Law and Practice of Foreign Arbitration and Enforcement of Foreign Arbitral Awards in Pakistan

59 Pages·2013·0.43 MB·English

by  Ahmad Ali Ghouri (auth.)

SpringerBriefs in Law
For furthervolumes:
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Ahmad Ali Ghouri
Law and Practice
of Foreign Arbitration
and Enforcement
of Foreign Arbitral
Awards in Pakistan
123
Ahmad AliGhouri
Faculty ofLaw
Universityof Turku
Turku
Finland
and
Department of Law
Universityof thePunjab
(Gujranwala Campus)
Gujranwala
Pakistan
ISSN 2192-855X ISSN 2192-8568 (electronic)
ISBN 978-3-642-32743-8 ISBN 978-3-642-32744-5 (eBook)
DOI 10.1007/978-3-642-32744-5
SpringerHeidelbergNewYorkDordrechtLondon
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(cid:2)TheAuthor(s)2013
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Preface
Pakistan has recently made extensive reforms of its arbitration laws, which relate
tobothinternationalcommercialandinvestmentarbitration.Thesereformsamend
laws on the recognition and enforcement of foreign arbitration agreements and
awards in Pakistan and aim to modernise the applicable laws as well as fulfil
Pakistan’s obligations under the New York and the ICSID Conventions.
This is the first book to present a comprehensive picture of international arbi-
trationfromaPakistaniperspective.Thisbookexplainstherelationshipofoldand
new Pakistani arbitration laws and elaborates the changes brought about by the
newenactments.Itgivesanin-depthandup-to-dateanalysisofPakistanicaselaw
dealing with foreign arbitration agreements and awards and provides detailed
account of the transition that foreign arbitration laws went through since the
independence of Pakistan in 1947.
Part (I) describes the background offoreign arbitration laws in Pakistan. Part
(II) explains, in the light of case law, the applicable substantive and procedural
rules that different enactments provide for the recognition and enforcement of
foreign arbitration agreements and awards in Pakistan. Discussion on how Paki-
stanicourtsdealwithimportantquestionssuchasseverabilityofarbitrationclause
from main agreement, public policy issues relating to foreign arbitration, and
interimmeasuresaidingforeignarbitrationarealsoincludedinthispart.Part(III)
analyses recent enactments that implement the New York and the ICSID Con-
ventions inPakistan,andexplainsthechangesbroughtabout bytheseenactments
in the existing foreign arbitration regime.
This concise book is designed to meet the needs of a practitioner, student or
business person to obtain an understanding of Pakistani arbitration laws quickly.
The book is compact and readable, but comprehensive in its coverage, and dis-
cusses and analyses the most recent developments in Pakistani arbitration laws,
rules and procedures.
v
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Analysis of the AA-APC Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A. General Scheme of AA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. General Scheme of APC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
C. Relationship Between AA and APC Respecting
Foreign Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1. Foreign Arbitration Agreement . . . . . . . . . . . . . . . . . . . . . . . . 11
2. Foreign Arbitration as Forum Non Conveniens . . . . . . . . . . . . . 14
3. Severability of Arbitration Clause from
Underlying Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4. Questions of Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5. Interim Measures Aiding Foreign Arbitration . . . . . . . . . . . . . . 23
6. Foreign Investment Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 24
7. Concurrent Court and Arbitration Proceedings . . . . . . . . . . . . . 25
8. Other Factors that may Affect Foreign Arbitration
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9. Enforcing Foreign Arbitral Awards in Pakistan. . . . . . . . . . . . . 29
10. Cost of Making Awards Rule of Court. . . . . . . . . . . . . . . . . . . 35
11. When a Foreign Award can be Filed and Enforced? . . . . . . . . . 37
The Position of New REFA and AIDA Regimes . . . . . . . . . . . . . . . . . 39
A. General Scheme of REFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
1. Enforcement of Foreign Arbitration Agreements. . . . . . . . . . . . 41
2. Enforcement of Foreign Arbitral Awards . . . . . . . . . . . . . . . . . 42
B. General Scheme of AIDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
List of Cases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
vii
Abbreviations
AA The Arbitration Act 1940
APC Arbitration (Protocol and Convention) Act 1937
AIDA Arbitration (International Investment Disputes) Act 2011
AA Bill Bill for the Arbitration Act 2009
BIT Bilateral Investment Treaty
CGM Compagnie General Maritime
GOP Government of Pakistan
ICSID International Convention for the Settlement
of Investment Disputes
ICC International Chamber of Commerce
LHC Lahore High Court
NA National Assembly
PPA Power Purchase Agreement
REFA Recognition and Enforcement (Arbitration Agreements
and Foreign Arbitral Awards) Act 2011
SCP Supreme Court of Pakistan
SGS Société Générale de Surveillance S.A
SHC Sindh High Court
UNCITRAL United Nations Commission on International
Trade Law
Wapda Water and Power Development Authority
WP West Pakistan
Abbreviations for Pakistani Case Law Journals
AIR All India Law Reports
CLD Corporate Law Decisions
CLC Civil Law Cases
MLD Monthly Law Digest
ix
x Abbreviations
MLR Monthly Law Reports
NLR National Law Reports
PLD Pakistan Legal Decisions
SCMR Supreme Court Monthly Review
YLR Yearly Law Reports
Introduction
The Arbitration Act, 1940 (the ‘‘AA’’) and the Arbitration (Protocol and Con-
vention) Act, 1937 (the ‘‘APC’’) have governed foreign arbitration regime in
Pakistanformorethan60 years.1APCwaspromulgatedtogiveeffecttothe1923
Protocol on Arbitration Clauses (the ‘‘Geneva Protocol’’)2 and the 1927 Con-
ventionontheExecutionofForeignArbitralAwards(the‘‘GenevaConvention’’)3;
and AA was enacted to provide rules for domestic arbitration. Although AA was
originally meant to regulate domestic arbitrations, however due to imprecise
provisionsofbothAAandAPConthepowerandjurisdictionofcourts,4Pakistani
courts applied both these laws in juxtaposition when deciding matters relating to
recognition and enforcement offoreign arbitration agreements and awards.
Pakistanicourtshavepronouncedmanyconflictingdecisionsbecauseofproce-
duralissuesarisingfromthewronglyjoinedAA-APCapplication.Thisresultedinan
uncertainregimeonrecognitionandenforcementofforeignarbitrationagreements
andawards.5Likewise,Pakistanicourtsdidnotendorsebilateralinvestmenttreaties
(the ‘‘BIT’’) based foreign investment arbitration because the 1965 International
1 Both AA and APC date back to British India era. For historical account of these laws, see
Anees Jillani, Recognition and Enforcement of Foreign Arbitral Awards in Pakistan, Interna-
tionalandComparativeLawQuarterly,Vol.37,No.4(October1988),pp.926–935.
2 ProtocolonArbitrationClauses,signedatameetingoftheAssemblyoftheLeagueofNations
heldonSeptember24,1923.
3 TheConventionontheExecutionofForeignArbitralAwards,signedatGenevaonSeptember
26,1927.
4 Anees Jillani described both these laws as ‘‘fragmentary, timorously tentative and often
bewildering.’’ See Anees Jillani, Recognition and Enforcement of Foreign Arbitral Awards in
Pakistan,InternationalandComparativeLawQuarterly,Vol.37,No.4(October1988),p.926.
5 Cf. Shahid Jamil, Pakistan’s Implementation of the New York Convention, International
JournalofArbitration,MediationandDisputeManagement,Vol.74,No.2(May2008),p.170.
A.A.Ghouri,LawandPracticeofForeignArbitrationandEnforcement 1
ofForeignArbitralAwardsinPakistan,SpringerBriefsinLaw,
DOI:10.1007/978-3-642-32744-5_1,(cid:2)TheAuthor(s)2013
2 Introduction
Convention for the Settlement of Investment Disputes6 (the ‘‘ICSID Convention’’)
hadnotbeenimplementedinPakistanthroughdomesticlegislation.7
Businesstransactionsandinvestmenttreatiesmostoftenincludeclausesforthe
settlement of disputes through international arbitration. Reformation and mod-
ernisation of Pakistani laws on recognition and enforcement offoreign arbitration
agreements and awards was due for a long time.8 At the time of independence
from British rule, bothPakistan and India inherited the same arbitration laws, but
IndiafirstenactedtheForeignAwards(RecognitionandEnforcement)Actasearly
as 1961. India has now enacted the Indian Arbitration and Conciliation Act in
1996, which is based on the 1985 UNCITRAL Model Law on International
Commercial Arbitration9 (the ‘‘Model Law’’), and consolidates arbitration laws
repealing the outdated AA and APC along with the Act of 1961.
The1958ConventionontheRecognitionandEnforcementofForeignArbitral
Awards10 (the ‘‘New York Convention’’) succeeded the Geneva Protocol and the
GenevaConvention.PakistanwasoneoftheoriginalsignatoriestotheNewYork
Convention, however, ratified it only on 14 July 2005.11 Pakistan has also signed
and ratified the ICSID Convention since 1965.12 According to the website of
6 OpenedforsignaturesonMarch18,1965andenteredintoforceonOctober14,1966.Pakistan
signedtheICSIDConventiononJuly06,1965,anddepositedratificationonSeptember15,1965,
andtheConventionenteredintoforceforPakistanonOctober15,1966.
7 InSociétéGénérale deSurveillanceS.A.v.Pakistan (2002SCMR1694),Supreme Courtof
Pakistan(the‘‘SCP’’)deniedenforceabilityofanICSIDarbitrationclausecontainedinPakistan–
Switzerland BIT since, first, both ICSID Convention and Pakistan–Swiss BIT had not been
implementedintoPakistanidomesticlegislation,and,secondly,sincetheSCPdidnotrecognise
that the provision of pre-shipment inspection services offered by SGS to the Government of
Pakistan (the ‘‘GOP’’) fall under the definition of ‘‘investment’’ as contained in the Pakistan–
Switzerland BIT. However, the ICSID Tribunal in Société Générale de Surveillance S.A. v.
IslamicRepublicofPakistan(ICSIDCaseNoARB/01/13,DecisiononJurisdictionofAugust6,
2003) disregarded the decision of PSC and found that the pre-shipment inspection services
offeredbySGSisaninvestmentcoveredbythePakistan-SwitzerlandBITandthatthetribunal
hadjurisdiction.
8 Dallah,SabaShipyard,andChinaNationalMachineryaretonameafewrecentexamples.See,
Dallah Real Estate and Tourism Holding Company v. The Ministry of Religious Affairs,
Government of Pakistan [2010] UKSC 46; Islamic Republic of Pakistan v. Messrs Sabah
Shipyard (Pakistan) Ltd. (2009 CLD Karachi 999); and China National Machinery Import and
ExportCorporationv.TufailChemicalIndustriesLtd.(2005CLDKarachi1577).
9 See General Assembly Resolution 40/72 (December 11, 1985) regarding the Model Law on
International Commercial Arbitration, the Official Records of the General Assembly, Fortieth
Session, Supplement No. 17 (A/40/17), annex I and the General Assembly Resolution 61/33
(December4,2006),OfficialRecordsoftheGeneralAssembly,Sixty-firstSession,Supplement
No.17(A/61/17),annexI.
10 DoneatNewYorkonJune10,1958,andenteredintoforceonJune7,1959.
11 PakistansignedtheNewYorkConventiononDecember30,1958,butratifieditonlyon14
July, 2005 with a reservation that it will recognise and enforce awards from other New York
ConventionStatesonly.TheConventionenteredintoforceforPakistanonOctober12,2005.
12 Pakistan signed the ICSID Convention on July 06, 1965 and deposited ratification on
September15,1965andtheConventionenteredintoforceforPakistanonOctober15,1966.
Introduction 3
Pakistan Board of Investment, Pakistan has concluded 47 BITs,13 and at the time
of this writing, five BIT-based arbitration proceedings under the ICSID Conven-
tion rules have been concluded and one such arbitration is pending against
Pakistan.14
The New York Convention was finally implemented in Pakistan in 2005
through an Ordinance entitled the Recognition and Enforcement (Arbitration
AgreementsandForeignArbitralAwards)Ordinance(the‘‘REFA’’).In2007,the
ICSID Convention was also implemented through another Ordinance called the
Arbitration (International Investment Disputes) Ordinance (the ‘‘AIDA’’). It is
important to note that an Ordinance issued by the President of Pakistan under
Article89ofthe1973ConstitutionofPakistanenjoysthesameforceasofanAct
of Parliament, but only for a period of 120 days. However, the same Article 89
empowersthePresidenttocontinuouslyreissueanyOrdinancesifsodesired,until
suchtemporaryOrdinancesareapprovedorscrappedbythePakistaniParliament.
However,theREFAandAIDAOrdinanceswentthroughinterestinglegislative
developments.InNovember2007,PresidentGeneralPervezMusharraf(ashethen
was)issuedaProvisionalConstitutionalOrderanddeposedmajorityofthejudges
of Pakistani Supreme Court and High Courts.15 In 2008, President Musharraf’s
handpickedSupremeCourt,initsjudgementinTikaIqbalcase,gavepermanence
toalltheOrdinancespromulgatedbyMusharraf,includingREFAandAIDA.16In
the meantime,inApril2009, aBillfor the Arbitration Act, 2009 (the‘‘AA Bill’’)
was introduced in the National Assembly (the ‘‘NA’’) for debate.17 On 16 March
2009, deposed judges were restored to their offices by a democratically elected
Pakistanigovernment.On31July2009,ajudgmentoffourteen-memberbenchof
the restored Supreme Court of Pakistan (the ‘‘SCP’’) in its judgement in Sindh
High Court Bar case declared, inter alia, that Ordinances given permanence
throughTikaIqbalcasewereduetolapsewithin120 daysstartingfromthedateof
judgement,unlessapprovedbytheParliamentorreissuedbythenewPresident.18
Both Ordinances were then reissued by President Asif Ali Zardari, first on 27
November 2009 and then on 21 April 2010.
TheAABillwasthenpendingforapprovalintheNA.TheAABillproposedto
repeal AA,19 and was a comprehensive legislation governing both domestic and
13 Seeonlinewww.pakboi.gov.pk.
14 Forrecentupdates,seeonlinehttp://icsid.worldbank.org/ICSID/FrontServlet.
15 For detailed account of the event, see Sindh High Court Bar Association v. Federation of
Pakistan(2009PLDSupremeCourt879).
16 Tika Iqbal Muhammad Khan v. General Pervez Musharraf and others (2008 PLD Supreme
Court25and178).
17 For some reflections on the Bill, see Dr. Shahid Jamil, Pakistani Arbitration: Towards the
ModelLaw,TheCounsel,Vol.1(Summer2010),availableonlineathttp://www.counselpakistan.
com/vol-1/dispute-resolution/pakistani-arbitration.php.
18 SindhHighCourtBarAssociationv.FederationofPakistan(2009PLDSupremeCourt879),
Para.22(vii).
19 AABillSection95.