Arbitration in Pakistan

Not much needs to be said about the importance of judiciary in any particular state. In Pakistan where the governmental system is much like that of the USA where all the three arms of the government are bound to each other in a relationship that does not give any other arm extra strength. Unlike our legal and colonial godfather UK, the Pakistani constitution does not practice parliamentary supremacy. The obvious question that any one would ask in this case is how to strengthen the judicial system which seems to be very ineffective at times.

 Consider the difference between the case lists in Pakistan and USA. We go to courts here and the average district judge has the responsibility of listening to around 60 cases daily. Now let us fly our selves to New york where when you go with a dispute to a court, the concerned parties are automatically referred to licensed alternative dispute resolution practitioners or retired judged. The arbitrators, mediators or reconciliators listen to the cases and pass a judgment which if further contested goes to the court. However the result is that around 90% of the disputes are resolved at the very first stage leaving the courts with important matters where the judges can give their full concentration to the case at hand and resolve it in a speedy and just manner.

Pakistani law does indeed provide for such alternative dispute resolution under the Arbitration Act 1940 but it is dependent on there being an arbitration agreement between the concerned parties. This act was a huge step back in 1940 but today we live in 2011 where arbitration has become a common and even necessary means of dispute resolution and international arbitration centers have emerged all over the world. Our 1940 act remains outdated when compared to the UK’s Arbitration Act of 1995 where we see that our courts have terrific discretions to interfere with any arbitral proceedings and they don’t shy from using that discretion either. The result has been Pakistan being classified as an “arbitration blackspot” because of Pakistan’s failure to update its laws to incorporate modern norms. 

 

As per section 11 of the 1940 Act appointed arbitrators can be removed by the courts. The court interference results in arbitral awards being regularly challenged in the courts and their implementation has to be done through the courts themselves under Section 17. The Court may modify the arbitral award (section 15), remit the award for reconsideration by the arbitrators (section 16) or even set it aside (section 30). The Act in general is almost completely silent on the procedure of arbitration and contains no direction on treatment of evidence and matters relating to disclosure.

These problems remain despite Pakistan being a signatory to the New York Convention and the Washington Convention on Arbitrations. These conventions have been ratified but adequate steps to implement the laws within these conventions have still not been taken. The Pakistani Supreme court was the world’s first court to award an injunction against ICSID arbitration which is a form of arbitration not subject to any interference by the national courts.

Whereas the interference by the Pakistani courts into arbitrations has hampered the process of the development of formal alternative dispute resolution forums, they cannot altogether be blamed. The need arises because the arbitration setup within Pakistan is very haphazard and scattered. Due to a lack of formal knowledge arbitrators themselves are often in violation of standard procedures and crafty lawyers draft agreements that allow a concerned party to become an arbitrator in his own case. The present nature of the unfair arbitrations being conducted allow the court’s interference as a relief incase injustice has been committed. In addition the New York and Washington Convention are often seen as conventions that were organized to safeguard the investments of foreign companies in a particular country. Their implementation has been minimized in Pakistan to prevent political upheavals.

It is suggested that in the case of Pakistan the courts should establish arbitration forums that are run by former judges and experienced lawyers. The lawyers appearing in arbitration proceedings should not be members of the bar councils thereby barring litigating and they should be solely arbitration lawyers. In addition any particular lawyer or judge should have not more than three arbitration cases at a time to prevent delays.

The possible success of court organized arbitration can be evidenced by an experiment in alternative dispute resolution conducted in the Lahore High Court in the year 2000. The then Chief Justice Mian Allah Nawaz ordered for the instituting of a mediation and conciliation forum for family law matters. In three months 16000 cases were disposed off as apposed to the normal rate of around 1000 in courts. This success was lauded by several international forums including the World Bank and replicated in other countries. Sadly not only was this institution abolished but no other was ever made in its place.