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Khan & Co Barristers-at-Law advise on all aspects of arbitration. In view of the fact that we have a concentration in UK law, we also advise clients on the effects of the UK’s Arbitration Act 1996. As an international law firm, Khan & Co Barristers-at-Law have a particular acumen for dispute resolution matters connected to the established centres of arbitration such as the London Court of International Arbitration, International Chamber of Commerce, the London Maritime Arbitrators Association, the Grain and Feed Trade Association, the Singapore International Arbitration Centre, the Hong Kong International Arbitration Centre, the Dublin International Arbitration Centre and the International Centre for Settlement of Investment Disputes. Should you require any advice or assistance in relation to whether to have an arbitration clause in your agreement or whether you would like to decide on where to designate the seat for the arbitral clause, we are here to help you in every way.
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As it became a signatory on 30 December 1958 ratified it on 14 July 2005, Pakistan is a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. The New York Convention came into force on 12 October 1960. It was initially implemented through the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Ordinance 2005. The 2005 Ordinance was a temporary in nature and in 2011 the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 took its place. The 2011 Act allows qualifying awards to be enforced mechanically.
Under Article I of the New York Convention, Pakistan declared that the Convention will apply to the recognition and enforcement of awards made only in the territory of another contracting state. Pakistan is also a party to the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965, the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927 (the Geneva Treaties). However, the Geneva Treaties do not apply to arbitration agreements and awards to which the New York Convention applies.
Pakistan is a party to 48 bilateral investment treaties with other countries, 31 of which are in force. Pakistan is also a party to several multilateral treaties on investments, including the South Asia Free Trade Area Accord, the Agreement on the Promotion and Protection of Investments among Member States of the Economic Cooperation Organisation, and the Agreement on Promotion, Protection and Guarantee of Investments among the Member States of the Organisation of Islamic Conference.
Arbitration law is generally governed by the 1940 Act and the recognition and enforcement of foreign awards is governed by the 2011 Act. There is no particular legislation in Pakistan pertaining to foreign arbitral proceedings. The 1940 Act does not specifically cater to foreign arbitral proceedings. So its application has at times resulted in court decisions that are perceived to be unfavourable to the development of international arbitration.
In the case Hitachi Ltd v Rupali Polyester, 1998 SCMR 1618, the Supreme Court of Pakistan held that, notwithstanding that an arbitration clause provided for the place of arbitration to be London, arbitral proceedings and the resulting award from such proceedings were domestic if they were pursuant to an arbitration agreement embedded in a contract governed by the laws of Pakistan. This decision was partly based on the Arbitration (Protocol and Convention) Act 1937, which implemented the Geneva Treaties. Section 9(b) of the 1937 Act provided that the 1937 Act (and therefore the Geneva Treaties) would not apply to any award made on arbitration agreements governed by the law of Pakistan.
It was thought that this position would change after the 2011 Act, which makes the New York Convention an integral part of it. Section 2(e) of the 2011 Act defines a “foreign arbitral award” as an arbitral award made in a contracting state and such other state as may be notified by the federal government in the Official Gazette. Section 8 provides that in the event of any inconsistency between the REA 2011 and the Convention, the latter will prevail. Accordingly, as per article 1, since the Convention applies to arbitral awards made in the territory of a state other than Pakistan, it was thought that any related arbitral proceedings seated in another state would be considered foreign. However, the Lahore High Court in Taisei Corporation v AM Corporation, PLD 2012 Lahore 455, following Hitachi, held that in light of the proper law of the contract being Pakistani law, the arbitration agreement was also governed by Pakistani law; therefore, the award was domestic, despite the place of arbitration being Singapore. This decision has been challenged in appeal before the Supreme Court of Pakistan where it is pending regarding the applicability of the 2011 Act to awards made abroad but rendered pursuant to an arbitration agreement governed by Pakistani law.
The 1940 Act only recognises interim and final awards. A decision on interim measures is not recognised as an interim award. Although an interim award is usually subject to a final award, in Burjorjee Cowasjee & Co v New Hampshire Insurance Company, 1992 CLC 1269, the Sindh High Court treated an interim award as not only binding but also enforceable to the extent of the decided issue. This suggests that interim awards under the 1940 Act may also be treated by the courts as partial awards, final to the extent of the decided issue for immediate enforcement. The Supreme Court of Pakistan in its recent decision in Gerry’s International (Pvt) Ltd v Aeroflot Russian International Airlines, 2018 SCMR 662, restated and clarified the principles on which an arbitral award can be set aside by a court under the Arbitration Act 1940. The Supreme Court confirmed that an arbitrator is the sole judge of all questions, both of law and fact; and a court could not review the award, nor entertain any question as to whether the arbitral tribunal decided properly on a point of law. However, it held that a court could set aside the award if there was an error, factual or legal, on the surface of it.
In the case of Louis Dreyfus Commodities Suisse SA v Acro Textile Mills Ltd, PLD 2018 Lahore 597, the Lahore High Court clarified the procedure and correct approach for the national courts to take in matters of enforcement of foreign arbitral awards. The High Court held that the general pro-enforcement bias of the New York Convention and the 2011 Act was “the underlying thrust to liberalise procedures for enforcing foreign arbitral awards”, and that Pakistani courts should shun a tendency to view an application for enforcement with scepticism, and consider the arbitral award as having a sound legal and foundational element. It further held that the policy of the 2011 Act required it to dispose of issues in enforcement proceedings by the usual test for summary judgment, and not by a regular trial. This decision dispels the previous impression that the procedure for enforcement of foreign awards required a full trial.
A party must make an application to the court to direct the arbitral tribunal to file the award in court within 90 days of the notice given by the tribunal to the parties that the award has been made (article 78, First Schedule to the Limitation Act 1908). There is no specific time limit specified under the REA 2011 for making an application for enforcement of a foreign award. In such circumstances, it is likely that the general rule will apply (ie, an application – for which no period of limitation is provided – must be made within three years from the date the right to apply accrues).
Article V(1)(e) of the New York Convention is deemed a part of the 2011 Act, thus an award being set aside in the country where it was made is a valid ground for refusing enforcement. However, no such case has come before the courts of Pakistan as yet to determine the view of the courts.