1. In our previous article titled "Pakistan: Resolution of Disputes in Construction of Infrastructure Projects Under FIDIC Regime Through Arbitration in Pakistan" we concluded by taking the reader through the essential steps of arbitration proceedings in Pakistan, leading up to the final award of the arbitrator. In this article we will be delineating the further steps needed for proper implementation and enforcement of the final award of the arbitrator/arbitration tribunal.
2. DELAYS IN AND TIMELY CONCLUSION OF ARBITRATION PROCEEDINGS
2.1. Prior to going into detail over the legal procedures in enforcing the arbitration award, we must first examine the matter regarding the time limit for conclusion of the arbitration proceedings, which is also of considerable importance.
2.2. Ideally, and in accordance with serial No. 4, Schedule I of the Arbitration Act 1940 (the "Arbitration Act"), the arbitration proceedings are to be concluded within a period of 4 months. However, this is far from what actually happens and this delay is attributable to multiple reasons. A major determining factor in the time consumed for arbitration is the attitude and diligence of counsel representing the parties to the dispute, the parties themselves, and the arbitration tribunal. The spirit of arbitration is for the expeditious resolution of proceedings, as opposed to adjudication from courts, the latter being a laborious process.
2.3. The matter of conclusion of arbitration proceedings within four months is obviously not a hard and fast rule and parties can have the proceedings extended either by the consent of both parties during the arbitration proceedings, or through an application before the court for extension of time under section 28 of the Arbitration Act. In the case of an application before the courts under section 28, we find that the courts are quite lenient towards extending the time in the interest of substantive justice and the adjudication of disputes on merits.
2.4. The actual time required for conclusion of the proceedings depends greatly on the diligence and efforts put in by the counsel from the claimant side, who has the most to gain from timely completion of the arbitration proceedings and finalization of the arbitration award. A dedicated and diligent effort on part of the counsel ensures that the arbitration tribunal gives shorter dates and also puts pressure on the respondent to be prepared for substantive proceedings on the dates fixed by the arbitration tribunal. On the contrary, a laid-back attitude of the claimant and its counsel only allow for the proceedings to be unduly delayed and extended as the arbitrators are neither under any scrutiny or pressure to make timely awards, nor are they pushed to expedite the proceedings. On the other hand, respondents also prefer to keep the matter in limbo as expeditious resolution of disputes does not necessarily lead to any payment to them.
3. RULE OF COURT PROCEEDINGS AFTER THE AWARD HAS BEEN PRONOUNCED
3.1. Once the arbitration tribunal has pronounced its award, the Arbitration Act requires the arbitration tribunal to file it in court for approval, which means making the arbitration award a "rule of court". The arbitration tribunal is empowered to file the award in court itself, however the superior courts have also allowed parties to file the award as well, provided they are authorized by the arbitration tribunal. Normally, in construction law related disputes, arbitrations are adjudicated upon by engineers, who prefer having the award filed by the parties themselves.
3.2. Once the arbitration award is filed in court, the court is under an obligation to review the award and thereafter either make it a rule of the court by upholding it, or set it aside on its own accord or upon objections raised by the respondent. Another possibility for the court is to remit the matter back to the arbitration tribunal regarding any issue that it feels has not been decided properly and/or is left incomplete. The courts are empowered to direct the arbitration tribunal to decide the entire matter afresh or to decide a certain issue that has been left undetermined therein.
4. CONSIDERATIONS FOR UPHOLDING AND SETTING ASIDE OF ARBITRATION AWARDS BY COURTS
4.1. The matter regarding upholding or setting aside an arbitration award as laid down in the Arbitration Act is not very detailed, however it has been sufficiently elaborated upon though several decades of jurisprudence of the superior courts of Pakistan. The courts generally uphold and set aside arbitration awards on the following principles and considerations:
4.1.1. The main issue that courts are concerned with is whether the arbitration award provides substantial justice in deciding the dispute between the parties, and if so, the courts tend to be very hesitant in setting aside arbitration awards on procedural technicalities. In any case, it should be noted that procedural technicalities as laid down in the Civil Procedure Code or laws of evidence of Pakistan, such as the Qanoon e Shahadat Order of 1984, clearly state that they do not apply to the arbitration proceedings;
4.1.2. Arbitration is the ultimate adjudication stage regarding all questions of law and fact between the parties, as by ousting the jurisdiction of the ordinary courts, the parties have instead chosen their own forum to settle their dispute. Courts lack jurisdiction to look into merits of the case and therefore are inclined to not set aside the arbitration award, even when the court may arrive at a different conclusion from that arrived at by the arbitration tribunal;
4.1.3. All that the arbitration tribunal is bound to do is to ensure that it upholds rules of natural justice in concluding the arbitration proceedings, meaning thereby, that both parties have got an equal opportunity of producing evidence and presenting their arguments. The courts therefore have a very high threshold for setting aside an arbitration award. The only grounds available to a party contesting the arbitration award and to have it set aside are that the arbitration tribunal had a bias against the objecting party, and/or the arbitration tribunal misconducted itself or the proceedings in any other way;
4.1.4. Courts have also opined that the arbitration awards have more sanctity than the judgments of courts, as even a superior court's judgment can be challenged on merits before different superior courts, through an appeal or review, while the award of an arbitration tribunal cannot be questioned or challenged on merits;
4.1.5. Courts have further laid down that they should have all inclinations towards upholding the arbitration awards as opposed to vitiating it because it is a forum that the parties choose themselves and once this forum gives its verdict the parties are bound to respect it;
4.1.6. On a number of occasions, courts have reprimanded the government authorities for unduly challenging arbitration awards through frivolous objections in courts as a standard procedure. Courts have observed that once parties agree to resolve their disputes through their private arbitration tribunals they lose the right to challenge that adjudication unless there is a serious violation of the principles of natural justice in view of a misconduct by the arbitration tribunal;
4.1.7. While it is the court's duty to apply its mind in reviewing awards and any objections raised against the same before making it a rule of the court, courts also prefer to not dig very deep into factual controversies of the dispute as that is considered to be the domain of the arbitration tribunal. The courts rarely scrutinize the process chosen by the arbitration tribunal when arriving to its decision, and when they do it is to a very limited extent;
4.1.8. It is crucial to appreciate that there are no specific requirements for the arbitration tribunal to come good on any specific formalities. If the court is satisfied after perusal of the relevant document and records that the arbitration tribunal has decided the matter after giving adequate opportunity of hearing to the parties, it will then proceed to uphold the arbitration award. In similar vein, it may also be mentioned that arbitration tribunals are not required to specifically refer to all the evidence that they have relied upon. However, this does not mean that the award can be based on extraneous considerations. The reason for not creating a strict requirement of recording evidence is that arbitrators do not always have the same understanding of these intricate technicalities as a lawyer or a judge, and therefore they are not expected to write the award as a competent judicial officer would. As the final arbiter of the dispute, the arbitration tribunal is the sole adjudicator of the quality and quantity of evidence and if it decides a matter in favor of one party upon being satisfied with the evidence produced, then courts respect such adjudication;
4.1.9. Arbitration tribunals are also not expected to address each and every issue in their awards to ensure that they make a speaking award. All that the courts require is for the arbitration awards to substantiate and back the conclusions with logical reasoning and that the arbitration awards are not perverse in any way;
4.1.10. Courts always attach a presumption of correctness to the arbitration awards while reviewing the same, and therefore any procedural or technical matters that do not have any material or substantive effect cannot become the basis for setting aside arbitration awards;
4.1.11. One of the grounds for setting aside an arbitration award is that there is perversity in the same and upholding it would make a mockery of justice. However, even for that to occur the party alleging such perversity has to prove the perversity alleged through evidence. Doing so would defeat the crucial requirement of ensuring substantial justice;
4.1.12. In case the court suspects that the arbitration tribunal committed some serious miscarriage of justice through personal misconduct or by misconducting the proceedings, the court then has the discretion of framing an issue for leading evidence for proving such misconduct before setting aside the arbitration award;
4.1.13. Courts have even gone on to hold that an arbitration award can only be set aside where the objecting party can prove that the arbitration tribunal misconducted the proceedings on purpose, and there was a deliberate disregard of the law. Minor mistakes in application of the law would not nullify an arbitration award as long as substantive justice is done;
4.1.14. In order for a party to successfully have an award set aside, the error must be apparent on the face of the arbitration award, meaning thereby that the arbitration award must be bad at the very outset and the same need not be proved through detailed fishing of records and evidence;
4.1.15. In order to explain the position of the courts in looking at the validity of an arbitration award, courts have time and again reiterated that in rule of court proceedings the courts do not sit as a court of appeal and do not have the same powers as that of an appellate court. The importance of this statement can be understood from the fact that an appellate court generally has the discretion to get into each and every aspect of the controversy which is similar to the authority of the trial court;
4.1.16. Generally, for setting aside an arbitration award the courts examine whether there an error so glaring that it cannot be overlooked, and if it is overlooked it would result in the miscarriage of justice. The reason for this is that the main focus and concern for the courts is to be satisfied that the arbitration award has done substantial justice in resolving the dispute between the parties, and if that is done it is difficult to convince a court to set aside an arbitration award;
4.1.17. However, on occasion the courts have also stressed that they are not supposed to simply "rubber stamp" arbitration awards. That they are supposed to examine the arbitration awards and proceedings to determine whether the dispute has been decided properly. Such judgments have created a vagueness in the law, and even upon examination of the Arbitration Act, we see that a lot of discretion has been left to the courts. This has led to uncertainty in the law, which leads to a negative environment for investors.
5. EXECUTION PROCEEDINGS
5.1. In case a court proceed to make the arbitration award a rule of court, the party against whom the arbitration award is pronounced (referred to as the "Judgement-Debtor" in execution proceedings) is directed to satisfy the same. However, this rarely happens in practice and the successful party (referred to as the "Decree-Holder" in execution proceedings) has to resort to execution proceedings to have the arbitration awards actually satisfied. In order to evade the obligation of satisfying the arbitration award, the Judgement-Debtor challenges the rule of court decision before the superior courts in the form of an appeal. As such if the appellate court grants an interim injunction to the execution proceedings, then the execution court is restrained from implementing the award. In the alternative, in the event a stay has not been granted then execution proceedings can be conducted in parallel to the appeal.
5.2. If the court proceeds to set aside the arbitration award due to misconduct by the arbitration tribunal, parties are at liberty to restart the arbitration proceedings afresh. This is because the rejection of the arbitration awards is not on merit, and is instead due to the arbitration tribunal's misconduct.
5.3. Again, both the pace at which arbitration proceedings result in an award and the materialization of the fruits of an award depend heavily on the efficiency and diligence of counsels representing the parties, the parties themselves, and the arbitration tribunal. It is a system which is used frequently in Pakistan and is by and large, through decades of jurisprudence, relatively more successful than the ordinary courts in providing efficient relief to parties to a dispute.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.