Our specialization includes aiding clients for matters involving alternative disputes resolution {ADRs}, including but not be limited to; Local and International Arbitration, Mediation and Reconciliation. We have represented clients in many arbitration proceedings involving the commercial, real estate, engineering and construction sectors disputes.

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The information provided below is meant for the purposes of helping our current and potential clients.Please note that while we keep every effort to update the information on our Website, we are not responsible if any new law or amendment has been ignored in the paragraphs below.This information is also not a substitute for actual legal advice by our Specialist team.If you have a legal query, we would recommend you to get in touch via free consultation.

METHODS OF DISPUTE RESOLUTION IN PAKISTAN:

Arbitration and Mediation

ARBITRATION:

Arbitration Act 1940 governs arbitration proceedings in Pakistan. Rules follow ordinary law of contract to major extent. An “Arbitration Agreement” has been defined in the Act as “a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not”. An Arbitrator’s Award, in order for it to be valid, must be final and certain, and must contain decisions only on matter referred.

The law implies certain conditions in arbitration agreements, which may be excluded by express statements to the contrary. These statements include the following conditions:

  • reference to arbitration will be deemed to be made by a sole arbitrator;
  • where there is an even number of arbitrators appointed by parties, the umpire must be appointed by those arbitrators within a month of their own appointment;
  • an Award by the arbitrators will be made within four months of reference whereas the umpire must announce his Award within two months of entering on reference;
  • an Award shall be final and binding on all parties; and,
  • the awarding cost of reference shall be within discretion of arbitrators.

Section 13 of the Arbitration Act of 1940, defines powers of arbitrators, subject to any express agreement to the contrary. These include, inter alia:

  • to administer oath to parties and witnesses;
  • to make Award conditional; and
  • to administer such interrogatories to any party to arbitration as may be necessary.

Civil Procedure Code of Pakistan does not apply to these proceedings, but arbitrators are under duty to observe common principles of equity and justice. Authority of arbitrator may be revoked if his/her power is granted by an arbitration agreement itself, on such grounds as are specified therein, or it may be revoked with leave of court. The Court will grant leave where the following situations occur:

  • the arbitrator has personal interest in matter, or
  • he is indebted to one of the parties, or
  • has conducted proceedings with undue and inordinate delay, or
  • has committed some misconduct, or
  • lacks jurisdiction, or
  • there is some other bias in the mind of the arbitrator which may unfairly prejudice interest of any of parties, (Section 5 Arbitration Act 1940).

An Arbitration Award may be modified or corrected by the court where it is necessary to do so for removing any ambiguity, confusion or obvious mistake etc. as long as such modification or correction does not change the Award materially. Court may not, however, change the Award merely because it takes a different view as to what is fair and what is not. It cannot, therefore, go into the merits of case or try to incorporate its own decision into the Award. Further, Section 26A of the Arbitration Act 1940, inserted by the Arbitration (Amendment) Act 1981, allows parties to be notified of any irrelevant or extraneous considerations or erroneous view of law or material facts and evidence etc. taken by arbitrators, so that they may, if aggrieved by an Award, challenge the same in court. The Arbitration Award may be set aside by the court on any of following grounds:

  • the arbitrator or umpire has committed some misconduct (which includes not following common rules of justice);
  • the Award has been made after issue of order by court superseding arbitration or after arbitration proceedings have become invalid; or
  • the Award has been improperly procured or is otherwise invalid.

The New York Convention was ratified through Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Award Ordinance, 2005). This Ordinance lapsed after four months as per terms of the Constitution of Pakistan but has been subsequently re-enacted several times. It is anticipated that an Act of Parliament will be enacted to place the New York Convention on more permanent statutory footings. Jurisdiction to arbitrate is often agreed to be conferred upon the International Court of Arbitration, International Chamber of Commerce and London Court of International Arbitration by the parties. Alternative methods of dispute resolution, such as Mediation, Conciliation, Fact Finding, Med-Arb, Early Neutral Evaluation and Multi-door Courthouses are still at early inceptive stages in Pakistan.

MEDIATION:

The Karachi Centre for Dispute Resolution (KCDR) is successfully resolving commercial disputes that are increasing along with business activity, according to Pakistan former Chief Justice who is on KCDR board. Established in 2005 with the World Banks assistance, International Finance Corporation (IFC), KCDR is now a non-governmental organization guided by both active and retired judges and business leaders. By reducing expenses and delays and freeing assets tied up in court, it is observed that KCDR encourages market based activity as also intended by IFC and serves as example for rest of Pakistan.

Alternative Dispute Resolution (ADR) is a vast field. It is not a very new concept in Pakistan. Dispute resolution has been apart of our culture for a long time, i.e. in the form of Panchayats and Jirgas, (committee of honorable elders of the community). However, this type of particular dispute resolution has been most often associated with marital and other family matters.

     

The Constitution of Pakistan

There is no specific mention of ADR in the Constitution of Pakistan. A reference to commercial and financial activities can be pinpointed in the Constitution, which may, however implicitly, lead to a view that Pakistan practices certain types of ADR. A quick review of the Constitution reveals that articles 153-154 deal with the Council of Common Interest, article 156 deals with the National Economic Council, article 160 deals with the National Finance Commission, and article 184 of the Constitution gives rise to original jurisdiction to the Supreme Court of Pakistan in “any dispute between any two or more Governments.”

 

International Treaties and Conventions

Specifically, with regards to ADR, a researcher can use these international trade organizations that Pakistan is a member of to find detailed information on ADR in Pakistan.

Multilateral Investment Guarantee Agency (MIGA)

Pakistan is a member of MIGA. MIGA is an agency of the World Bank that enhances foreign direct investment into developing countries by insuring cross-border investments. ADR is an important component of any international trade organization and because MIGA insures and promotes investments into developing countries, it also provides “an umbrella of deterrence against government actions that could disrupt insured investments and helps resolve potential disputes” to enhance investor confidence. To promote its goal, in 1996, MIGA began offering dispute resolution services to help governments and foreign investors find creative solutions to their disagreements. Pakistan is a developing country that has an influx of investments. Given that it has signed and ratified the convention establishing MIGA, it has agreed to all its terms including those pertaining to ADR. Pakistan became a member to MIGA in April 1992.

International Center for Settlement of Investment Disputes (ICSID)

Pakistan is a member of ICSID. ICSID is also an institution of the World Bank that “provides facilities for conciliation and arbitration of international investment disputes.”

ICSID was formed via the ICSID Convention, also known as the Washington Convention. ICSID is a “multilateral treaty formulated by the Executive Directors of the International Bank for Reconstruction and Development (the World Bank). It was opened for signature on March 18, 1965 and entered into force on October 14, 1966.” Today, ICSID is considered to be a leading international arbitration institution.

As stated above, foreign direct investment in Pakistan is fairly large. Given that Pakistan has signed and ratified the Washington Convention establishing ICSID, it has agreed to all its terms. Pakistan was one of the first countries to sign the Washington Convention on July 6, 1965. It deposited its ratification of the Convention on September 15, 1966 and the Convention went into force one month after, in October 1996.

United Nation’s Conventions

Pakistan has also signed and ratified the New York Convention. The New York Convention is also known as the New York Convention of 1958 and the Convention for the Recognition and Enforcement of Foreign Arbitral Awards.

UNCITRAL is a Commission of the UN established by the General Assembly on 17 December 1966 by Resolution 2205 (XXI). Thus, although the New York Convention was adopted in 1958, the Commission’s essential mandate is to promote the Convention further. Furthermore, UNCITRAL serves as the International Trade Law Branch of the Office of Legal Affairs of the UN. Hence, UNCITRAL, under the umbrella of the UN, is the biggest organizational body to prepare rules relating to ADR, namely arbitration and conciliation.

Pakistan has signed and ratified the New York Convention. Pakistan was once again, one of the earliest signatory members to an ADR related document, here the New York Convention. It signed the Convention on December 30, 1958 and ratified it on July 14, 2005, bringing it into force three months later in October 2005.

Although the New York Convention is just one treaty related to ADR that Pakistan has signed and ratified, there are various other ADR related Conventions by the UN that Pakistan has overlooked in implementing. These include, but are not limited to, 1) Convention on the Limited Period in International Sales of Goods; 2) UN Convention on Contracts for the International Sale of Goods (CISG); 3) UN Convention on Independent Guarantee and Stand-by-Letters of Credit; 4) UN Convention on International Bills of Exchange and International Promissory Notes; 5) UN Convention on Assignment of Receivables in International Trade; 6) UN Convention on Carriage of Goods by Sea. You can access the color-coded database maintained by LegaCarta, the International Trade Centre’s database to gather this information.

Domestic (Pakistani) Laws and Rules

As discussed above, laws related to ADR are implicitly mentioned in the Constitution of Pakistan. Explicit mention of ADR methods and mechanisms is made in the following domestic laws of Pakistan:

  • The Small Claims and Minor Offences Courts Ordinance of 2002;
  • Sections 102-106 of the SBNP Local Government Ordinance of 2001;
  • Chapter XXII of the Code of Criminal Procedure of 1898 (summary trial provisions); and
  • The Arbitration Act of 1940.

The Small Claims and Minor Offences Court Ordinance is a law intended to establish a court of Small Claims and Minor Offences, where the value of the small claims suit is less than Rs.100,000 ($1600) and the punishment for minor offences is less than three years. The purpose of the law is to “provide legal cover to amicable modes of settling disputes between parties…easily and expeditiously.”

Sections 102 – 106 under Chapter XI of the Ordinance encourage “amicable settlement of disputes…through mediation, conciliation, and arbitration.” Given that this is provincial law (equivalent of state law in the U.S.); it goes to show that Pakistan has resolved to the use ADR methods, even at a local level.

Lastly, the Arbitration Act of 1940, an Act passed for all of British Indian before Pakistan’s independence, continues to apply to Pakistan today. The Act provides for three classes of arbitration: 1) arbitration without court intervention (Chapter II, sections 3-19); 2) arbitration where no suit is pending, (but through court) (Chapter III, section 20); and 3) arbitration in suits (through court) (Chapter IV, sections 21-25).

Conciliation Courts Ordinance, 1961

  Conciliation Courts have jurisdiction over criminal and civil matters. They can impose fines for minor offences, but they cannot sentence anyone to imprisonment. The fine is limited to Rs. 500, payable to the Union Council and recovered by the District Magistrate. The pecuniary jurisdiction of these Courts is limited to Rs, 50, 000/- (or Rs 100, 000/- if both parties agree to mediation).

  Where conciliation fails, a certificate of failure is issued, but even after failure the parties can seek a remedy in the ordinary courts. Furthermore, decrees issued by the conciliation courts are executed by the Civil Courts and appeal lie to the District Court within thirty days of the arbitration council’s decision. Lawyers are not permitted to appear in these Courts, and the CPC and the Evidence Act are not applicable in this forum. This simplifies procedures and adds to the informality of the conciliation courts, but even so, these courts cater to very few litigants. The main hurdles faced by these courts include: the frequent dissolution of local bodies, the procedure for appointing arbitrators and the non-appearance of arbitrators, limited jurisdiction and lack of execution powers, and the frequency of appeal.

Small Claims and Minor Offences’ Ordinance, 2002

                        Small claims and Minor Offences’ Ordinance was promulgated in 2002 to resolve the small civil claims (involving amounts up to Rs. 100, 000) and minor offences at district level. The High Courts have been empowered under the law to establish one or more SCMOs’ Courts in each district to try small claims and minor offences. These courts are to be presided over by Civil Judges cum Judicial Magistrates.

                        The SCMO law has in-built ADR mechanism. The Presiding Officer can refer the cases for amicable settlement of disputes, on his own or on the request of the parties, at any stage when he thinks that situation is conducive for such settlement. The cases are to be referred to one of the “saliseen (mediators)” from a list in each district. This list is to be prepared by the D&SJ of the respective district in consultation with the president of the bar and is to be approved by the Chief Justice of the High Court. Retired judges and lawyers are to be included in the list. But if the parties agree to a salis (mediator), who is not included in the list, the court shall refer the matter to that salis.

FISCAL LAWS

            To resolve fiscal dispute between the parties from the forum of their choice necessary amendments have been made in the various fiscal laws. By Finance Act, 2004 section 13-A of the Income-Tax Ordinance has been incorporated and it allows any aggrieved person in connection with any matter pertaining to the liability of income tax, to apply to Central Board of Revenue for appointment of a committee for resolution of any hardship or dispute mentioned in the application. The Central Board of Revenue, which is the highest authority in the revenue matters, after examining the application, can appoint a committee consisting of an Income Tax Officer along with two persons from a notified panel of reputable tax payers for resolution of the dispute. Section 36-D of the Central Excise Act, 1944 and Section 195-C of Customs Act, 1969 were also incorporated by Finance Act, 2004 for resolving the dispute through a panel of mediators. Section 47-A of Sales Tax Act also provided that any registered person may apply to Central Board of Revenue for appointment of a committee for resolution of any hardship or any dispute through mediation.

Law reforms Act, 2007 as passed by the National Assembly of Pakistan

For the Section 89-A, the following shall be substituted, namely:-

“89- A.   Alternate Dispute Resolution.

All courts shall, in cases of civil or commercial nature at any stage of the case, preferably at the initial stage, require the parties to have resort to one of alternative dispute resolution methods, such as mediation or conciliation.

Notwithstanding anything contained in sub-section (1), the parties may resort to mediation or conciliation before the legal proceedings are commenced in a court and in that case the parties or either of them may apply to court for resolution of their dispute through mediation or conciliation. If either of the parties applies to the court for resolution of their dispute through mediation or conciliation, the court shall serve notice on the other party or parties and if both or all of them agree to on resolution of their dispute through mediation of conciliation, the court shall refer the matter to a mediator or conciliator as provided in sub-section (3) and upon such reference other provisions of this section shall mutatis mutandis apply.

The court may refer the matter to a retired judge of a superior court or of a sub-ordinate court, a technocrat having experience in the relevant field or a lawyer from a panel maintained for the purpose or any other person agreed by the parties. Upon referring the matter, the court shall direct the parties to appear before the conciliator on date and time fixed by the court under intimation to the mediator or conciliator.

The parties to the dispute shall take part in the mediation or conciliation proceedings in person or through an authorized representative.

A mediator or conciliator to whom a matter is referred for mediation or conciliation under this section shall try to resolve the dispute within a period of sixty days, extendable by the court for sufficient cause for another period of thirty days and during this period the court proceedings shall remain stayed.

In dealing with the dispute or difference referred to him, the mediator or conciliator may follow such fair procedures as it may be necessary in the circumstances of the case.

If as a result of the efforts of mediator or conciliator, a settlement is reached between the parties, the mediator or conciliator shall record such statement, duly signed by him and the parties and submit it to the court. The court shall pronounce judgment in terms of settlement and upon the judgment so pronounced a decree shall follow.

If the efforts of mediator or conciliator, fail in bringing about a settlement between the parties, the mediator or conciliator shall submit a report certifying that the parties have not reached any settlement and the court shall proceed with the case.

Save as otherwise provided in this section, the proceedings before the mediator or conciliator shall not be admissible before any court and the mediator or conciliator shall not be required to appear as witness or otherwise in any arbitral or judicial proceedings with respect to a dispute that is or was the subject-matter of mediation or conciliation. The mediator or conciliator shall also not act as an arbitrator or as representative or counsel of a party in any arbitral or judicial proceedings with respect to a dispute that is or was the subject-matter of a mediation or conciliation.

This Code and the Qanoon-e-Shahadat, 1984 (P.O No 10 of 1984) shall not apply to the proceedings before the mediator or conciliator.

No appeal or revision shall lie from a decree or order made a result of the consent of the parties.

The High Court or Federal Government may make rules for giving effect to the provisions of this section.

Other areas of law where Arbitration and ADR become relevant

 

Our team is able to advise you on the ambit and applicability of the Conciliation Courts Ordinance, small Claims and Minor Offences Ordinance, Family Laws, Civil Procedure Code, Local Government Ordinance (Musalihati Anjuman) and the Arbitration Act, Finance Act, 2004.Please note that Arbitration is a vast area of law

Small Claims and Minor Offences’ Ordinance, 2002

Small claims and Minor Offences’ Ordinance was promulgated in 2002 to resolve the small civil claims (involving amounts up to Rs. 100, 000) and minor offences at district level. The High Courts have been empowered under the law to establish one or more SCMOs’ Courts in each district to try small claims and minor offences. These courts are to be presided over by Civil Judges cum Judicial Magistrates.

The SCMO law has in-built ADR mechanism. The Presiding Officer can refer the cases for amicable settlement of disputes, on his own or on the request of the parties, at any stage when he thinks that situation is conducive for such settlement. The cases are to be referred to one of the “saliseen (mediators)” from a list in each district. This list is to be prepared by the D&SJ of the respective district in consultation with the president of the bar and is to be approved by the Chief Justice of the High Court. Retired judges and lawyers are to be included in the list. But if the parties agree to a salis (mediator), who is not included in the list, the court shall refer the matter to that salis.

Muslim Family Laws Ordinance, 1961

Polygamy (6)………. (1)     No man, during the subsistence of an existing marriage shall except with the previous permission in writing of the Arbitration Council, contract another marriage, nor shall any such marriage contracted without such permission be registered under this Ordinance.

An application for permission under sub-section (1) shall be submitted to the Chairman in the prescribed manner together with the prescribed fee, and shall state reasons for the proposed marriage, and whether the consent of existing wife or wives has been obtained thereto.

On receipt of the application under sub-section (3) , Chairman shall ask the applicant and his existing wife or wives each to nominate a representative, and the Arbitration Council so constituted may, if satisfied that the proposed marriage is necessary and just, grant, subject to such conditions if any, as may be deemed fit, the permission applied for.

In deciding the application the Arbitration Council shall record its reasons for the decisions and any party may, in the prescribed manner, within the prescribed period, and on payment of the prescribed fee, prefer an application for revision, in the case of West Pakistan to the Collector and, in the case of East Pakistan, to the Sub-Divisional Officer concerned and his decision shall be final and shall not be called in question in any court.

(5)            Any man who contract another marriage without the permission of the Arbitration Council shall,

pay immediately the entire amount of the dower whether prompt or deferred, due to the existing wife or wives, which amount, if not so paid, shall be recoverable as arrears of land revenue, and

on conviction upon complaint be punishable with simple imprisonment which may extend to one year, or with fine which may extend to five thousand rupees, or with both.

Talaq (7) ……… (1)        Any man who wishes to divorce his wife shall, as soon as may be after the pronouncement of talaq in any form whatsoever, give the Chairman a notice in writing of his having done so, and shall supply a copy thereof to the wife.

Whoever, contravenes the provision of sub-section (1) shall be punishable with simple imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both.

Save as provided in sub-section (5) talaq, unless revoked earlier, expressly or otherwise, shall not be effective until the expiration of ninety days from the day on which notice under sub-section (1) is delivered to the Chairman.

Within thirty days of the receipt of notice under Sub-section (1), the Chairman shall constitute an Arbitration Council for the purpose of bringing about reconciliation between the parties, and the Arbitration Council shall take all steps necessary to bring about such reconciliation.

If the wife be pregnant at the time of talaq is pronounced, talaq shall not be effective until the period mentioned in sub-section (3) or the pregnancy, whichever later, ends.

(6)            Nothing shall debar a wife whose marriage has been terminated by talaq effective under this section from remarrying the same husband, without an intervening marriage with a third person, unless such termination is for the third time so effective.

Maintenance (9) ………. (1)            If any husband fails to maintain his wife adequately or where there are more wives than one, fails to maintain them equitably, the wife, or all or any of the wives, may in addition to seeking any other legal remedy available apply to the Chairman who shall constitute an Arbitration Council to determine the matter, and the Arbitration Council may issue a certificate specifying the amount which shall be paid as maintenance by the husband.

(2)                        A husband or wife may, in the prescribed manner, within the prescribed period, and on payment of the prescribed fee, prefer an application for revision of the certificate, in the case of West Pakistan, to the Collector and, in the case of East Pakistan, to the Sub-Divisional Officer concerned and his decisions shall be final and shall not be called in question in any court.

Any amount payable under sub-section (1) or (2) if, not paid in the due time, shall be recoverable as arrears of land revenue.

West Pakistan Family Courts Act, 1964

Pre-trial Proceedings (10)……… (1)   [When the writing statement is filed, the court shall fix an early date for a pre-trial hearing of the case].

(2)            On the date so fixed the court shall examine the plaint, the written statement (if any) and the précis of evidence and documents filed by the parties and shall also, if it so deems fit, hear the parties and their Counsel.

(3)            At the pre-trial, the court shall ascertain the points at issue between the parties and attempt to effect a compromise or reconciliation between the parties, if this be possible.

(4)            If no compromise or reconciliation is possible the court shall frame the issues in the case and fix date for [the recording of the] evidence, [”provided that notwithstanding any decision or judgment of any court or tribunal, the Family court in a suit for dissolution of marriage, if reconciliation fails, shall pass decree for dissolution of marriage forthwith and shall also restore to the husband the Haq Mehr received by the wife in consideration of marriage at the time of marriage”].

Conclusion of trial (12)……… (1)     After the close of evidence of both sides, the Family Court shall make another effort to effect a compromise or reconciliation between the parties [“Within a period not exceeding fifteen days”].

(2)            If such compromise or reconciliation is not possible, the Family Court shall announce its judgment and give a decree

CIVIL PROCEDURE CODE, 1908

[89-A Alternate Dispute Resolution ……… The court may, where it considers necessary, having regard to the facts and circumstances of the case with the object of securing expeditious disposal of a case, in or in relation to a suit, adopt with the consent of the parties alternate dispute resolution method, including mediation and conciliation.]

Order–X Rule IA ……… The Court may adopt any lawful procedure not inconsistent with the provisions of this Code to (i) conduct preliminary proceedings and issue order for expediting processing of the case; (ii) issue, with the consent of parties, commission to examine witnesses, admit documents and take other steps for the purpose of trial: (iii) adopte, with the consent of parties, any alternative method of dispute resolution including mediation, conciliation or any such other means.

NWFP LOCAL GOVERNMENT ORDINANCE, 2001

Courts may refer cases to Musalihati Jarga ………..

102   (1)             Any court of competent jurisdiction may, in a case where it deems appropriate, refer a matter to the Musalihati Jarga through the Union Nazim for settlement.

(2)                        The court making a reference to Musalihati Jarga for settlement of a dispute under sub-section (1), may lay down the procedure for summoning the parties to the dispute, the terms of reference, the period during which settlement is to be made, the manner in which report of the settlement is to be submitted and such other matters as it may deem appropriate for resolution of the dispute:

Provided that no matter in the cases:

falling within the purview of Hudood laws, including Hudood Ordinances and Order;

by or against the Federal Government or a Provincial Government or any statuary body or a body which is controlled by any such Government, or in which any of such Government has a controlling share or interest; or

by or against persons under legal disabilities shall be referred for such (conciliation).

(3)                        Where on a reference made by the court under sub-section (1), the dispute is settled between the parties, the court may make such settlement as rule of the court.

(4)                        The Musalihati Jarga shall inform the court if the dispute is not settled within the time fixed by the court or, may ask for extension in time for settlement of dispute.

FISCAL LAWS

To resolve fiscal dispute between the parties from the forum of their choice necessary amendments have been made in the various fiscal laws. By Finance Act, 2004 section 13-A of the Income-Tax Ordinance has been incorporated and it allows any aggrieved person in connection with any matter pertaining to the liability of income tax, to apply to Central Board of Revenue for appointment of a committee for resolution of any hardship or dispute mentioned in the application. The Central Board of Revenue, which is the highest authority in the revenue matters, after examining the application, can appoint a committee consisting of an Income Tax Officer along with two persons from a notified panel of reputable tax payers for resolution of the dispute. Section 36-D of the Central Excise Act, 1944 and Section 195-C of Customs Act, 1969 were also incorporated by Finance Act, 2004 for resolving the dispute through a panel of mediators. Section 47-A of Sales Tax Act also provided that any registered person may apply to Central Board of Revenue for appointment of a committee for resolution of any hardship or any dispute through mediation.