Pakistan’s Arbitration Reform: A New Era for Dispute Resolution
Sheraz's address began on the point of redundancy of the legal framework regarding arbitration in Pakistan, which dates back even prior to the country's independence. Following little time after being independent, Pakistan sacked the Arbitration Act of 1940, which had been the host to alternative dispute resolution (ADR) for many decades. This legislation, however, was purely of the elementary character to manage the practice of arbitration; it did not mention the topic of international arbitration or the way to enforce foreign arbitral awards. Pakistan was one of the earliest nations to sign the New York Convention (1958), but it did not confirm it until 2005; in 2011, it could pass an act on Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) to recognise international arbitration agreements and foreign arbitral awards. The progress notwithstanding, Sheraz blended in, the arbitration system in Pakistan has still been outdated, thus contributing a lot of inefficiency in resolving disputes, especially as there was a mind-boggling court backlog of over 2.26 million cases.
In that context, Sheraz talked about the Pakistan Arbitration Act of 2024, which has been drafted, as the country's first important step towards building a modern arbitration system. This new piece of legislation, developed with legal professionals, will replace the outdated 1940 Act. Borrowing from international frameworks, particularly the UNCITRAL Model Law on International Commercial Arbitration (1985) and the Indian Arbitration and Conciliation Act of 1996, the 2024 Act takes cue from the legal philosophies of the United Kingdom, Canada, Singapore, and Malaysia.
Key Objectives of the 2024 Arbitration Act
The 2024 Act seeks to achieve clarity and efficiency in the arbitration process, reduce delays, and provide clearer guidelines on the conduct of arbitration, including the annulment and enforcement of arbitral awards. Sheraz spoke about some of the notable provisions in the 2024 Act, including the following:
- Clarity and Efficiency: One of the main aims of the 2024 Act is to simplify the arbitration program. The Act establishes clearer procedures and guidelines, which will considerably reduce inefficiencies and delays in the processes of dispute resolution, which are rife in the existing system.
- Annulment and Enforcement of Awards: The act more fully furnishes provisions for recognition and enforcement of arbitral awards made within Pakistan. Moreover, it lays down the conditions for setting aside an arbitral award and gives the requisite legal certainty. The grounds for annulling an award are derived from the UNCITRAL Model Law but are rather modified to prevent frivolous cases. Some of them are fraud, corruption, material breach of natural justice, and violation of the fundamental principles of morality and justice.
- Guaranteeing Party Autonomy: One of the significant reforms of the 2024 Act is the empowerment of the parties involved in arbitration. The Act gives parties greater autonomy over the arbitration process, including the freedom to choose the seat of arbitration, appoint arbitrators, and select the rules governing the proceedings. This increased control aims to make arbitration a more flexible and tailored process for those involved.
- Limited Judicial Intervention: The Act seeks to restrain judicial participation in arbitral proceedings. Under the present legal framework, courts might intervene in an array of ways during and after arbitration proceedings, causing disruption and delay in resolving disputes. The 2024 Act very clearly confines judicial intervention in a matter that is not provided for under this Act itself. In addition, avenues for appeals have been limited, which means that an arbitral award stands except in exceptional circumstances leading to its annulment.
- Arbitral Authority: The effect of the 2024 Act is that it has given arbitral tribunals greater authority over the arbitration process. In other words, the arbitral tribunals have the power to determine their own jurisdiction and grant interim measures. If the tribunal has no authority to grant interim measures, only then may the parties approach a court. Interim measures may also be enforced by the court as though it were such an order by the court, thereby securing the independence of the tribunal and enhancing the enforceability of its decisions.
- Appointment of Arbitrators: The latest 2024 Act now carries a fair number of amendments in the process enabled for appointing arbitrators. Now parties are empowered to select arbitrators not necessarily via a party-to-party process but through an arbitration agreement, and this is an improved aspect of autonomy and flexibility into it. Further, the Act now stipulates the qualifications and requirements for arbitrators as necessary for them to be independent and impartial during the process. This is from pre-existing international norms, such as when translated with the International Bar Association's Rules on Conflicts of Interest in International Arbitration (2014). The Act also provides the method as to whom or who may challenge the appointment of arbitrators as protection for impartiality before the arbitral tribunal. More so, the Act requires that arbitral tribunals consist of an odd number of arbitrators and that such a sole arbitrator is appointed in case the arbitration agreement does not define how many arbitrators would constitute the panel.
Impact of the 2024 Act on Pakistan’s Arbitration System
Modernisation of the arbitration framework in Pakistan has been reached by the passage of the 2024 Arbitration Act, according to Sheraz, who noted that it means something important in the country's legal condition. Reform of law with respect to arbitration is going to bring Pakistan's arbitration system in line with international standards, including the UNCITRAL Model Law, widely regarded as the gold standard for international commercial arbitration. The Act aims to develop an increasingly effective and efficient arbitration system that would better address the needs of domestic enterprises as well as international ones. This would mean improved arbitration that would dissipate the already overburdened courts in Pakistan, expediting the resolution of cases and thereby reducing backlogs, making the process more predictable and transparent in resolving disputes.
The 2024 Act also aims to create a more favourable environment for foreign investment in Pakistan by providing greater legal certainty, transparency, and fairness in arbitration. By ensuring that arbitration agreements are recognised and foreign arbitral awards are enforceable, the Act promotes Pakistan as an attractive destination for international businesses seeking dispute resolution mechanisms that are independent of the court system.
Challenges and the Road Ahead
As such, according to Sheraz, the Act is a big step forward for arbitration in 2024 because it would only be successful if effectively implemented. This involved addressing certain issues that hinder the attainment of the hoped-for: making the ADR infrastructure in Pakistan more robust, ensuring an absolute commitment of the judiciary to the arbitration process, as well as fully comprehensive training of all professionals in the arbitration field. The judiciary has to refrain from misusing or undermining the arbitral process, which could erode the gains made by the new legislation.
The other thing, according to Sheraz, is that the government must ensure awareness of all stakeholders in the arbitration process, such as legal practitioners, arbitrators, and businesses, of the statutory provisions in the new Act. Public awareness and professional development programs will play a major role in making the new arbitration framework effective and operational.
Sheraz concluded his address by referring to how the Arbitration Act of 2024 represents a transformative step towards modernising Pakistan's arbitration system. By aligning with global standards, reducing judicial interference, and providing greater party autonomy, the Act offers a more efficient, transparent, and predictable dispute resolution framework. Successful implementation of the Act will require enormous labour from the government, judiciary, and legal professionals, but it holds great potential to alleviate the court burden, enhance Pakistan's attractiveness for international businesses, and promote a stronger ADR system in the country.
