I had the privilege of attending a talk held by No5 Chambers titled ‘Pakistan as an Emerging Market for International Arbitration After Development of the China Pakistan Economic Corridor (CPEC)’. The speakers included the Honourable Judge of the Lahore High Court, Mr. Justice Shahid Jamil Khan, Commercial Judge at the Lahore High Court, Mr. Justice Jawad Hassan, Barrister Mian Sheraz Javaid FCIArb, Chair of the CIArb Pakistan Branch and a Partner of MK Consultus LLP, and Ms. Camilla Draycott, Commercial Barrister at No5 Chambers who stepped in as Mohammed Zaman QC was unable to make it to the talk.
With CPEC, the potential for disputes between contractors of different nationalities are more likely to happen, given the differences in language, culture, availability of skilled labour and so on. However under CPEC, there is no unified system of dispute resolution. Consideration must be had towards various regulations. In terms of arbitration, should parties adopt the FIDIC standard contractual clauses, clause 20 mandates that reference be made to the ICC rules.
Alternatively, arbitration can be pursued under several bilateral investment treaties (BIT). The earliest relevant example is the Germany-Pakistan BIT of 1959 which came into force in 1962. In the Sino-Pakistani context, the relevant treaty is the China-Pakistan BIT of 1989 which entered into force in 1990. Under the different BITs, there are differing rules. For instance, under the China-Pakistan BIT a period of 36 months must lapse before a notice of arbitration can be issued, whereas there might not be such a requirement in a different BIT.
Notably, the China-Pakistan Free Trade Agreement (‘CPTFA’) of 2006 has its own dispute resolution method which mixes conciliation, mediation and detailed arbitration. However, enforcement of decisions arising from this context is limited to the CPTFA states only.
Pakistan has steadily increased its adoption and development of international arbitration. References were made to Pakistan’s signature of the New York Convention in 30 December 1958, ratifying the Convention in 14 July 2005, and with the enactment of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 on 19 July 2011. Further, with the establishment of the Pakistan branch of the CIArb in recent years heralded a new era for international arbitration in the country.
Further, the Judiciary in Pakistan has demonstrated a willingness to recognise and enforce foreign arbitral awards, the most well-known example being Orient v SNGPL where a Petition for Recognition was converted into an Execution Petition for enforcement under the Civil Procedure Code of Pakistan.
Additionally, the Judiciary in Pakistan have gone as far as to use references to the Constitution of Pakistan as a basis for enforcing foreign arbitral awards. In Pizza Hut v Multan Development Authority, Justice Hassan ruled that the protections afforded by Article 4 of the Constitution, read together with Article 5 and 18, meant that the interests of foreign investors were to be protected in Pakistan so as to build up their confidence in investing in the country.
Foreign investors looking to expand their interests in the Pakistan construction industry may benefit from reading up on the first Pakistan Construction Disputes Report (‘PCDR’), accessible at https://pcdr.pk/. The focus of the PCDR, as explained by Mr. Javaid, was on the avoidance of disputes. The PCDR was based on a survey of 200 mega construction projects in Pakistan, with an eye to understanding what were the root causes of such disputes. The findings, interestingly, show that 95% of the respondents stated that at least one dispute had arisen in their project, the majority of these stemming from payment delays. Further, it was discovered that the adversarial nature of contract drafting in Pakistan contributed to this statistic.
However, much remains to be done. Presently, the first commercial court was established in Lahore under the Punjab Commercial Courts Ordinance, 2021. Although four more commercial courts have been established since then, this has been limited to the region of Punjab. Some time will be needed before this becomes common throughout the country.
It is the intention of high-profile members of the Judiciary in Pakistan that the country becomes the Regional Arbitration Market connecting South Asia, Central Asia, Afghanistan to the west and China to the east. Given its present efforts, this may very well become a possibility in the not too distant future.
