1 Legal framework
1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?
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.
1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?
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.
1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?
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.
1.4 Are all provisions of the legislation in your jurisdiction mandatory?
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.
1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?
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.
1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?
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.
1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?
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.
2 Arbitrability and restrictions on arbitration
2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?
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.
2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?
There are no provisions that restrict the choice of seat of arbitration.
3 Arbitration agreement
3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?
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.
3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?
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.
3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?
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.
4 Objections to jurisdiction
4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?
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.
4.2 Can a tribunal rule on its own jurisdiction?
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.
4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?
Yes – where there is a dispute in the mutual agreement between the parties regarding the jurisdiction of the tribunal.
5 The parties
5.1 Are there any restrictions on who can be a party to an arbitration agreement?
Under Pakistan law, there are no restrictions as to who can be a party to an arbitration agreement.
5.2 Are the parties under any duties in relation to the arbitration?
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.
5.3 Are there any provisions of law which deal with multi-party disputes?
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.
6 Applicable law issues
6.1 How is the law of the arbitration agreement determined in your jurisdiction?
The law of the arbitration agreement is generally determined based on the governing law of the contract.
6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?
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.
7 Consolidation and third parties
7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?
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.
7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?
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.
7.3 Does an arbitration agreement bind assignees or other third parties?
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.
8 The tribunal
8.1 How is the tribunal appointed?
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.
8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?
There are no requirements as to the number or qualifications of arbitrators in Pakistan.
8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?
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.
8.4 If a challenge is successful, how is the arbitrator replaced?
If the challenge is successful, a new arbitrator will be appointed by the court.
8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?
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.
8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?
(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.
8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?
If a party is continuously absent from the arbitration proceedings, the tribunal may proceed on an ex parte basis.
8.8 Are arbitrators immune from liability?
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.
9 The role of the court during an arbitration
9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?
The courts will generally stay proceedings and refer the parties to arbitration where the parties have entered into an arbitration agreement.
9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?
The courts can stay arbitration proceedings through injunctive orders. The parties refer to matter contrary to the agreement.
9.3 Can the parties exclude the court's powers by agreement?
The parties cannot exclude the court's powers, as these powers are mandated under the law.
10 Costs
10.1 How will the tribunal approach the issue of costs?
As a general rule, the losing party pays the costs to the winning party that has secured an award in its favour.
10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?
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.
11 Funding
11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?
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.
12 Award
12.1 What procedural and substantive requirements must be met by an award?
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.
12.2 Must the award be produced within a certain timeframe?
Yes, as per the agreed rules of arbitration which prescribe the timeframe.
13 Enforcement of awards
13.1 Are awards enforced in your jurisdiction? Under what procedure?
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).
14 Grounds for challenging an award
14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?
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.
14.2 Are there are any time limits and/or other requirements to bring a challenge?
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.
14.3 Are parties permitted to exclude any rights of challenge or appeal?
The parties cannot exclude the rights of challenge or appeal, as the decision of the high court may be appealed to the Supreme Court.
15 Confidentiality
15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?
All arbitration proceedings are conducted on a confidential basis.
15.2 Are there any exceptions to confidentiality?
Only where there is a court order for disclosure.
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.
