ZAFAR & ASSOCIATES - LLP | Arbitration Law Services - Pakistan

Arbitration law implies the dispute settlement process between two agreeable parties through appointing an arbitrator to give a binding solution on the dispute.

Arbitration law connotes the dispute settlement process between two agreeable parties through appointing an arbitrator to give a binding solution on the dispute, arbitration is a way to settle disputes outside the courts thereby saving time and resources at the same time, the object of arbitration is to provide a neutral forum for parties engaged in business transactions and relevant affairs.

The parties are able to preserve confidentiality which is imperative especially when they wish to protect their trade secrets and commercial interests. These factors are vital when dealing with cross border transactions involving foreign investment where neutrality in terms of place, the law and the arbitrators are considered prime by the parties in settling their disputes. The neutrality ensures that the arbitral tribunal deciding the matter at hand is separated from any direct national influence therefore giving loyalty mainly to the parties.

In today's world, the most imperative area of arbitration is foreign investment. The use of arbitration for resolving foreign investment disputes provides a safe haven especially for foreign investors involved in global economy due to its trusted, credible and workable system in place.

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Arbitration Law Concept & Scope

Arbitration is a legal process which takes place outside of the courts, but still results in a final and legally binding decision similar to a court judgment. Parties involved in arbitration are effectively opting out of the court system and submitting their case for resolution by a neutral, third party arbitrator. The reasons for selecting arbitration vary from case to case. Arbitration is generally faster, less expensive and more informal than going to court. It also has the advantage of being private and confidential.

Within the limits permitted by law, parties are free to negotiate the ground rules under which they want the arbitration to take place, such as the number of arbitrators or whether formal rules of evidence will apply. Binding arbitration clauses can be written into most kinds of contracts, requiring that in the event a dispute arises in conjunction with the contract, the parties will go to binding arbitration instead of to court. The cost of arbitration is generally shared by the parties.

The decision of an arbitrator is as binding on the parties to the arbitration as a court judgment, and it can be enforced by the courts, if necessary.

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Arbitration Law Practice in Pakistan

Pakistan is the signatory of United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards concluded in New York in June 1958 (also known as the New York Convention 1958) and of International Convention on the Settlement of Investment Disputes between States and Nationals of other States. In order to implement and incorporate these conventions within the law of land, two Acts have been passed by Parliament i.e.:

• Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011;

• Arbitration (International Investment Disputes) Act, 2011

Under the force of these Acts, the Courts of Pakistan get the jurisdiction to recognize and enforce the Awards rendered pursuant to these Conventions as binding and to execute the same within its territories in the same manner as the judgment passed by the Courts in Pakistan.

What is arbitration?

Arbitration is a method of dispute resolution in which a neutral third party, an arbitrator, conducts an evidentiary hearing and/or reviews written submissions from the parties. Upon consideration of the evidence, the arbitrator makes a legally binding decision which can be enforced in the same manner as a civil court judgment.

Arbitration differs from mediation in that once you enter the arbitration process, you are bound by the arbitrator's decision. Mediation is a negotiation process, in which the mediator helps the parties negotiate a mutually acceptable solution.

How does arbitration work?

Arbitration provides distinct advantages over the court system in many different types of disputes. Because arbitration is a private method of settling disputes, parties can tailor the arbitration proceeding in almost any manner they choose. For example, parties involved in arbitration can agree to limit the number of witnesses each side will present, set parameters on the amount and type of evidence that will be presented, and pre-determine what issues the arbitrator's award should cover.

Another important benefit of arbitration is its ability to provide the parties with an arbitrator experienced in the subject matter of the dispute. Many cases involve complex evidence, testimony, and documents. The arbitrator's knowledge allows for a quick understanding of the issues, which in turn saves time and expense.

Because they are conducted by private agreement, arbitration hearings are not open to the public and the decisions reached are generally not matters of public record.

What is high-low arbitration?

In High-Low arbitration, the parties mutually establish, prior to the hearing, a range in which the award must be. lf the arbitrator's decision is between the high and the low figures, that amount is the final award. However, if the award is above the pre-set maximum, it automatically moves down to the previously agreed-upon high figure. Conversely, if the arbitrator's decision is below the established minimum, the award moves up to the predetermined low figure. In most instances, the parties agree to not inform the arbitrator of the range of their High-Low agreement.

Is arbitration final?

Arbitration awards are final and binding on all parties to the arbitration, and may not be appealed except under very limited circumstances provided by statute. Awards may be confirmed in any court having jurisdiction and, thereafter, carry the same force and effect as an original court decision. Rules of Arbitration include an Internal Appeal Procedure, but it does not apply unless the parties specifically so state in their Contract to Arbitrate.

Key Partners Associated with Arbitration

Ultimate Role of Arbitration

There has been a significant improvement as to the adaptation of arbitration as a technique for the resolution of international trade disputes in accordance with the escalation in international trade over the last several decades. Parties in dispute must agree on the usage of arbitration as a mode of settlement of their trade / commercial disputes. Arbitration, however, contains many gains over litigation, the usual method for the resolution of trade disputes. Many of the key advantages of arbitration are as under:

• The processes are flexible;

• There is no issues as to jurisdiction;

• Arbitrators are neutral;

• On the basis of procedural corporate expertise, arbitrators can be appointed;

• International treaties may enforce the arbitration awards;

• Since the arbitration proceedings will not be conveyed, the parties should be able to avoid the adversative publicity which usually follows litigation, so they may keep it confidential;

• Where a court judgment is commonly subject to rights of appeal to higher appeal courts, an arbitration award is normally final.

Institutions around the world have recognised the upsurge in the popularity of international arbitration. An increase in the number of arbitration centres for meeting the requirements is the possible outcome. Legislature have streamlined the arbitration laws and procedures and responded by establishing improved national courts, generally establish a readiness to deliver a sociable environment for arbitration and to necessitate the parties to observe with predetermined obligations for resolving disputes through arbitration. Local courts normally construe arbitration clauses extensively so that they shield a large number of disputes and will normally make it more problematic for parties to challenge arbitration awards in the courts.

Arbitration may be formal where disputing parties may move to an established foundation which is specialised in arbitration proceedings or ad hoc. Where disputing parties may establish their own rules and jurisdiction for the arbitration process.

For an ad hoc arbitration, there is a multitude of distinct institutional arbitration organisms as well as the established rules exist all over the world. These may be relevant to international franchisees established in Pakistan.

London Court of International Arbitration (LCIA) - 1892

The LCIA is one of the world’s leading international institutions for commercial dispute resolution. The LCIA provides efficient, flexible and impartial administration of arbitration and other ADR proceedings, regardless of location, and under any system of law. The international nature of the LCIA’s services is reflected in the fact that, typically, over 80% of parties in pending LCIA cases are not of English nationality.

The LCIA has access to the most eminent and experienced arbitrators, mediators and experts from many jurisdictions, and with the widest range of expertise. The LCIA's dispute resolution services are available to all contracting parties, without any membership requirements.

In order to ensure cost-effective services, the LCIA’s administrative charges, and the fees charged by the tribunals it appoints, are not based on sums in issue. A registration fee is payable with the Request for Arbitration and, thereafter, hourly rates are applied by the arbitrators and by the LCIA.

This deals mainly with construction projects, real insurance deals and commodity contracts. Unlike the ICC, it does not always ask for an advance deposit and it pays interest to the parties on any sums deposited with it.

Stockholm Chamber of Commerce (SCC) - 1917

Sweden has recently made a breakthrough on the international arbitration scene and the SCC applies its own rules, which have been recently revised to encourage the submission of transnational cases. In particular, it is now easier for parties to choose which system of law should be applied to a dispute and to use the rules in cases heard outside Sweden. The SCC deals particularly with maritime disputes, sales contracts, licensing agreements and construction projects. It is particularly popular in East / West disputes involving trade organisations from the Russia, Germany, Poland and Hungary on the one part, and from the UK, the US, Italy and France on the other. Western European corporations, and more recently Chinese trade organisations, often include arbitration clauses in their contracts referring dispute to the SCC.

The SCC is part of the Stockholm Chamber of Commerce since 1917 and has acquired extensive experience in dispute resolution over a period of nearly 100 years. During this time, the SCC has developed into one of the premier institutions globally for east-west-related disputes and is today an international centre for the settlement of disputes where parties from up to 40 countries choose to have their disputes settled each year.

International Chamber of Commerce (ICC) - 1923

ICC Arbitration assures the best quality of service. That’s because it is delivered by a trusted institution and a process that is recognised and respected as the benchmark for international dispute resolution. From straightforward sales contracts to intellectual property matters, joint ventures, share purchase arrangements or state-financed construction projects, whatever the case, ICC can assist in resolving disputes of all sizes.

The ICC handles cases under all systems of law including civil law, common law and Islamic law. It applies the ICC Rules of Conciliation and Arbitration to its disputes. Under the ICC Rules if an arbitrator has jurisdiction over certain questions of law, and the parties do not specify a prevailing law or an arbitration centre, then the arbitrator will select the prevailing law and the arbitration centre.

The ICC is often criticised on cost grounds as the arbitrator’s fees are linked to the amount in dispute rather than being related to time as in the case of many other arbitration institutions. Furthermore, the ICC always insists on an advance deposit to cover costs, which can be paid in two instalments. No interest is awarded on that sum and the question of costs has recently made other institutions more popular.

American Arbitration Association (AAA) - 1926

AAA cases are often settled prior to the arbitrator’s decision—and nearly half of those cases incur no arbitrator compensation. AAA panels comprise distinguished judges as well as leaders in the legal and business communities with industry-specific knowledge and expertise. Arbitrators are required to adhere to Codes of Ethics developed by the AAA and the American Bar Association (ABA). Select Expert Panels include Aerospace, Aviation, and National Security; Construction, Cybersecurity, Employment, Energy, Healthcare, Intellectual Property, Judicial, Labor, and Large and Complex Cases. The AAA has implemented best practices, policies, technologies, and procedures to help protect case data stored and managed on the AAA’s technology infrastructure.

AAA fees, easily available online, are due at specific times and are not tied to the length of the case or the arbitrators’ compensation. This is much cheaper than the ICC as some of the arbitrators work without a charge and there is a ‘bargain basement’ procedure for small claims. Although the AAA has not yet expanded sufficiently to take on many complex international cases now, it should be sufficient for resolving the majority of franchise disputes.

International Centre for Settlement of Investment Disputes (ICSID) - 1966

ICSID is the world’s leading institution devoted to international investment dispute settlement. It has extensive experience in this field, having administered the majority of all international investment cases. States have agreed on ICSID as a forum for investor-State dispute settlement in most international investment treaties and in numerous investment laws and contracts.

ICSID provides for settlement of disputes by conciliation, arbitration or fact-finding. The ICSID process is designed to take account of the special characteristics of international investment disputes and the parties involved, maintaining a careful balance between the interests of investors and host States. Each case is considered by an independent Conciliation Commission or Arbitral Tribunal, after hearing evidence and legal arguments from the parties. A dedicated ICSID case team is assigned to each case and provides expert assistance throughout the process. More than 600 such cases have been administered by ICSID to date.

Centre for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (CAM CCBC) - 1979

Year after year, the use of arbitration as an appropriate means for settling disputes is growing, in which the parties define an impartial third party independent of the demand to analyze and judge the conflict. The parties may further define an institution to promote the administration of the proceeding through cost and document management, a service provided by centers such as the CAM-CCBC.

Another important step in Brazil was the ratification of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitration Decisions of 1958 (known as the New York Convention). The document is considered to be the most important multilateral agreement on International Arbitration and has been ratified by more than 150 countries. By becoming a signatory to the convention in 2002, Brazil came to be recognized by the international community as favorable to the use of arbitration as an effective method for settling international disputes.

Hong Kong International Arbitration Centre - 1985

Hong Kong is ranked among the top five seats of arbitration worldwide by Queen Mary University of London and White & Case’s 2018 International Arbitration Survey. Founded in 1985, HKIAC is an independent and not-for-profit organisation. “Regional arbitration pretty much began with the HKIAC. No regional institution has been running for so long. Or with such success.” GAR Guide to Regional Arbitration 2018. HKIAC is a one-stop shop which handles arbitration, mediation, adjudication and domain name cases. HKIAC plays a leading role in developing innovative arbitration practices. Its practices have received numerous GAR awards and nominations for best innovation.

With offices in Hong Kong, Shanghai and Seoul, the Secretariat comprises individuals from diverse backgrounds, including nationals of Hong Kong, New Zealand, Morocco, mainland China, Singapore, Germany, Australia and Canada. Secretariat members are qualified in both civil and common law jurisdictions and speak 10 languages. A Secretariat member can be appointed as tribunal secretary under HKIAC’s detailed guidelines on the use of tribunal secretaries.

Singapore International Arbitration Centre - 1991

Since commencing operations in 1991 as an independent, not-for-profit organisation, SIAC has established a track record for providing best in class arbitration services to the global business community. SIAC arbitration awards have been enforced in many jurisdictions including Australia, China, Hong Kong SAR, India, Indonesia, Jordan, Thailand, UK, USA and Vietnam, amongst other New York Convention signatories. SIAC is a global arbitral institution providing cost-competitive and efficient case management services to parties from all over the world.

The Court's main functions include the appointment of arbitrators, as well as overall supervision of case administration at SIAC. SIAC has an experienced international panel of over 400 expert arbitrators from over 40 jurisdictions. Appointments are made on the basis of our specialist knowledge of an arbitrator's expertise, experience, and track record. SIAC’s panel has over 100 experienced arbitrators in the areas of Energy, Engineering, Procurement and Construction from more than 25 jurisdictions.

WIPO Arbitration & Mediation Centre - 1994

Based in Geneva, Switzerland, with a further office in Singapore, the WIPO Arbitration and Mediation Center was established in 1994 to offer Alternative Dispute Resolution (ADR) options for the resolution of international commercial disputes between private parties. Developed by leading experts in cross-border dispute settlement, the arbitration, mediation and expert determination procedures offered by the Center are widely recognized as particularly appropriate for technology, entertainment and other disputes involving intellectual property. Since 2010 the Center has an office at Maxwell Chambers in Singapore.

The WIPO Arbitration and Mediation Center is a neutral, international and non-profit dispute resolution provider that offers time- and cost-efficient alternative dispute resolution (ADR) options. WIPO mediation, arbitration, expedited arbitration, and expert determination enable private parties to efficiently settle their domestic or cross-border IP and technology disputes out of court. The WIPO Center is also the global leader in the provision of domain name dispute resolution services under the WIPO-designed UDRP.

Dubai International Arbitration Centre - 1994

The Dubai International Arbitration Centre (DIAC) is an autonomous, permanent, non-profit institution that provides the regional and international business communities a high caliber of arbitration services and facilities at an affordable price.

Through DIAC’s associate membership, members could enhance their knowledge and experience international commercial arbitration by participating in seminars, training workshops and international conferences.

The services it offers include the overseeing of arbitral proceedings and commercial disputes, appointing arbitrators, choosing the venue for the arbitration and fixing the fees of arbitrators and mediators.

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There are also other Regional Arbitration Centers in almost all countries, which the parties can choose in accordance with their convenience and can get the settlement through Award.

ZA-LLP give support and assistance to the clients to get their dispute settled domestically and worldwide through Arbitration Centers and also helps the clients to get the Awards rendered by these Arbitral Forums recognized and enforced in Pakistan.

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