Arbitration Law

Arbitration in Pakistan is primarily governed by the Arbitration Act, 1940 and the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011. These laws regulate both domestic and international arbitration proceedings.

1. Domestic Arbitration (Arbitration Act, 1940)

The Arbitration Act, 1940 applies to disputes where arbitration agreements are made in Pakistan and involve domestic matters.

Key Provisions:

1. Arbitration Agreement

   • An arbitration agreement must be in writing.
   • It can be part of a contract or a separate agreement.

2. Appointment of Arbitrators

   • Parties can appoint one or more arbitrators.
   • If parties fail to appoint an arbitrator, the court can do so.

3. Powers of Arbitrators

   • Arbitrators can decide on evidence and procedure.
   • They have the authority to issue awards.

4. Challenging an Award

   • A party can challenge the award in court under limited grounds, such as misconduct by the arbitrator or procedural errors.

5. Enforcement of Awards

   • Awards are enforceable as a court decree unless challenged.

6. Judicial Intervention

   • Courts have the power to review arbitration proceedings and intervene in specific cases.

2. International Arbitration (Recognition and Enforcement Act, 2011)

The Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 aligns Pakistan’s arbitration laws with the New York Convention (1958), which Pakistan ratified in 2005.

Key Provisions:

1. Recognition of Foreign Arbitral Awards

   • Foreign arbitration agreements and awards are recognized in Pakistan.
   • The law applies to awards made in countries that are signatories to the New York Convention.

2. Enforcement of Foreign Awards

   • Foreign arbitral awards are enforceable as if they were local court judgments.
   • Pakistani courts have limited grounds to refuse enforcement, such as:
     
     • The award violates public policy.
     • Lack of proper notice to a party.
     • The arbitration agreement is invalid.

3. Limited Judicial Review

   • Courts cannot re-examine the merits of the award but can review procedural fairness.

3. Key Differences Between Domestic & International Arbitration

4. Institutional vs. Ad Hoc Arbitration

• Ad Hoc Arbitration: Conducted independently by the parties without an institution.
• Institutional Arbitration: Managed by an arbitration center such as:
  
  • Pakistan Centre for Dispute Resolution (PCDR)
  • Lahore Chamber of Commerce & Industry (LCCI) Arbitration Center
  • International Chamber of Commerce (ICC) Arbitration

5. Challenges in Arbitration Law

• Delays in enforcement of arbitral awards.
• Judicial interference despite limited grounds for review.
• Lack of awareness about arbitration among businesses.
• Need for modernization of the 1940 Act to align with international standards.

6. Future Reforms & Recommendations

• Adopting UNCITRAL Model Law to modernize arbitration in Pakistan.
• Strengthening institutional arbitration to promote efficiency.
• Reducing court intervention to make arbitration faster and more reliable.

Conclusion

Pakistan’s arbitration framework provides options for resolving disputes outside the traditional court system. However, the Arbitration Act, 1940 is outdated and needs reforms to align with modern international arbitration practices. The 2011 Act has improved the recognition of foreign awards, but enforcement challenges remain. Strengthening arbitration institutions and reducing judicial intervention can improve dispute resolution efficiency.