ENOFORCEMENT OF FOREIGN ARBITRAL AWARDS IN PAKISTAN

In international arena, the convention that regulates the enforcement of foreign arbitral awards is
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards done
at New York in June, 1958, also known as New York Convention, 1958. Pakistan ratified it on 12
October, 2005 which meant that it had to pass a domestic legislation in order to give force to it
through domestic law. For that purpose, Recognition and Enforcement (Arbitration Agreements
and Foreign Arbitral Awards) Ordinance, 2005 was passed which had been re-enacted through
2006, 2007, 2009 and 2010 until the final Act of 2011 was enacted called the Recognition and
Enforcement (Arbitration Agreement and Foreign Arbitral Awards) Act, 2011. Before the New
York Convention, there used to be Arbitration (Protocol and Convention) Act, 1937 having the
same purpose i.e. enforcement of foreign arbitral awards.

The objective of Arbitration is to save the time and lessen the burden on courts by seeking an
alternate remedy of dispute resolution and avoid long exhaustive procedures of litigation. In order
to give effect to this purpose, the convention sets out the rules in its articles II to V that aids the
implementation of this purpose with regards to international arbitration and to give recognition
and similar status to foreign arbitral awards as is given to domestic arbitral awards. These rules
contributes towards the enforcement of foreign arbitral awards through pro-enforcement bias intent
of the legislation.

As for giving a brief account that how these articles proceed through the convention in aiding the
enforcement of arbitral awards, article II sets out the bias in favor of arbitration during the pre-
arbitral proceedings. That is, if a party takes the matter to the court in presence of an arbitration
agreement, the other party may make the application to stay the proceedings and refer the parties
to arbitration unless the other party has already stepped into the proceedings. As under the
legislation ratifying the New York Convention, i.e. Recognition and Enforcement (Arbitration
Agreements and Foreign Arbitral Awards) Act, 2011, a matter has been brought to the court that
the agreement has become null and void and hence is incapable of being performed where the
court used the severability principle that arbitration agreement is separate from rest of the contract
and nullity of the contract does not render the arbitration agreement void. Hence, the court granted
the stay of proceedings and referred the parties to arbitration.1 Moreover, in my opinion the nullity
of the contract and incapability of its performance is to be determined by arbitral tribunal and
article V cannot be invoked in court proceedings before arbitral tribunal proceedings. Invalidity
and nullity of the contract is to be invoked when enforcement of the award is sought by court of
concerned country “after” the award has been made.

As regards the matter of stepping into the proceedings no such matter has been brought to the
courts yet as this law has been passed very recently however, under Arbitration Act, 1940, the
courts has interpreted the phenomenon of stepping into the proceedings quite strictly where lenient
interpretation was required so as to fulfill the purpose of arbitration at the beginning. The mere
asking for adjournment to submit a written reply would amount to stepping into the proceedings
of the court after which the stay of proceedings would not be granted to refer the matter to
arbitration on application under section 34 of Arbitration Act, 19402. This judgement was relied
upon another judgement of Supreme Court, 1981 in which after several adjournments the court
interpreted the intent of the parties to be giving in to the court proceedings and hence dismissed
the application for the stay of proceedings.3 Although this interpretation of PLD 2006 S.C. 196 has
been set aside in another case “Pakistan stone development company v. Mohammad Yousaf”4
stating the judgement of August Supreme Court has been misconstrued in the judgement of PLD
2006 and allowed the application of stay of proceedings after one adjournment, however, this
narrow interpretation of stay of proceedings by court at various times reflects the insecurity of our
judiciary as to its authority and jurisdiction might be challenged on adjudication and this too is the
attitude towards domestic arbitration let alone the foreign arbitration. However, it is good to see
that the judiciary is understanding the significance of arbitration agreements and procedures as
reflected by 2018 judgement. Since, there is no case law directly on the stay of proceedings under
Recognition and Enforcement (Arbitration Agreement and Foreign Arbitral Awards) Act, 2011,
the courts of Pakistan would mostly probably tend to rely on case laws under Arbitration Act, 1940
for the purpose of interpretation of stay of proceedings and stepping into the proceedings. These
judgements do have persuasive value if not the mandatory value in cases of stay of proceedings

1
2015 MLD 1646
2
PLD 2006 S.C. 196
3
PLD 1981 S.C. 553
4
2018 CLC Islamabad 877
and referral to international arbitration. This is the pre-arbitral procedure that favors taking the
matter to arbitral forum and reflect the arbitration-biased intention of the convention.

The actual enforcement of arbitral awards starts after the award has been rendered and it is time to
enforce that award. The New York Convention of 1958 again shows an intent to support the easy
enforcement of foreign arbitral awards when it sets out in article III that enforcement of foreign
arbitral awards would be in the same manner as the enforcement of domestic arbitral awards as
regards to the procedure as well as the cost. The cost of enforcing foreign arbitral awards would
not be more just on the basis that it is foreign award and not a domestic one. Pursuant to this article,
the 2011 enactment of Pakistan stated that the enforcement foreign arbitral award would be carried
out considering as if it is the domestic arbitral award in its section 6. However, the issue that
remains even after the enactment of 2011 Act is regarding the procedure that is to be followed for
the enforcement. With this ambiguity, two methods are left for pursuing the enforcement, which
are by filing civil suit for enforcement in which the options of appeal are available and gives courts
an option to exercise their discretion for enforcement of awards. (As has been exercised in several
cases under 1937 Act5). This kills the purpose of the convention which is pro-enforcement bias
and speedy enforcement of foreign arbitral awards. Second method that is left is summary
procedure which lacks proper trial and hence lacunas are left when judgements are given.

As to the prevention for the enforcement of awards article V of the convention is to be interpreted.
A few judgments have been given that favors the enforcement and is according to the purpose of
New York Convention. One such recent judgement is Abdullah v. Mssrs CNAN Group SPA where
judge relied on the judgements of the yearbooks on commercial arbitration (YCA) that stated the
purpose of the New York Convention and various commentaries on NY Convention including
Global Commentary on New York Convention by Herbert Kronke, 2010 and concluded that where
the award-debtor seeks a declaratory and injunctive relief against the enforcement of the award
under article V of the New York Convention, the article must be interpreted narrowly and used as
a shield and not a sword. That indicates that enforcement can only be prevented in case when the

5
1982 CLC 301, 1990 MLD 857 (Court refused to enforce the award by stating that arbitration agreement was
vague and uncertain or that the parties have failed to affix stamp duty on foreign award under Pakistani law). This
shows procedural irregularities.
enforcement of the award is sought and article does not favor the award debtor to seek nullity of
the award.

Concluding the article, that how Pakistani courts and Pakistani law has acted in enforcing the
foreign arbitral awards, the road to enforcement has been vague and uncertain. At some points,
courts has used discretion as the proper procedure was lacking and some points courts has relied
upon global commentaries for highlighting the purpose and correct interpretation of the
convention. This shows the lack of proper legislation for enforcement of foreign arbitral awards
especially with regards to the procedure for the enforcement even after the enactment of 2011 Act.
Although justice Saqib Nisar in his article “International Arbitration in the context of
Globalization: A Pakistani Perspective” shows contentment that the ordinance of 2005 for the
enforcement of foreign arbitral awards is closer to the purpose of the New York Convention, there
is still a need for filling this lacuna of procedure and limiting the power of courts to exercise the
jurisdiction to act as the appellate forum for the award.