Can the 2024 Draft Bill reform Arbitration in Pakistan?

In 2024, the Law and Justice Commission of Pakistan, using the United Nations Commission on International Trade (UNCITRAL) model law as a blueprint, drafted a new Bill on arbitration i.e. Arbitration Bill 2024. The draft bill aims to consolidate and amend the Arbitration Act of 1940. There are certain issues and shortcomings in the current act such as excessive judicial intervention, no party autonomy, omission of any criteria for arbitrators, and the grounds for challenge, which the bill tries to address. All these issues will be analyzed one by one.

Judicial intervention

In a shift towards minimizing judicial intervention, the bill seeks to amend S.16 of the 1940 Act. By virtue of this section, only a court could award interim measures, albeit only primarily. However, it can be argued that S. 16(1) only gave this power to the court where there is a substantial issue with the award given. Whatever the matter may be the draft bill reflects the UNCITRAL model by further taking away the court’s role by letting the tribunal itself decide if they have the authority to hear the case, otherwise known as the ‘kompetenz-kompetenz’ principle. This has been explained in S.18 especially S.18(1) as ‘the arbitral tribunal may rule on its jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement’. The current act has no room for this principle as interpreted by the Supreme Court in Karachi Dock Labour Board v. Quality Builders Ltd., PLD 2016 SC 121.

Section 18 may be called a good addition as it takes the power away from courts and any issues the parties may have will be resolved by the tribunal itself. This eventually will also take the burden away from courts and free up their time to rule on the cases that have been clogging the courts. The Law and Justice Commission of Pakistan made their 2^nd Bi-annual report which showed, as of 31^st December 2023, there are 2.6 million cases awaiting decision. 1.8 million of these are of the district court. One of the main issues with the 1940 act is that it allows the judiciary to penetrate too much into the arbitration process, which diminishes the actual purpose of arbitration.

In addition to the above discussion, the bill does leave some room for court involvement through S.10. It may be stated that the new bill puts the court’s role in the back seat, whereas before the courts would get involved at a preliminary stage now, they only come after. In achieving the objective of freeing up the courts and unclogging them the new draft does it thoroughly. In this process, the independence of the arbitration tribunal is also being upheld, which is the next issue with the 1940 act.

Impartiality and qualifications of Arbitrator tribunal/ appointment

Impartiality, competence, and independence of a tribunal have always been a key factor. Despite this, the existing act never required any qualification or procedure for the arbitrators but did require them to be even, which might give rise to deadlock. The 2024 Bill, in an attempt to aid this, requires S.14(1) to disclose any circumstances that may give rise to impartiality or may cause them to not complete the arbitration process properly. The law commission heavily relied on International Bar Association (IBA) guidelines on conflict of interest. This is a pivotal addition because if discovered at the enforcement stage it may lead to the award being considered void and would just add to the burden of the courts.

Additionally, under S.14(3) of the draft bill, a party can challenge the appointments. The procedure of which is deliberated on in S.15. This is to guard the unbiasedness of a tribunal. Continuingly as mentioned above the 1940 act required the tribunal to be even, however, the bill has proposed there to be an odd number of tribunals. This is to avoid a deadlock taking place. Furthermore, in a circumstance where a party has not set out the number then, under S.12 the arbitral tribunal shall consist of a sole arbitrator. However, the Bill again leaves a door open for judicial intervention in S.13. The involvement of the high court can again cause delays leaving the cases pending, as it is part of the senior judiciary. As the bill suggests, in some cases the high court shall be responsible for making appointments.

Grounds for challenge/ enforcement of arbitral award

Another issue with the current law is the grounds on which parties can challenge the award given after the arbitration process is over, by broadly interpreting public policy. The draft bill to circumvent this issue has narrowed the scope of public policy in S. 39.  Through this the parties (debtors) will be prevented from coming up with creative interpretations to avoid the enforcement of the award. This would promote a more enforcement-oriented environment, subsequently fostering Pakistan’s arbitration system. This would also aid in unclogging the courts.

Party autonomy

Party autonomy is not a substantial issue with the current act as it does allow the parties to choose and appoint the arbitrator. The parties themselves can best choose which arbitrator is more suitable for them, which the draft Bill doesn’t change and upholds the autonomy and discretion of parties. Furthermore, S. 12 and 13 of the draft Bill give parties control over the number of arbitrators, including discretion in applicable governing rules. The draft Bill is very much in favor of party autonomy by making these additions

Conclusion

Concluding the above arguments, it can safely be deduced that the draft Bill aims to bring about many positive changes in the 1940 act. Excessive judicial intervention is one of the most substantial issues with the act, which the Bill aims to change by repealing S.16. To assure the impartiality of a tribunal the Bill has s. 14, which is again a smart change as it simultaneously minimizes court intervention. Although party autonomy wasn’t much of an issue, the Bill does try to give more discretion to parties so they can also choose the applicable rules. Overall, the Bill could potentially aid in unclogging the courts and strengthening the arbitration process, by providing parties with enforceable awards and all the changes discussed.