THE AUTHOR:
Wasif Majeed, LL.M, MCIArb, Partner at Lexium Attorneys at Law
The Draft Pakistan Arbitration Act 2024 (“the Draft”) is a proposed legislation aimed at updating and reforming the archaic Arbitration Act in Pakistan, which was enacted in the year 1940. As can be seen from the year of enactment, the 1940 Act predates the entry into force of the New York Convention in 1959 and the adoption of the UNCITRAL Model law in 1985. The Pakistan Arbitration Act, 1940 (“the 1940 Act”) deals only with matters relating to the conduct of arbitration in Pakistan. It does not provide any separate framework for international arbitration or for the enforcement of foreign arbitral awards in Pakistan.
Background: Pakistan’s Arbitration Laws and International Frameworks
While Pakistan was one of the first signatories to the New York Convention in 1958, however, it was ratified by Pakistan only in 2005 through a series of temporary legislations that was finally enacted in the year 2011. This was not done by amending or updating the 1940 Act, but by enacting a sui generis legislation, i.e., the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 (“the 2011 Act”). The 2011 Act only deals with the recognition of arbitration agreements in international contracts and foreign arbitral awards but does not deal with the framework of the conduct of international arbitration. Therefore, there is a legislative void in the Pakistani jurisdiction vis-a-vis international arbitration.
The Draft Pakistan Arbitration Act 2024
The Draft aims to fill that void since, in material terms, it follows the UNCITRAL Model Law and governs both the conduct of domestic and international arbitration seated in Pakistan.
Key Aspects of the Draft
Modernization of Arbitration Laws
The Draft aims to align Pakistan’s arbitration laws with international standards, such as those set by the UNCITRAL Model Law on international commercial arbitration, to facilitate domestic and international arbitration. It also aims to expand the scope of arbitrability by allowing the parties to have any dispute determined through arbitration unless it is contrary to the public policy of Pakistan. Currently, the Pakistani law does not allow such civil disputes to be determined through arbitration for which special courts have been established. The Draft also allows the tribunal to refer the consenting parties to mediation, conciliation, or other forms of ADR procedures during the arbitral proceedings.
Clarity and Efficiency
The Draft introduces clear guidelines and procedures for the arbitration processes, aiming to reduce delays and inefficiencies in resolving disputes. To promote efficiency in the arbitration process, the Draft proposes to confer upon the district courts the original jurisdiction to deal with any matter arising out of the act except in matters relating to international commercial arbitration for which the original jurisdiction lies with the high courts. In this regard, the Draft departs from the current framework, where original jurisdiction in arbitral matters lies with the lower-tier civil courts, and the jurisdiction of the district and high courts is limited to appellate matters. The Draft allows the parties to agree to consolidate two or more arbitration proceedings or to hold concurrent hearings of two or more arbitrations.
Appointment of Arbitrators
The Draft gives the parties autonomy to choose the arbitrator(s) in accordance with their agreement. In the case of any disagreement, the appointment will be done by the high court or by any person or institution designated by the high court. The Draft lays down extensive guidelines in its First Schedule for determining the independence and impartiality of an arbitrator, which is in contrast with the UNCITRAL Model law that provides only a generic provision governing the independence and impartiality of an arbitrator. The guidelines contained in the First Schedule to the Daft are inspired by the International Bar Association’s Rules on the Conflict of Interest in International Arbitration 2014. The various instances impacting the independence and impartiality of an arbitrator have been categorized in the form of lists including a green list (no disclosure required), an orange list (waivable/optional disclosure), a red list (may compromise/mandatory disclosure) and a black list (non-waivable/mandatory disclosure).
Regime for Costs
The Draft proposes a comprehensive regime for costs in international and domestic arbitration. In the context of international arbitration, it binds the tribunal to determine the amount of costs and the payee of such costs unless the parties agree otherwise. Whereas, in the context of domestic arbitration, the tribunal has the discretion to determine the costs. In any case, where such a determination is to be made by the tribunal, it is bound to adopt the general principle that the cost should follow the event. The Draft proposes that any agreement which has the effect of binding only one party to pay the costs should be declared null and void, unless such an agreement is made after the dispute has arisen.
Recognition and Enforcement of Awards
The Draft provides detailed provisions on the recognition and enforcement of awards made in Pakistan. Some of the grounds for setting aside an award mirror the grounds listed in Article V of the New York Convention, however, the Draft also proposes to set aside an award on the ground of patent illegality appearing on the face of the award. Additionally, the proposed draft provides the definition of public policy of Pakistan, which includes matters relating to fraud, corruption, breach of the rules of natural justice, and the violation of the most fundamental norms of morality and justice. An award is to be enforced as a decree of the court upon an application by the award creditor unless the award is set aside, or its enforcement is stayed by the competent court.
Interim Measures
The Draft includes provisions for interim measures that arbitrators can grant during the arbitral proceedings. This power is concurrent with the court’s power to grant such interim measures. Any interim measure ordered by the tribunal can be enforced by the court as an order of the court.
Conclusion
Overall, the Draft Pakistan Arbitration Act 2024 seeks to create a more robust and reliable arbitration framework that fosters a conducive environment for both domestic and international businesses, encouraging investment and economic growth in Pakistan. However, some of its provisions unnecessarily stifle the parties’ autonomy. In this regard, the Draft grants high courts the power to frame regulations for the determination of fees of an ad-hoc tribunal. Furthermore, in a domestic arbitration, it allows the tribunal a time period of 18 months to render an award without giving the parties a right to curtail this time period. This undue limitation will hamper expedited arbitrations in Pakistan. The proposed act is lying with the National Assembly in Pakistan awaiting enactment.
ABOUT THE AUTHOR
Wasif Majeed is an advocate admitted to practice in the Supreme Court and High Courts of Pakistan. He is Partner (Dispute Resolution) at Lexium Attorneys-at-Law, Pakistan. His qualifications include an LL.M in International Dispute Resolution from the University of London. His areas of expertise are international trade law, banking and commercial laws and intellectual property laws.
Mr. Majeed is a member of the Chartered Institute of Arbitrators (CIArb), UK, and an accredited mediator of the CEDR. He currently serves as the ICC YAAF Regional Representative for Pakistan. He also serves as the Chair, Education and Training, of the Chartered Institute of Arbitrators, Pakistan Branch.
*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.
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