not guilty of procedural lapses (as in the above categories of
misconduct), employs a wrong criterion for coming to a conclusion. The award may then be set
aside on that ground. Examples are:
(i) assessment of damages for breach of contract, on the basis of rates prevailing in the black
market (instead of the controlled rates);
(ii) ignoring very material documents, at a stage when the evidence has not yet been closed.

Errors of Law

Questions of difficulty arise, when the arbitrator's decision is challenged, for an erroneous
conclusion reached by the arbitrator on matters of law. The position appears to be a bit complex
and cannot be stated with absolute certainty. However, broadly speaking, one can state the law on
the subject in the form of the following propositions:–
(a) where a question of law has been specifically referred to the arbitrator for his decision, then
his ruling on that question, if bona fide and if not suffering from any other defect, is not open to
challenge, merely because it is erroneous;
(b) if a question of law has not been specifically referred to the arbitrator, his ruling on the point
of law (if material to the result) may render the award void.
First as to situation (a) above. Where an arbitrator is called upon to decide the effect of the
agreement, he has to really to decide a question of law, (i.e., in interpreting the agreement), and
hence his decision on the point is not open to challenge.
In situation (b) above, the award of the arbitrator can be set aside on the ground of an error of law
on the face of the award. However, for this purpose, the court cannot look into a document not
referred to, in the award.
Generally, the question of error of law can arise only if reasons are given in the award. However,
if the very relief granted by the award is illegal, the position is different. Thus, an arbitrator cannot
grant specific performance of a contract of service. Nor can a contract for the sale of movable
property be enforced specifically, save in exceptional cases.

Decision to be According to Legal Rights

An arbitrator must decide according to legal rights, and not according to his own notions of
fairness. There may, of course, be special situations where a different intention of the parties may
be inferred and upheld judicially.

Basis of Interference by Court

The logical basis on which the jurisdiction of the court to interfere for apparent error can be
justified, needs first to be explained. The general principle is that an arbitrator is a final judge both
of fact and of law. So far as questions of fact are concerned, this jurisdiction has been limited to
decisions pronounced after serious procedural lapses, which reveal breach of natural justice or
other technical misconduct. So far as errors of law are concerned, the jurisdiction of the court,
(though not conferred in so many words by section 30), seems to have been based on the
assumption that if the parties have not specifically referred a question for the decision of the
arbitrator, then it is implied that the general power of the court to determine legal questions
between the parties remains unimpaired. In theory, the jurisdiction can also be supported on the
ground that the ultimate arbiters of questions of law should be the courts, so that uniformity is
maintained.

Reasoned and Unreasoned Awards

Where the award is an unreasoned one, the court cannot interfere on the ground of an error
therein. If the arbitrator chooses to give reasons, then the award can be set aside on the ground of
error of law, although, in general, the reasonableness of the reasons themselves cannot be
challenged.

Interpretation of Contracts

The same principle is also followed, regarding questions of interpretation of contract as


determined in the award. Court can interfere only if the award is a speaking award. It is only if the
line of interpretation is set out in the award that the court can interfere.

Breach of Natural Justice

Of course, the arbitrator would be guilty of misconduct, if there is a breach of natural justice.
Thus, it is well established that the arbitrator cannot depend on personal knowledge or arrive at a
conclusion behind the back of the parties.
But where the arbitrator decides a question of fact on the basis of the evidence and on the basis of
answers given by the parties in response to queries from the arbitrator, the award cannot be said to
be based on personal knowledge and cannot be set aside on that ground.
Arbitrator's award may be set aside, if it awards charges for extra work, escalation charges and
damages claimed by the construction contractor without any supporting material.
The preceding Arbitration Act of 1940 that governs domestic arbitration in Pakistan has several
deficiencies. Under the Act, the parties are relatively free to adopt procedures of their choice with
little oversight. With no national arbitral institutions, there are no arbitral rules, except for some
formulated by courts within the framework of the Act.
There are flaws in Arbitration Act 1940, namely: No interim power in the arbitrator, too many
grounds for judicial intervention at all stages (pre-arbitral, during arbitration & post award), as a
result it defeats the whole object of speedy and cost effective dispute resolution. A new
Arbitration Act should be passed to implement the UNCITRAL Model Law on International
Commercial Arbitration (the Model Law) into Pakistan. This will constitute a further step forward
in the efforts of the Government of Pakistan to build a framework for investor-friendly Dispute
Resolution. Some landmark judgments on the Arbitration Act are worth reading.5

Pakistan Enacts a Statute to Implement the ICSID Convention

The Islamic Republic of Pakistan is not foreign to defending investment claims. In order to restore
investors’ confidence in its country, the Pakistani government enacted on April 28, 2011 a law to
secure foreign investment. The International Investment Disputes Act (the “Act”) had been
qualified by the Pakistani president, Mr. Asif Ali Zardari, as “a giant leap forward” to create
confidence amongst foreign investors.
The Act is Pakistan’s answer to the Supreme Court of Pakistan’s 2002 decision in the SGS v.
Pakistan proceedings that the ICSID Convention, although ratified by Pakistan, having not been
incorporated into the laws of Pakistan by implementing legislation, the domestic courts had no
power to enforce the provisions of the Convention while ignoring the existing national statutes
relating to arbitration. This case saw parallel arbitration proceedings in Pakistan and before
ICSID, and the Supreme Court upheld the lower courts’ decision not to stay the arbitration
proceedings under the Pakistani Arbitration Act following the commencement of the ICSID
arbitration.
Pakistan is a signatory to the United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 1958 ("Convention") and after a long time the Convention has been made
part of the domestic laws of Pakistan whereby foreign arbitral agreements and awards are now,
enforceable without any questions asked except for rejecting the same on the grounds set forth in the
Convention.
As per the Foreign Awards Act, a party to a foreign arbitration agreement against whom legal
proceedings have been brought in respect of a matter which is covered by the arbitration
agreement may, upon notice to the other party to the proceedings, apply to the court in which the
proceedings have been brought to stay the proceedings in so far as they concern that matter. On
such application being made, the court shall refer the parties to arbitration as per the foreign
arbitration agreement unless the court finds that the arbitration agreement was null and void,
inoperative or incapable of being performed in accordance with the Convention.
The above provision is a mammoth change of law in Pakistan whereby, prior to the Foreign
Awards Act, the court before which legal proceedings were brought against a party to an (foreign)
arbitration agreement had absolute discretion whether to stay the proceedings before it or refuse it in
toto. All the grounds like forum non conveniens (most commonly used ground for refusal to stay legal
proceedings in foreign arbitration agreements by domestic courts) have been set at naught and there
does not appear to remain any domestic impediment in Pakistan to the enforcement of foreign
arbitration agreements. In this regard, a very compelling principle has been upheld in a judgment
vide a separate note recorded by Mr. Justice Ajmal Mian (the "Note"), which states that:
"I may observe that while dealing with an application under section 34 of the Arbitration
Act in relation to a foreign arbitration clause like the one at issue, the Court's approach
should be dynamic and it should bear in mind that unless there are some compelling reasons,
such an arbitration clause should be honoured as generally the other party to such an

5
2010 MLD 561, PLD 2010 KARACHI 390, 2010 YLR 611, 2010 CLC 258, 2010 MLD 421, 2010 CLC 1018,
PLD 2010 LAHORE 443, 2011 SCMR 243, 2011 SCMR 1361, PLD 2011 ISLAMABAD 43, 2011 YLR 2413, 2011
MLD 502, 2011 CLC 863, PLD 2011 LAHORE 458, 2011 CLC 841, 2012 SCMR 1606, , 2012 SCMR 402, PLD
2012 ISLAMABAD 21, 2012 CLD 796, PLD 2012 KARACHI 114, 2012 MLD 95, 2012 CLD 1380, PLD 2013
SUPREME COURT 641, 2013 MLD 1083, 2013 CLC 108, 2013 CLC 767, PLD 2013 KARACHI 254, 2013 CLC
1028,2013 CLC 820, 2013 CLC 1518, 2014 CLD 824 SUPREME COURT, PLD 2014 SUPREME COURT 494,
2014 SCMR 1268, 2014 CLC 238, 2014 MLD 1100, PLD 2014 LAHORE 179, 2014 MLD 1795, 2014 CLC 1519.
arbitration clause is a foreign party. With t h e development and growth of international
trade and commerce and due to modernization of communication/transport systems in the
world, the contracts containing such an arbitration clause are very common nowadays. The
bargain that follows from the sanctity which the Court attaches to contracts must be applied with
more vigour to a contract containing a foreign arbitration clause. We should not overlook the
fact that any breach of a term of such a contract to which a foreign company or person is a
party, will tarnish the image of Pakistan in the comity of nations. A ground which could be a
contemplation of party at the time of entering into the contract as a prudent man of business
cannot furnish basis for refusal to stay the suit under section 34 of the Act. So the ground like,
that it would be difficult to carry the voluminous evidence or numerous witnesses to a
foreign country for arbitration proceedings or that it would be too expensive or that the
subject-matter of the contract is in Pakistan or that the breach of the contract has taken place
in Pakistan in my view cannot be a sound ground for refusal to stay a suit filed in Pakistan in
breach of a foreign arbitration clause contained in contract of the nature referred to
hereinabove. In order to deprive a foreign party to have arbitration in a foreign country in the
manner provided for in the contract, the Court should come to the conclusion that the
enforcement of such an arbitration clause would be unconscionable or would amount to forcing
the Plaintiff to honour a different contract, which was not in contemplation of the parties and
which could not have been in their contemplation as a prudent man of business." (emphasis
added)
In another judgment by reference to the note, it was maintained that:
"…a party having entered into an agreement after having full knowledge of its consequences
cannot be allowed to defeat the arbitration clause."
Moreover, while observing the principal laid down in the Note, a view was maintained in another
judgment, which is
"…arguments regarding public policy and expensiveness of the arbitration taking place in
London as ground for stay of suit are no longer tenable in light of the observations of the
Supreme Court of Pakistan in the Hitachi case…There is no doubt some expense is involved in
litigation but that is true anywhere in the world. In the present suit, the plaintiff has filed a suit
for more than USD 1 m, and it is reasonable to expect to incur some expenses in the event of
a dispute. Further, there is no restriction imposed by the State Bank of Pakistan on
remittance of foreign exchange for any lawful purpose at any time and with the availability of
modern devices such as teleconferencing facilities, evidence may be recorded easily
anywhere in the World under the supervision of the arbitral body." Accordingly, the suit
was stayed in this case.
Similarly, the foreign arbitral awards as per the Foreign Awards Act will be recognized and enforced
in the same manner as a judgment or order of a court in Pakistan. The recognition and
enforcement of foreign arbitral awards, now, cannot be refused except in accordance with the
Convention.
While closing the subject of foreign arbitration agreements and awards, suffice here to state that the
arbitration agreements and awards between Pakistani parties and foreign parties domiciled or
incorporated in non- contracting states may be able to take advantage of the Arbitration Act and
seek recognition and enforcement thereunder as if the same was a domestic arbitration agreement
and award. In the Annex to this article, we provide a list of the case law concerning the Foreign
Awards Act, which pertains only to the year.
However, the SGS v. Pakistan case had highlighted the need for national legislation in order to
give full force and effect to the ICSID Convention. The enactment of this legislation, however,
was not exempt of obstacles. The legislation was first promulgated by presidential ordinance in
November 2006, but lapsed. Under the Constitution of Pakistan, presidential ordinances have a
limited life of four months unless earlier repealed or enacted into a statute. A new presidential
ordinance was promulgated in March 2007 followed by another in July 2007, but the state of
emergency was thereafter declared in Pakistan, which gave it permanent life. The permanent life
however was cut short by a judgment of the Supreme Court which declared the emergency as
illegal. This resulted in promulgation of another presidential ordinance in November 2009
followed by another in April 2010. The current Act is the result of a government sponsored bill
introduced in Parliament in 2010.
The purpose of the Act is to implement the International Convention on the Settlement of
Investment Disputes between States and Nationals of other States, with an aim to bringing
transparency in the settlement of investment disputes. The Act attaches the ICSID Convention as
a schedule.
Under the ICSID Convention, awards are insulated from review by national courts at the
recognition and enforcement stage, but no such guarantees are offered when specific assets are
targeted in execution of the award. Article 54(1) of the ICSID Convention provides that each
contracting state shall “recognize an award rendered pursuant to this Convention as binding and
enforce the pecuniary obligations imposed by that award within its territories as if it were a final
judgment of a court in that State”. Article 54(3) of the ICSID Convention provides that the
execution of the award is governed by the laws concerning the execution of judgments in force in
the State in whose territories such execution is sought, and Article 55 emphasizes that “nothing in
Article 54 shall be construed as derogating from the law in force in any Contracting State relating
to immunity of that State or of any State from execution”.
The Act leaves a great discretion to the Pakistan courts for the enforcement of ICSID awards.
Article 4 provides that an award registered in Pakistan must “be of the same force and effect for
the purposes of execution as if it had been a judgment of the High Court” and, if the award
“relates to pecuniary obligations”, “proceedings may be taken on the award” and “the High Court
shall have the same control over the execution of the award, as if the award had been a judgment
of the High Court”. High Courts in Pakistan are generally courts of appeal, which are to be found
in each province. The purpose of giving jurisdiction to a High Court is to ensure the quality of
judicial expertise. With respect to its binding effect on the government itself, the Act provides that
the principles set forth in Article 4 bind the government but “not so as to make an award
enforceable against the Government in a manner in which a judgment would not be enforceable
against the Government”. Moreover, the Act provides that these principles do not apply if the
government is not a party to the award (Article 5).
In effect, therefore, the Act does not provide for a foolproof execution of ICSID awards in
Pakistan. Execution of awards is subject to the review of the High Court and, if the award has
been rendered against the Government, it can only be enforced if it were enforceable in the same
circumstances if it were a judgment. In practice, the High Court will have the power to attach and
sell assets, as long as such assets are not related to defense and national security. High Court
decisions can be appealed. However, in execution matters, the grounds of appeal are very limited.
The Act, however, removes a lacuna and one can hope that it will render the enforcement of
ICSID awards in Pakistan easier. It has also the advantage of a providing an effective reference
for the execution of awards in Pakistan. In contrast, in many a state, the execution of ICSID
awards is left to the civil procedure provisions applicable to the execution of judgments, which
can lead to confusion and unsatisfactory decisions.
In addition to this Act, Pakistan has also prepared the enactment of two statutes relating to
international arbitration. First, a law to enforce the New York Convention has been passed by the
Parliament National Ass, a new Arbitration Act, based on the UNCITRAL Model Law, is pending
before the National Assembly.

A New Legislation Proposed

The Arbitration Bill, 2009 (the Bill) was introduced into the Pakistan National Assembly on 24
April 2009, which still has not been passed6. The preceding Arbitration Act of 1940 that governs
domestic arbitration in Pakistan has several deficiencies. Under the Act, the parties are relatively
free to adopt procedures of their choice with little oversight. With no national arbitral institutions,
there are no arbitral rules, except for some formulated by courts within the framework of the Act.
In its preamble the Bill aspires to implement the UNCITRAL Model Law on International
Commercial Arbitration (the Model Law) into Pakistan. The Bill, once promulgated into law, will
constitute a further step forward in the efforts of the Government of Pakistan to build a framework
for investor-friendly Dispute Resolution.
Although it purports to implement the Model law, the Bill is in fact a modified version of the
Indian Arbitration Act 1996 (the Indian Act). Although it is still very much in draft form its
initiation is a positive sign for international commercial arbitration in Pakistan. It is hoped that the
Bill is passed through the Parliament shortly and that note is taken of the changes proposed in this
article. This author’s concerns, in particular, arise from the problems faced in India in respect of
the implementation of the Indian Act.
The Bill is intended to supersede and build on the Recognition and Enforcement (Arbitration
Agreements and Foreign Arbitral Awards) Ordinance, 2007 (REAO) which implemented the
United Nation’s Convention on the Recognition and Enforcement of Foreign Arbitral Awards
1958 (NY Convention) into Pakistani law7. It is a holistic piece of legislation that covers the use
of arbitration, conciliation and alternative dispute resolution within and outside Pakistan,
including re-promulgating a domestic law implementing the International Convention on the
Settlement of Investment Disputes (ICSID) between States and Nationals of Other States (the
Washington Convention)8. The Bill also proposes to establish an Arbitration and Conciliation
Centre in Pakistan.
This article analyzes the pros and cons of the Bill for international arbitration in Pakistan and also
seek to highlight some of the challenges for international investors that it may pose.

A Good Move

The Bill builds on the progress made in the REAO in providing for NY Convention-compliant
provisions and reproduces the REAO in its Part III. Consequently, the REAO's pro-enforcement
provisions regarding arbitration agreements and awards are preserved by the Bill.
The REAO's failure in laying out a criterion for when an award can be characterized as domestic
or foreign has been addressed in the Bill. The Bill moves towards a territorial approach on this
issue and implements nearly identical grounds for challenging both types of awards9.

6
https://international-arbitration-attorney.com/wp-content/uploads/2016/10/Pakistan-Arbitration-Law.pdf

7
Task Force on National rules of procedure for recognition and enforcement of foreign arbitral awards pursuant to
the New York Convention of 1958 which was Co-chaired by Geoffroy Lyonnet (France) and David P. Roney
(Canada), In view of the 50th anniversary of the New York Convention in 2008, the Commission on Arbitration
has created this task force.
The objectives of the task force are:
• to identify the countries to be covered by the work of the task force;
• to determine, for each country so identified, the national rules of procedure for recognition and
enforcement of foreign arbitral awards, with reference to articles III and IV of the New York Convention;
• to compile all such national rules of procedure for recognition and enforcement of foreign arbitral awards
on a country-by-country basis in one user-friendly document;
• to draft an introduction to and a summary of such compilation.
The Task Force is composed of over 150 registered members from 70 different countries.
8
Pakistan originally implemented the Washington Convention into its domestic law by promulgating the Arbitration
(International Investment Disputes) Ordinance 2006.
9
In respect of foreign awards, section 50 of the Bill states that:
Accordingly, awards rendered within Pakistan are seen as domestic awards capable of being
enforced or set-aside (as appropriate) by a Pakistani court while awards rendered outside Pakistan
and in a state that is party to the NY Convention are enforceable in accordance with the terms of
the NY Convention. Awards rendered in countries that are parties to the Geneva Protocol on
Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral
Awards of 192710 continue to be enforceable in Pakistan under the Arbitration (Protocol and
Convention) Act 1937 (the APC Act).
It is important to note that, under the REAO, there was a residual risk that awards rendered in a
NY Convention country that applied Pakistani substantive law might have been characterized as a
domestic award and so be subject to the enforcement provisions of the Pakistan Arbitration Act
1940. This residual risk arose as a result of the reasoning of the Supreme Court of Pakistan in
Hitachi Ltd v Rupali Polyester,11 where the Supreme Court tacitly affirmed (while commenting
that it seemed impractical) the theory of "concurrent jurisdiction" expounded by the Indian
Supreme Court in National Thermal Power Corporation v The Singer Company 12. Both Singer
and Hitachi were concerned with the interpretation of S.9 (b) of the APC Act (the ‘savings
clause’13) which made the substantive law applicable to an award a determining factor14.
Since both the REAO and the Bill specifically omit the savings clause, a strong argument can be
made that the legislature has consciously altered the criteria of character determination away from
the choice of substantive law and towards a more territorial approach. This argument has also
been used in India where the Indian Arbitration Act 1996 replaced a similar savings clause

"The recognition and enforcement of a foreign arbitral award shall not be refused except in accordance with
Article V of the [NY] Convention."
In respect of domestic awards, section 34(2) of the Bill lays down the following grounds for set aside:
"(a) the party making the application furnishes proof that —
(i) a party to the arbitration agreement was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication
thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of
the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only
that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of
the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that —
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in
force, or
(ii) the arbitral award is in conflict with the public policy of Pakistan.
Explanation. — Without prejudice to the generality of expression public policy it also includes an arbitral award
the making of which was induced or affected by fraud, misrepresentation or corruption and in violation of
confidentiality."
10
92 League of Nations Treaty Ser. 2302
11
Hitachi Ltd v Rupali Polyester (1998 SCMR 1618).
12
Hitachi Ltd v Rupali Polyester (1998 SCMR 1618).
13
APC Act s.9 (b) is a Savings clause that states: “Nothing in this Act shall…. (b) apply to any award made on an
arbitration agreement governed by the law of Pakistan.”
14
See these cases on Pakistan Law Site.
contained in the Indian Foreign Awards (Recognition and Enforcement) Act 1961 (FARE).
Accordingly, it is likely that all awards rendered outside Pakistan will be recognised and enforced
pursuant to, as applicable, the NY Convention or the Geneva Convention (15,16).
International commercial arbitrations17 taking place within Pakistan are also covered by the Bill.
The Bill provides certain enabling provisions in respect of such arbitrations and gives
supervisory powers over such arbitrations to Pakistani courts largely in accordance with the
UNCITRAL Model law. Such provisions and powers include, amongst other things, giving the
parties the power to obtain interim measures before or during arbitral proceedings18; the Chief
Justice of Pakistan having powers to appoint arbitrators19; supervisory powers of Pakistani courts
over the appointment and challenge of arbitrators20; giving arbitral tribunals the power to rule on
their own jurisdiction21; rules governing the conduct of arbitrations22; court assistance in taking
evidence23; powers to arbitrators to decide a case ex aequo et bono or as amiable compositeur if
authorized by the parties24; and to apply the substantive law of any country chosen by the
parties25.

Problems Likely to Arise

The Bill copies, without substantive change, the Indian Act. Accordingly, there is a danger that it
will import the same problems that the international arbitration community has faced in India
following a number of decisions of the Indian Supreme Court. The Indian courts have, as a result,
been heavily criticized for their extra-territorial interpretation of the Indian Act.
Though Pakistani courts have shown a willingness to independently evaluate Indian precedents
that are cited before them26, Indian judgments, along with judgments from other common law
countries, still have persuasive value in Pakistani proceedings. Accordingly, it would be useful if
the legislators in Pakistan would review the consequences of some of the Indian cases and try to
incorporate (into the Act when passed) potential solutions for dealing with the problems faced

15
Compare the APC Act s.9(b) in fn. 8; s.9(b) of India's FARE was a savings clause identical to
s. 9(b) of the Pakistan APC Act: “Nothing in this Act shall…. (b) apply to any award made on an arbitration
agreement governed by the law of India.”

16
In Centrotrade Minerals and Metals Inc v. Hindustan Copper Ltd, 2006(11) SCC 245, the Supreme Court of India
held that an award from international commercial arbitration conducted in any NY Convention country would be a
foreign award irrespective of the proper law governing the arbitration agreement. This case is also important as the
Indian Supreme Court held that the phrase "or under the law of which that award was made" used in Article V (1)(e) of
the NY Convention refers to the law of the country in which the arbitration had its seat rather than the country whose
law governs the substantive contract. Additionally, Vikramjit Sen J. in Bharti Televentures Ltd v DSS Enterprises
Private Ltd CS (OS) No1769/2003 decided on August 17 2005, 2001 (3) RAJ 433 (Del) has stated in para [19] that “The
deliberate decision not to incorporate s.9 (b) of FARE assumes great significances, and leads inexorably to the
conclusion that the factum of Indian laws in the 1996 Arbitration regime, especially Part II thereof, venue/territoriality is
all important.”

18
Section 9 of the Bill.
19
Section 11 of the Bill
20
Sections 11 to 15 of the Bill
21
Chapter IV of Part II of the Bill
22
Chapter V of Part II of the Bill
23
Section 27 of the Bill
24
Section 28 of the Bill
25
Section 28 of the Bill
26
For a good example of this, see Hitachi Ltd v Rupali Polyester (1998 SCMR 1618) where the Pakistani Supreme
Court refused to follow the Indian Supreme Court's theory of concurrent jurisdiction set out in National Thermal Power
Corporation v The Singer Company
under the Indian Act.

If Only

Confusingly, Part II of the Pakistani Bill is a reproduction (with minor modifications) of Part I of
the Indian Act. Both these Parts include provisions that apply to arbitrations taking place inside
the respective country to which they apply (e.g. the domestic courts' powers to order interim
measures, to appoint arbitrators, set aside, etc.).
The principle problem with the Bill arises in Section 2(2) which is substantially identical to
Section 2(2) of the Indian Act. Section 2(2) of the Bill states that:
"This Part and Part IV shall apply where the place of arbitration or conciliation is in Pakistan"
Section 2(2) of the Indian Act states that:
"This Part shall apply where the place of arbitration is in India"
In Bhatia International v Bulk Trading S.A. and Another27and, more recently, Venture Global
Engineering v Satyam Computer Services28, the Indian Supreme Court has interpreted the wording
of Section 2(2) of the Indian Act to mean that Part I of the Indian Act would apply to all
arbitrations whether conducted within or outside India.
The Indian Supreme Court's reasoning has been predicated largely on the fact that the word "only"
is absent after the word "shall" in the Section.29In interpreting the consequences of this omission,
the Indian Supreme Court reasoned in Bhatia that the Section mandatorily applied Part I of the
Indian Act to arbitrations taking place within India, but did not prohibit Part I from applying to
arbitrations taking place outside India. Recognizing that, as a general principle of Indian law, the
jurisdiction of a court needs to be specifically excluded either by statute or by contract, the Indian
Supreme Court reasoned that Part I would, therefore, apply to arbitrations conducted outside India
unless the parties specifically agreed otherwise.
Consequently, the Indian Supreme Court in Bhatia allowed a party to obtain interim measures
from an Indian court despite the arbitration taking place outside India and, more worryingly, in
Venture Global it held that Indian courts can set aside foreign awards on the same grounds (e.g.,
patent illegality) as are applicable to domestic awards.
To avoid Pakistani courts reaching a similar conclusion, it would be sensible to insert the word
"only" into section 2(2) of the Bill, after the word "shall".

Public Policy:

Another problem arising out of the Indian Act comes from the reasoning of the Indian Supreme
Court in ONGC v Saw Pipes Ltd30where an award rendered in India was not enforced on the
grounds that it failed to correctly apply Indian substantive law.31The Indian Supreme Court

27
Bhatia International v Bulk Trading S.A. and Another (2002) 4 SCC 105)
28
Venture Global Engineering v Satyam Computer Services (2008(1) ARBLR1 37 (SC))
29
Bhatia International v Bulk Trading S.A. and Another, at paragraphs [21] and [27] the Indian Supreme Court made
reference to the fact that Article 1(2) of UNCITRAL Model Law, on which Section 2(2) of the Indian Act is based,
uses the word "only" and that this word was specifically omitted by the Indian legislature in drafting that Section.
30
ONGC v Saw Pipes Ltd 2003 SOL Case No175
31
In ONGC v Saw Pipes Ltd 2003 SOL Case No175, the arbitrators had determined that a claim for liquidated damages
under Indian law required the proof of some loss contrary to Sections 73 and 74 of the Indian Contract Act. The Indian
Supreme Court reasoned that since the arbitrators had failed to consider these sections, they had misapplied Indian
substantive law. The court felt that the phrase public policy of India meant that an award could be set aside if it
contained an illegality. This is a very wide interpretation of that phrase and has been criticized heavily in international
commercial arbitration circles
predicated its decision on Section 34 of the Indian Act, which allows a court to refuse to enforce
an award if such an award is contrary to the public policy of India. Section 34 of the Indian Act
has been reproduced with slight modification as Section 34 of the Bill. Accordingly, the Pakistani
courts could follow a similar line of reasoning in interpreting this phrase in the

Pakistani Context:

Pakistani courts have, in the past, largely tried to give a restrictive construction to the term "public
policy"32. Accordingly, the Pakistani courts will hopefully not try to use the vagueness of the term
so as to imply a generalized supervisory interest in the application of Pakistani substantive law in
arbitration proceedings involving foreign parties. Such a result would not be in line with the spirit
of the NY Convention. (29)
The Bill does attempt to clarify the construction of the term public policy as applicable to
arbitrations taking place within Pakistan, in the Explanation to sub-Section 34(2) of the Bill where
public policy is to include: "an arbitral award the making of which was induced or affected by
fraud, misrepresentation or corruption and in violation of confidentiality." These are broader
grounds than that provided in the Explanation to Section 34(2) of the Indian Act. It is suggested
that the inclusion of misrepresentation and violation of confidentiality in the Explanation are
capable of immense interpretation and should be deleted, or more precisely framed.

Conclusion:

The legal system in Pakistan is inefficient/inadequate which has failed to give speedy remedy to
litigants and it had not been delivering at all. Therefore, the author is a great proponent of alternate
dispute resolution “ADR” mechanisms, including arbitration and its benefits, for resolution of
disputes, however, it is suggested to bring a new Arbitration Act which would not be as antiquated
as the existing Arbitration Act of 1940. The prevalent Arbitration law was a failed phenomenon
because, once the arbitrators give an award the parties have to go to court again to have it
implemented by making it as rule of the court or objected/appealed, which gives rise to another
round of litigation. The four major benefits of Arbitration, namely: time efficiency, cost efficiency,
confidentiality and integrity have not in fact materialized yet. Another problem with arbitration was
that courts were very miserly in giving away their jurisdiction and were acting as adversaries in this
respect.
The process for domestic arbitration is very much based on the more recognized common law
jurisdiction albeit certainly needing modernity in the codified Arbitration Act to promote investor
confidence in Pakistani legal system but the gap is being filled in by the superior courts through
their precedents which are binding. International arbitration framework, Foreign Awards Act, is
32
In Manzoor Hussain v Wali Muhammad, PLD 1965 SC 425, the Pakistan Supreme Court in deciding whether a
contract was contrary to public policy under section 23 of the Pakistan Contract Act 1872 stated that this section has to
be construed strictly and that the court should not invent new categories or heads of public policy. Cf. Ali Muhammad v
Bashir Ahmad, 1991 SCMR 1928 where the Pakistan Supreme Court affirmed the setting aside of an arbitration award
because that award purported to decide a criminal matter and the arbitrability of such a matter would be against public
policy. Also see The Hub Power Company Ltd v Wapda (PLD 2000 Supreme Court 841), where the Supreme Court of
Pakistan refused to enforce an arbitral agreement between Hubco (a subsidiary of Britain’s National Power set up with
World Bank support) and the Pakistani government on the grounds that the underlying agreement had been procured as a
result of fraud and corruption. Also see Grosvenor Casino Limited v Abdul Malik Badruddin (PLD 1998 Karachi 104)
where Bhagwandas J refused to execute a judgment of the United Kingdom High Court of Justice Queen's Bench
Division on the grounds that the judgment decided a matter in respect of gambling debts and that such contracts for
wagering were void under Pakistani law and were also repugnant to principles of Shariah; and as such were contrary to
the public policy of Pakistan. 2014 CLD KARACI 337, PLD 2014 KARACHI 349, PLD 2014 KARACHI 427
already in line with the most commonly followed process.
In the proposed Arbitration Bill by clearly preventing the application of Part II of the Bill to
arbitrations taking place outside of Pakistan, the Pakistani legislature is going to import the same
problems faced by the international arbitral community in India.
The application of Part I of the Indian Act to arbitrations taking place outside India has resulted not
only in interim measures being ordered by Indian courts in respect of such arbitrations (30) but has
also led to the Indian Supreme Court ruling that an award rendered outside India is capable of being
set aside by Indian courts (31).
Additionally, the term "public policy" is a precarious and unpredictable term and the uncertainty that
results from it is only further exacerbated by the definition that the Bill provides in its Explanation
to Section 34(2). These are problems that Pakistan should seek to avoid in introducing its new
legislation on international commercial arbitration. It is hoped that these deficiencies in the Bill can
be cured before the Bill becomes an Act of the Parliament.

i
Zafar Iqbal Kalanauri, Mediator & Advocate Supreme Court of Pakistan, Adjunct Faculty of Law at SAHSOL, Lahore
University of Management Sciences (LUMS), SAF Center, #3 3rd Floor, 8-Fane Road Lahore 54000, Pakistan.
Cell: (92) 300- 4511823 & 314-4224411 E-mail: [email protected] ; Web: http://www.zklawassociates.com

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