THE AUTHOR:
Fahad Bin Tariq, Trainee Lawyer at ABS & Co.
For several years now, the Islamabad message has been that Pakistan is moving towards a generational change in its arbitration law. In mid-2024, the Federal Cabinet approved the draft Arbitration Act 2024, which aimed to replace the colonial Arbitration Act 1940 with a regime based on the UNCITRAL Model Law. The content of that Bill has already been covered in-depth on Daily Jus. However, the Bill is still pending in the National Assembly, and 2026 brings fresh questions that must be addressed. The promise of the reform, and the flip side, its delivery, does not just influence these academic decisions; it also has ramifications for where to seat the tribunal, how to draft the arbitration clause, and what to expect from enforcement proceedings when foreign parties enter into contracts with Pakistani counterparties or public entities.
A Reform That Stalled
In 2025, no Bill was passed, and the reform narrative stalled. The standstill has coincided with other constitutional developments in Pakistan, namely the 26th and 27th Constitutional Amendments, which appear to have pushed arbitration reform down the legislative agenda. Regardless of the reasons, the practical issue has not changed. Arbitrations seated in Pakistan are still subject to the standards outlined in the 1940 Act, while the Recognition and Enforcement (Arbitral Agreements and Foreign Arbitral Awards) Act 2011 – Pakistan’s implementation of the New York Convention – still applies to the recognition and enforcement of foreign awards. As far as the contents of the much-discussed modernisation are concerned, interim measures ordered by tribunals, judicial intervention reduced to its narrowest limits, competence-competence (provided for by statute), and obligations on arbitrators in the context of conflicts of interest (following IBA Guidelines on Conflicts of Interest) are not yet law, but rather still pieces in the draft.
Why the Delay Matters: The Seat Still Decides Everything
The most significant aspect of arbitration in Pakistan up to the enactment of the Bill is the seat of the arbitration. In AMC v. Teisei, Judgment of the Supreme Court of Pakistan 2024 SCMR 640, 28 February 2024, the Supreme Court ruled that the seat of an award, rather than the law governing the parties or the contract, determines its nationality. The same logic applies by corollary, and cross-border users must bear it in mind: an arbitration with a “domestic” seat in Pakistan is governed by a court-centred Act which, among other things, denies the tribunal jurisdiction to grant interim relief and the award must be filed in and adopted by that forum before it can take effect. When an arbitration is heard outside the country, the award issued by that arbitration is a “foreign award” which is enforced under the more predictable terms of the 2011 Act implementing the New York Convention. Delay in reform, that is, does not merely delay good law; it extends a system of disproportionate consequences of choice of seat.
Enforcement: Pro-enforcement, but Unforgiving on the Seat
For award creditors, the news on enforcement is good, subject to one caveat. That is the posture which the Supreme Court adopted in Teisei, indicating that awards that are truly foreign in origin will be recognised on this basis. However, courts remain exacting about the seat: an award will be recognised as foreign only where the seat genuinely supports that characterisation. In SpaceCom v. Wateen Telecom, the Lahore High Court refused to enforce the award because the tribunal had designated the DIFC as the seat, whereas the Court found that the parties had in fact chosen onshore Dubai—a departure from the parties’ agreement engaging Article V(1)(d) of the New York Convention. Read together, Teisei and SpaceCom mean that in 2026 Pakistan will enforce genuinely foreign awards, but only where the parties have defined the seat clearly and unambiguously. The ones at a loose end are not for fashion, but for enforcement.
What to Watch in 2026
One thing needs to be considered highly, and two others can’t be ignored. The first is the fate of the Bill. The Bill’s transitional provisions matter as much as its enactment. They should be read alongside a key question: how will proceedings already underway, and awards already rendered, be treated once the new law takes effect? That treatment needs to be clear for both pending arbitrations and those commenced after the amendment. The second is seat strategy. Until the new Act comes into operation, the safer seats for any Pakistan-related contract remain Singapore, London or the DIFC, because, no matter what, a Pakistani seat continues to bring the 1940 Act into play. The third is drafting discipline. The lesson from SpaceCom is that the seat must be clearly defined and separated from the venue of the hearing; and when urgent relief is required, or relief is sought before the tribunal is constituted, parties must remember it cannot be obtained from a Pakistani-seated arbitration.
Outlook
The draft Bill, if adopted in 2026, would make Pakistan for the first time a viable seat for international arbitration, removing the current need to route proceedings elsewhere. Until then, the country’s arbitration map remains split: a Pakistan-seated arbitration stays subject to the court-centric 1940 Act, while foreign awards are enforced under the more predictable 2011 Act implementing the New York Convention. The Bill is also no longer the only reform in play—in July 2026, the Law and Justice Commission of Pakistan recommended a constitutional amendment to establish an International Commercial Court of Pakistan, expressly aimed at strengthening the enforcement of arbitral awards, though it remains only a recommendation to the federal government for now. For cross-border users, what truly matters is the importance of the seat and the precision of the drafting—and the developments to watch most closely in the year ahead are the Bill itself and the proposed commercial court.
ABOUT THE AUTHOR
Fahad Bin Tariq is a Trainee Lawyer at ABS & Co., where his work focuses on arbitration, commercial litigation, constitutional law, and company matters. Fahad is a mentee in the 13th Cycle of the Young ICCA Mentoring Programme and the Young ITA Mentoring Programme.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
