International Arbitration

In Pakistan, there are three main laws governing arbitration:

• the Arbitration Act, 1940;
• the Recognition and Enforcement of Foreign Arbitral Awards and Agreements Act, 2011; and
• the Arbitration Protocol and Convention Act, 1937.

The Arbitration Act mainly deals with local arbitrations which are conducted within the geographical boundaries of Pakistan.

The Recognition and Enforcement of Foreign Arbitral Awards and Agreements Act deals with the recognition and enforcement of foreign arbitral awards issued in proceedings with foreign seats of arbitration, to which the Arbitration Act and the Arbitration Protocol and Convention Act do not apply.

The Arbitration Protocol and Convention Act deals with local arbitral awards and foreign arbitral awards which were issued prior to the commencement of the Recognition and Enforcement of Foreign Arbitral Awards and Agreements Act within the geographical boundaries of Pakistan.

The main difference between domestic arbitration and international arbitration concerns limitations on the scope of the statutory regime. As such, there is no international arbitration law in Pakistan – only an enforcement regime for the recognition and enforcement of agreements and foreign arbitral awards.

Unfortunately, Pakistan still has not incorporated the UNCITRAL Model Law on International Commercial Arbitration into local law. Doing so would provide a comprehensive legal framework for international arbitration.

Provisions that are incorporated into Pakistan law become laws of the land and their mandatory and exclusive nature can be interpreted by the wording of the statute. Therefore, there are certain provisions that create exceptions to the general rule. Those exceptions must be interpreted based on the individual circumstances of each case.

A proposed Arbitration Act, 2025 is pending approval by the Senate and will incorporate all necessary modifications required to align this legislation with current needs.

Pakistan is a signatory to the New York Convention. Section 8 of the Recognition and Enforcement of Foreign Arbitral Awards and Agreements Act, 2011 gives effect to the letter and spirit of the convention, which broadens its application to the enforcement of foreign arbitration agreements and foreign arbitral awards issued outside the jurisdiction of Pakistan.

The New York Convention is the sole international treaty to which Pakistan is a party in this sphere.

Pakistan is a signatory to the Exit Convention, which regulates investor-state arbitrations, and has implemented this convention into local law through the Exit Convention Act.

This will depend on the arbitration clause in the agreement, which stipulates the terms of its scope of application – for example, in the event of conflict arising between the parties that leads to such disputes being determined through arbitration.

There are no provisions that restrict the choice of seat of arbitration.

The arbitration agreement must:

• be in writing; and
• clearly set out the governing law and the rules of arbitration to be followed in the arbitration proceedings.

Pursuant to the concept of separability, the Pakistan courts at various instances have declared that the invalidity of an agreement will not affect the validity of an arbitration clause, which continues to be operative if the court declares the remaining part of the agreement invalid.

In case of absence of agreement on the seat or language of the arbitration, the mutual consent of the parties on the seat and language will be operative. If there is no consensus, the matter can be referred to the court to determine where the arbitration should be conducted and in what language. The court’s decision in this regard will become part of the terms of reference for the conduct of the arbitration.

At any stage during the proceedings, a party can raise objections to the jurisdiction of the tribunal, unless the parties have mutually agreed to the contrary as to whether such tribunal will have jurisdiction. Otherwise, the seat of arbitration, including the arbitral institution, will differ from the mutually agreed seat of arbitration as well as the arbitral institution.

The arbitral tribunal can only rule on its own jurisdiction but the validate grounds where all specific jurisdiction is vested with such tribunal in accordance with the arbitration agreement in writing, or where its jurisdiction is not challenged.

Yes – where there is a dispute in the mutual agreement between the parties regarding the jurisdiction of the tribunal.

Under Pakistan law, there are no restrictions as to who can be a party to an arbitration agreement.

Parties that have mutually agreed upon arbitration as a mechanism for dispute resolution must follow arbitration procedures strictly in accordance with the governing rules of the arbitration.

There are no specific provisions of law dealing with multi-party disputes. However, the general provisions of the law are also applicable to multi-party disputes.

The law of the arbitration agreement is generally determined based on the governing law of the contract.

If there is no express clause on the governing law of the arbitration agreement, and if the parties have not agreed on the governing law of the contract, the governing law will be the law of the seat of the arbitration.

The law permits the consolidation of separate arbitrations into a single arbitration proceeding where the matters pertaining to the arbitration are:

• interrelated or connected in terms of subject matter; and
• among the same parties.

The law permits the joinder of additional parties where it is determined that those additional parties meet the test of interested parties with locus standi.

The arbitration agreement under the law binds assignees or third parties where there is:

• a deed of assignment; or
• an express provision pertaining to the successor in interest in the arbitration agreement.

The tribunal is appointed in accordance with the rules of the arbitration to which the parties adhere in the arbitration agreement. For example, if the parties agree on a single arbitrator, that arbitrator:

• will be appointed with the mutual consent of the parties; and
• must have a different nationality from that of the parties.

There are no requirements as to the number or qualifications of arbitrators in Pakistan.

The appointment of an arbitrator can be challenged on the following grounds:

• The arbitrator has a personal connection to one of the parties;
• The arbitrator is insane;
• The arbitrator has indulged in taking benefits from a party; or
• The arbitrator has refused to hear the case on the scheduled hearings.

If the challenge is successful, a new arbitrator will be appointed by the court.

Arbitrators must ensure that:

• the arbitration is conducted in a way that ensures the fairness of the process; and
• there is no bias against any party.

Upon the conclusion of the arbitral proceedings, the arbitrators must also issue the award.

(a) Procedure, including evidence?

An arbitrator can direct the parties to disclose proper evidence. The arbitrator will record the evidence, including oral testimony given by the witnesses.

(b) Interim relief?

An arbitrator will issue interim relief if requested to do so during the arbitration proceedings.

(c) Parties which do not comply with its orders?

(d) Issuing partial final awards?

(e) The remedies it can grant in a final award?

An arbitrator can award the principal outstanding sums to be recovered, including:

• the administrative costs of the arbitration proceedings; and
• the legal fees of counsel.

(f) Interest?

An arbitrator can grant interest for the delay in making outstanding payments.

If a party is continuously absent from the arbitration proceedings, the tribunal may proceed on an ex parte basis.

Arbitrators are generally immune from liability, particularly on the merits of the case. However, if an arbitrator misconducts themselves – for example, by making personal comments, using abusive language or refusing to hear both parties – they may be held accountable.

The courts take a pro-arbitration approach and seek to encourage a culture of arbitration by:

• referring matters to arbitration; and
• ensuring compliance with arbitration by the parties.

The courts will generally stay proceedings and refer the parties to arbitration where the parties have entered into an arbitration agreement.

The courts can stay arbitration proceedings through injunctive orders. The parties refer to matter contrary to the agreement.

The parties cannot exclude the court’s powers, as these powers are mandated under the law.

As a general rule, the losing party pays the costs to the winning party that has secured an award in its favour.

There are no express provisions in the arbitration legislation permitting third-party funding. However, the parties may internally, on a confidential basis, secure third-party funding in their favour.

There are no express provisions in the arbitration legislation permitting third-party funding in Pakistan. However, the parties may internally, on a confidential basis, secure third-party funding in their favour.

The arbitral award must:

• contain a concise statement of facts;
• refer to the evidence presented by the parties through their counsel;
• summarise the arguments of counsel in a comprehensive manner;
• contain a clear conclusion based on the factual and legal analysis;
• specify the quantum of damages with interest and the timeframe within which the specific quantum must be paid by the award debtor; and
• be produced in accordance with the agreed rules of the procedure governing the arbitration.

Yes, as per the agreed rules of arbitration which prescribe the timeframe.

Pakistan became a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 in December 1958. The New York Convention was incorporated into local law through the enactment of the Recognition and Enforcement of Foreign Arbitral Awards Act 2011.

The Recognition and Enforcement of Foreign Arbitral Awards Act defines a ‘foreign arbitral award’ as an award made in:

• a contracting state to the New York Convention; or
• such other state as may be notified by the federal government in the Official Gazette.

The definition of a ‘foreign arbitral award’ thus extends to awards made in non-contracting states which are not party to the New York Convention. This enables parties from a non-contracting state, upon notification in the Official Gazette, to enforce a foreign arbitral award in Pakistan.

Foreign arbitral awards issued prior to 14 July 2005 may be enforced exclusively under the Recognition and Enforcement of Foreign Arbitral Awards Act. Under Section 3, the high courts have exclusive jurisdiction under the act. The high courts rank next to the apex court for undertaking the enforcement of foreign arbitral awards in Pakistan. Section 5 specifically entails a duty to furnish documentary evidence required as prescribed under Article 4 of the convention. Authenticated original copies of the award must also be submitted.

Section 6 of the Recognition and Enforcement of Foreign Arbitral Awards Act imposes a positive obligation on the High Court to recognise and enforce a foreign arbitral award in the same manner as a judgment or order of the Pakistan courts.

A foreign arbitral award that is enforceable will have obligatory application among and between the parties to the foreign arbitration agreement. Section 7 of the Recognition and Enforcement of Foreign Arbitral Awards Act reaffirms the court’s positive obligation to enforce a foreign arbitral award (see FAL Oil Company v Pakistan State Oil Company PLD 2014 Sind 427, in which the Sind High Court enforced a foreign arbitral award in Pakistan).

Article V(1) of the New York Convention sets out the grounds that must be proven by a party to successfully resist enforcement of the award. It provides that enforcement of the award may be refused in any of the following circumstances:

• A party to the arbitration agreement was under some incapacity;
• The arbitration agreement was invalid;
• The procedure before the arbitral tribunal was affected by procedural unfairness;
• The award deals with issues that fall outside the scope of the submission to arbitration;
• The composition of the arbitral authority or the arbitral procedure was not in accordance with:
• • the agreement of the parties; or
  • absent such an agreement, the law of the seat of arbitration;
• The award has not yet become binding on the parties; or
• The award has been set aside in the country in which it was made.

The award debtor should check whether:

• the procedure set out in Article 4 of the New York Convention has been complied with by the claimant; and
• the award has been issued by the courts of a contracting state – if the courts of a non-contracting state have issued the award, notification in the Official Gazette will be required.

The parties cannot exclude the rights of challenge or appeal, as the decision of the high court may be appealed to the Supreme Court.

All arbitration proceedings are conducted on a confidential basis.

Only where there is a court order for disclosure.