This article was featured in Jus Mundi‘s 2025 Arbitration Year in Review, an annual publication analyzing arbitration developments across 40+ jurisdictions on 6 continents. This edition brings together young practitioners and senior experts to capture the year’s most significant legislative reforms, enforcement trends, and institutional innovations.
THE AUTHORS:
Ammad Manzur, Advocate at the High Courts of Pakistan
In its seminal judgment of Taisei v. AM Construction, 2024 SCMR 640 (“Taisei”), the Supreme Court of Pakistan firmly established that the location of the seat will determine which law is to apply to a given arbitration. Accordingly, arbitrations seated in Pakistan are governed by the Arbitration Act, 1940 (the “1940 Act”), while those seated abroad and subject to the New York Convention (1958) (the “NYC”) are subject to the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 (the “2011 Act”).
Pakistan’s superior courts have made great strides in recent years, delivering pro-arbitration judgments and recognizing the pro-enforcement bias of the NYC as part of the country’s jurisprudence. That said, it has long been felt that the country’s arbitration regime is in dire need of reform, as the 1940 Act is a relic of the colonial era. To address this, the Law and Justice Commission of Pakistan formed the Arbitration Law Review Committee (the “ALRC”), comprising subject-matter experts, and tasked it with preparing a modern arbitration legislation. After extensive consultations, the ALRC prepared the Draft Arbitration Act, 2024 (the “Draft Act”), which is based on the UNCITRAL Model Law on International Commercial Arbitration 2006 (the “Model Law”). The proposed law has been awaiting enactment since May 2024, and the Supreme Court of Pakistan most recently renewed the call for its promulgation in Kausar Rana v Qatar Lubricants, 2025 SCLR 27.
Notably, the Draft Act’s scope of application is limited to arbitrations seated in Pakistan. Therefore, upon enactment, the proposed law will only repeal the 1940 Act, while the regime for foreign-seated arbitrations will remain largely unchanged.
The Draft Act
A key feature of the Draft Act is its foundation on the principle of judicial non-intervention. This principle is enshrined in Section 6 of the Draft Act, which states that no court or judicial authority may intervene in the arbitral process, except to the limited extent expressly provided in the proposed law.
Thus, party autonomy is paramount under the Draft Act. This marks a significant departure from the regime under the 1940 Act, which was generally perceived as not conducive to the arbitral process with undue court intervention.
Consistent with this approach, the proposed law gives primacy to the parties’ chosen arbitral tribunal, while courts are assigned a subsidiary role. A few of its key features are discussed below.
Determination of the Arbitral’s Jurisdiction
Section 18 of the Draft Act codifies the principle of competence-competence, pursuant to which the arbitral tribunal determines its own jurisdiction with respect to any dispute referred to it.
Limitations have also been placed on the right to contest the arbitral tribunal’s jurisdiction. Under Section 18(2), pleas contesting jurisdiction in general (including those relating to the existence or validity of an arbitration agreement) must be raised before submission of the statement of defence. Section 18(3) provides that a plea asserting the arbitral tribunal has exceeded the scope of its authority must be made as soon as the matter arises during the arbitral proceedings.
More importantly, unlike the Model Law, the arbitral tribunal’s finding on jurisdiction may not be appealed but only set aside on the limited grounds as provided under Section 39 of the Draft Act.
Limited Role of Courts During the Arbitral Proceedings
Section 10(3) of the Draft Act ousts the jurisdiction of courts to grant interim relief once the arbitral tribunal has been constituted.
This bar on court jurisdiction may only be overcome if the party seeking interim relief satisfies the court that the arbitral tribunal is unable to grant “adequate interim relief”. Notably, no such ouster of court jurisdiction is provided for under the Model Law. Article 9 of the Model Law states that seeking interim relief from the court is not incompatible with the parties’ arbitration agreement. The jurisdictional bar has been inspired by the Indian Arbitration and Conciliation Act, 1996 (the “IAA”), which, like Pakistan, also struggled with undue court interference in the arbitral process under its earlier version.
Further, under Section 19 of the Draft Act, arbitral tribunals are empowered to grant interim measures. Drawing on the Singaporean arbitration law, the Draft Act recognizes emergency arbitration by including it within the definition of “arbitral tribunal.” Given these broad powers, court intervention would be limited to the most extreme cases.
Setting Aside of Awards on Limited Grounds
Perhaps the most significant feature of the Draft Act is that, once the arbitral award has been rendered, it restricts the power of courts to set it aside only on the limited grounds stipulated in Section 39. These grounds largely mirror those provided under the Model Law and thus align Pakistan’s regime with the NYC in respect of domestic-seated arbitrations with a foreign nexus.
The only additional ground not contemplated under the Model Law is the power of the courts to set aside awards on the ground of patent illegality. Once again, this change from the Model Law has been adopted from the IAA.
Nevertheless, the patent illegality ground is very limited in its application, as it cannot be invoked in the context of “international commercial arbitrations”. These include Pakistan-seated arbitrations with a foreign nexus (e.g., where one of the parties is resident abroad) and, in the absence of such a nexus, arbitrations designated as such by the parties through agreement.
The 2011 Act
As noted above, the 2011 Act governs foreign-seated arbitrations that are subject to the NYC. The legislation itself, however, is very scant, with its substantive provisions spanning just two pages. The remainder of the law appends the NYC as a schedule, with Section 8 stipulating that the latter should prevail in case of conflict between the two.
It is therefore puzzling why the ALRC chose to exclude the 2011 Act from the scope of its review in its effort to overhaul Pakistan’s arbitration regime. This is especially so because the operation of a few of the Draft Act’s provisions have specifically been extended to foreign-seated arbitrations, to address certain deficiencies found under the 2011 Act. For instance, the power of courts to order interim relief under Section 10 of the Draft Act has also been extended to foreign-seated arbitrations, since one cannot seek such relief under the 2011 Act. Having identified the2011 Act’s deficiencies, it is safe to assume that the ALRC was also aware of the law’s other drawbacks, not least its many drafting issues with which the courts are still grappling.
Notwithstanding the above, the ALRC consciously refrained from overhauling Pakistan’s foreign-seated arbitration regime, citing the trend of pro-arbitration judgments from superior courts as the reason for doing so. Recent competing judgments, however, call into question whether such a piecemeal development of the law is desirable.
Significant Cases
SpaceCom v Wateen Telecom (“SpaceCom”)
This case concerned the enforcement of arbitral awards rendered nearly six years earlier by a DIFC (Dubai International Financial Centre)-LCIA (London Court of International Arbitration) tribunal, which was being contested by the award debtor under Section 7 of the 2011 Act. It was argued that the arbitrator had wrongly assumed jurisdiction over the dispute, since he had designated the DIFC—an economic zone in the city of Dubai—as the seat of arbitration, despite the parties’ arbitration agreement providing that disputes were to be resolved “through arbitration in Dubai, UAE.”
The Lahore High Court (the “LHC”) agreed with the award debtor, holding that the correct seat of arbitration in the circumstances was onshore Dubai, not the DIFC. It reasoned that the sole arbitrator’s wrong seat designation violated Article V(1)(d) of the NYC, and, as a result, this assumption of jurisdiction was defective. Consequently, recognition and enforcement of the awards were refused.
Setting the Dial Back on Pro-Enforcement Jurisprudence
Quite apart from the fact that the LHC relied heavily on the English judgment of Dallah v Pakistan, which has since been statutorily reconsidered in the UK, the judgment conflicts with the established pro-enforcement jurisprudence mandated by the Supreme Court of Pakistan under the 2011 Act. In Taisei v AMC, the author judge was at pains to point out that the grounds for refusing recognition and enforcement of awards under Article V of the NYC are not mandatory but merely permissive in nature.
SpaceCom was arguably an instance where the permissive nature of the refusal grounds required that the awards nevertheless be recognised, as the alleged defective seat determination did not otherwise affect the awards rendered. It is also worth noting that the parties’ chosen arbitration rules provided that the question of jurisdiction was to be determined by the arbitrator, which could not later be challenged.
Zaver Petroleum v Saif Energy 2025 CLD 695
This case concerned the enforcement of arbitral awards rendered by an arbitrator appointed under the London Court of International Arbitration Rules, 2020 (the “LCIA Rules”).
Although the award creditor’s application for enforcement of the awards under Section 6 of the 2011 Act was accepted, the reasoning employed by the Islamabad High Court (the “IHC”) highlights the issues associated with relying on a piecemeal development of the regime under the 2011 Act.
Which Court?
On the basic question of which court a party is to approach to file a stay of proceedings injunction against in an instance where the opposing party had filed a suit before a local court, the IHC struggled considerably with the (unfortunate) drafting of the 2011 Act.
This is because while the 2011 Act allows the filing of such an injunction (consistent with Article II (3) of the NYC), it is not at all clear as to which forum is to entertain such an application. For starters, the term “Court” has been defined in Section 2 (d) to mean High Court and other superior courts notified by the Federal Government. Thereafter, Section 3 of the 2011 Act, which deals with the exclusivity of jurisdiction of the High Court(s) over all “matters related to arising from this Act”, provides that such an application “may be filed in the Court, in which the legal proceedings are pending”. Confusingly, however, the very next provision, Section 4, states that such an injunction may also be applied “to the court in which proceedings have been brought”. Thus, leading one to wonder whether a party seeking such an injunction is to approach the “Court” defined in Section 2 (d) of the 2011 Act (i.e., a High Court of relevant jurisdiction) or any “court” which is seized of such an action.
The IHC held that both Sections 3 (2) and 4 of the 2011 Act point to the same provision of the NYC, namely, Article II (3). The said Article II (3) requires the relevant court before which proceedings have been brought in violation of an arbitration agreement to stay the same. Thus, the IHC reasoned that use of the defined term “Court” in Section 3 (2) did not imply that such an application may only be filed before a High Court. Instead, a stay of proceedings application could be filed before any court, where an action in violation of the arbitration agreement had been brought.
Notably, in reaching its conclusion, the IHC specifically disagreed with the reasoning employed by the LHC in its earlier judgment of Tradhol International v Shakarganj Limited, 28 April, 2023 (“Tradhol”). In Tradhol, the opposite result was reached, with the LHC ruling that the term “court” in Section 4 was to be read as the High Court.
Needless to say, the divergent views from Lahore and Islamabad are hardly helpful for a party anxiously seeking to enforce its arbitration agreement in an instance where the opposing party has brought proceedings before a court in violation thereof.
Which Seat?
One of the grounds on which the award debtor contested the recognition and enforcement of the awards was the arbitrator’s designation of London as the seat of arbitration.
The IHC, however, paid short shrift to this argument. While rejecting this contention, the judgment referred to the parties’ chosen arbitration rules, namely, the LCIA Rules. Specifically, Article 16.2 of the LCIA Rules provides that in case there is no agreement between the parties as to the seat of arbitration, the default seat is London. Thus, the arbitrator’s choice of seat was upheld.
This is a markedly different result from the LHC’s judgment in SpaceCom, where awards were refused recognition on this very basis—and no mention was made of the fact that the parties’ chosen arbitration rules stipulated the DIFC as the default seat and that the arbitrator’s finding of jurisdiction was not open to challenge.
Concluding Remarks
The enactment of the Draft Act would no doubt go a long way to modernizing Pakistan’s domestic arbitration landscape. However, in the absence clear legislative mandate under the 2011 Act, coupled with the legislation’s many drafting complications, one can hope that the superior courts propound consistent jurisprudence which is conducive to the enforcement and recognition of foreign arbitration agreements and arbitral awards in Pakistan.
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ABOUT THE AUTHORS
Ammad Manzur is an Advocate of the High Courts of Pakistan, with a wide-ranging experience in both contentious and non-contentious commercial law. He has a keen interest in international arbitration and has represented clients in cross-border disputes before international arbitral tribunals as well as in associated litigation before courts. His qualifications include an LL.M. in International Commercial Law from the Brunel University London.
*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.
