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Question: What sort of legislative initiative has been taken in Pakistan with respect

recognition and enforcement of foreign award? What are the responsive attitudes with
respect to sanctity of arbitration clauses in commercial contract?
Answer:
On 14th July 2005, after forty-seven years of being an original signatory to the
United Nation’s Convention on the Recognition and Enforcement of Foreign Arbitral Awards
1958 (the NY Convention), Pakistan promulgated the Recognition and Enforcement
(Arbitration Agreements and Foreign Arbitral) Awards Ordinance, 2005 (REAO), Ordinance
No. VIII of 2005 and finally ratified and implemented the NY Convention. This
implementation is however due to become ineffective with the lapse of the REAO on 14th
November 2005 . It is hoped that the implementation of the NY Convention will be
sustained by the passing of an act of the National Assembly that enforces the NY
Convention.
However, the provisional reform of the promulgation of the REAO has come about as a
result of the tireless lobbying of various private sector players (most notably the Pakistan
National Committee of the International Chamber of Commerce) as well as through key
players in the Government of Pakistan; specifically, the Committee on Upgradation and
Development of Laws on Arbitration which drafted the REAO.
The REAO replaces the Arbitration (Protocol and Convention) Act 1937 (APC Act) which
previously applied the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva
Convention on the Execution of Foreign Arbitral Awards of 1927 (the Geneva Convention) to
the enforcement of foreign arbitral awards in Pakistan.
The REAO represents the recognition by the Pakistani government for the need for the
enablement and protection of Foreign Direct Investment. A principle benefit that is
expected from the promulgation of the REAO, and, after the REAO lapses, from any
subsequent NY Convention legislation, is to enhance the image of Pakistan’s investment
climate in the eyes of the global community.

The Recognition and Enforcement (Arbitration Agreement and Foreign Arbitral Awards)
Act,2011 came into force on 15 July, 2011. Thus, the international convention is backed by
the force of law after the legislation. The law clearly states that the courts of Pakistan shall
have the jurisdiction to enforce foreign award given by the arbitrators. The awards will be
dealt n the same manner as if they are passed by the Pakistani courts. In such a case the
Code of Civil Procedure ,1908 would be applicable in stay proceedings and the courts will
have the same powers as of the civil courts but with exclusive jurisdiction in trying such
cases. The Pakistani courts also, under the law, have the power to enforce arbitration
agreements. The courts would not refuse the enforcement of an award until and unless it
falls under the ambit of Article V of the convention.
Arbitration arising from the investment treaty arbitration are covered by the ICSID
Convention and are regulated by the Arbitration (International Investment Act) which
specifically provides that the provisions of the 1940 Act shall not apply to proceedings
pursuant to the ICSID Convection (section 7). The law covers the International Convention
on Settlement of Disputes by registering the awards and the awards shall be affected. It
binds the government unless the awards are against the government. The law also enlists
certain articles of convention which would be having the force of law. The law consist of 10
sections and the schedule comprises of the Convention. The government has tried to fulfil
the international obligation, but it is subject to various loopholes.
Pakistan has the Arbitration Act ,1940 to govern its domestic arbitration proceedings and
enforcement of such arbitral awards. When question of enforcement of such arbitral arises,
the relevant law that deals with it is Arbitration (Protocol and Convention) Act,1937 which is
based on The Hague convention. The act under its section 3 provides the provision to stay
the proceedings notwithstanding anything contained un Arbitration Act,1940 and the code
of civil procedure, 1908. The concept of reciprocity is very important for the recognition and
enforcement of foreign awards and it is important that the foreign country must have
embedded the reciprocal legal provision of this act are recognised and enforced as they
have been made under domestic law.
Both under the Arbitration Act ,1940 and the Arbitration (Protocol and Convention)
Act,1937 if a party to an agreement having valid arbitration clause embodied in the
agreement decides to submit the matter before the court of law instead to opt for Arbitron
then there is mechanism provided to stay the proceedings of court of law. That minimizes
the intervention of court in the arbitration process and also creates trust of the business
community to opt for arbitration.
The Arbitration Act 1940 under its section 34 provides where a party to an agreement
initiate judicial proceedings against the other having been embodies the arbitration clause
in the agreement as preferred mode to resolve dispute, the other party against whom such
judicial proceedings have been initiated can apply to court for stay of such proceedings. The
court after its due satisfaction should not refer the matter to the arbitration and stay the
judicial proceedings. Where the court is not satisfied, it has discretion powers not to grant
the stay on the grounds that the substantial miscarriage of justice or inconvenience would
be caused to parties.
Similarly , the Arbitration (Protocol and Convention) Act,1937 under section 3 provides if
judicial proceedings are initiated by one party of a valid arbitration agreement against the
other, the court after its dur satisfaction that the agreement and arbitration are operative
and can be proceeded with and there is a contention to be resolved , should refer the case
for arbitration and stay the judicial proceedings. The adoption pf New York Convention on
the Recognition and Enforcement of Foreign Arbitral Awards ,1958has brought change in
the legal regime of Pakistan.