Impact of the New Arbitration Act Introduced at PIDW
Historically, the arbitration regime in Pakistan has been covered under the Arbitration Act of 1940, an old colonial piece of legislation relating to arbitration agreements, procedures, and domestic arbitral awards. In view of rapid changes in international trade and arbitration, it had become clear that the Act required modernization on par with other countries' regimes. Mian Sheraz Javaid said that the Arbitration Act 2024 has been enacted to bring Pakistan's arbitration laws at par with the internationally recognized UNCITRAL Model Law, which would provide a modern framework enhancing fairness, efficiency, and predictability in dispute resolution.
Global Arbitration Framework and the Need for Reform
International arbitration is indeed being conducted under a harmonious framework comprising of UNCITRAL Model Law, New York Convention, and UNCITRAL Arbitration Rules. The Model Law encompasses extensive procedural rules regarding arbitration from the arbitration agreement to the recognition and enforcement of arbitral awards. The New York Convention brings into existence global recognition and enforcement of foreign arbitral awards.
While the Arbitration Act 1940 of Pakistan was doing well in its context, it failed to achieve harmony that could maintain this momentum of new frameworks. Mian Sheraz Javaid noted that Arbitration Act 2024 will bridge this gap for Pakistan by harmonizing Pakistan's law with international best practices. It will create a more efficient, reliable, and attractive arbitration system and, consequently, put Pakistan as a more competitive destination for international commercial arbitration.
Key Features of the Arbitration Act 2024
The Arbitration Act 2024 introduces several key reforms that bring Pakistan's arbitration laws in line with global standards. Mian Sheraz Javaid highlighted these reforms, which include the designation of the District Court as the competent court, the introduction of the 'Cost Follows the Event' principle, the shift to a supervisory role for courts, and the provision for direct enforcement of arbitral awards.
- District Courts as Competent Courts: Another significant change under the Arbitration Act 2024 is the declaration of District Courts as the competent courts to deal with arbitration matters, superseding the previously declared civil courts. District courts are higher up in the judicial hierarchy and, therefore, better equipped to handle complex arbitration matters. This move is expected to streamline the arbitration process and bring down case delays drastically, which would improve the overall efficiency of dispute resolution in Pakistan.
- Introduction of 'Cost Follows the Event': The New Arbitration Act introduces the globally recognized principle of 'Cost Follows the Event', allowing arbitrators to impose costs on the losing party. This provision acts as a deterrent against frivolous claims and enhances the efficiency of the arbitration process by encouraging parties to focus on genuine disputes. According to Mian Sheraz Javaid, this change introduces greater predictability because parties know that they would incur financial costs while pursuing or defending an arbitration case.
- From Interventionist to Supervisory Role of Courts: The erstwhile arbitration system saw Pakistani courts playing an interventionist role on a regular basis in the arbitral process as they often intervened to review and enforce the awards. With the Arbitration Act 2024, Pakistan's approach takes a supervisory role, mirroring the approach under the UNCITRAL Model Law and the best international practices. This change will reduce unnecessary judicial interference and enable arbitration to become more autonomous and efficient. According to Mian Sheraz Javaid, this shift is imperative in attracting more international arbitration cases to Pakistan.
- Direct Award Enforcement: A new reform under the Arbitration Act 2024 is direct enforcement of arbitral awards without requiring the award to first be converted into a "rule of court." It shall thus save time and fewer resources, thereby allowing a quicker enforcement of awards besides making the arbitration process as a whole more reliable. According to Mian Sheraz Javaid, this provision for direct enforcement would put Pakistan at par with the rest of the international arbitration community by making its commercial dispute resolution system more predictable.
- Potential for Appeal: It is also equipped with the provision to appeal before the High Court for arbitral awards, and as long as a party finds fault in the award, they can seek judicial review. Mian Sheraz Javaid noted that this mechanism has ensured fairness in the arbitration process while the autonomy of the arbitral system remains unrestricted. This undoubtedly offers a vital safeguard and strengthens the integrity of the arbitration framework in Pakistan.
- Expansion to International Arbitration: The Arbitration Act 2024 expands on Pakistan's existing arbitration laws on international arbitration too. This integrates Pakistan's bodies of law and practice with International frameworks, specifically the New York Convention, with regard to matters of recognition of foreign arbitral awards. In embracing these provisions, Pakistan is further positioning itself as a more favorable venue for international commercial arbitration that will facilitate the resolution of cross-border disputes while creating a better environment for foreign investment. In this regard, Mian Sheraz Javaid said that with this expansion, Pakistan's role in global trade and arbitration would further be enhanced.
- Incorporation of IBA Guidelines: In the Arbitration Act 2024, the incorporation of International Bar Association (IBA) guidelines puts Pakistan's arbitration system at par with global best practices. In this respect, such guidelines outline in detail standards governing the conduct of arbitrators that ensure them being independent and impartial. Mian Sheraz Javaid added, "It also enhances the overall fairness and integrity of the arbitration process.".
- Arbitration Council: Another significant reform implemented by the New Arbitration Act is the formation of the Arbitration Council, an oversight body responsible for managing arbitration procedures, arbitrator appointments, and ensuring consistency between cases. It will make the arbitration system in Pakistan more transparent and reliable in terms of its credibility and integrity. Mian Sheraz Javaid highlighted the fact that such a body will be created only when Pakistan becomes committed to implementing international best practices in the domain of dispute resolution.
General Impact and Future Outlook
The Arbitration Act 2024 is going to be a very influential piece of legislation for Pakistan's legal, economic, and business landscapes. Pakistan is aligning its arbitration laws with international standards, thus making it an attractive destination for international commercial arbitration. Mian Sheraz Javaid highlighted that this modernization may increase foreign direct investment (FDI) and contribute significantly to Pakistan's economic growth by making it a more favorable location for resolving international commercial disputes.
Looking ahead, the successful implementation of the Arbitration Act 2024 will require key steps, including:
- Effective Enforcement: Ensuring the provisions of the Act are fully adhered to in arbitration proceedings.
- Introduction of Model Arbitration Clauses: Standardizing arbitration clauses in commercial contracts.
- Formulation of Arbitration Rules: Creating clear and comprehensive rules aligned with international best practices.
- Capacity Building: Training local professionals and arbitrators to build expertise in arbitration.
- Promotion of Institutional Arbitration: Encouraging the use of institutional arbitration to provide a structured and reliable dispute resolution framework.
In conclusion, Mian Sheraz Javaid emphasized that these steps will enhance Pakistan’s arbitration landscape, making it more aligned with international standards and more attractive for resolving commercial disputes, thus fostering global trade and investment.
