Pakistan

Part I: what can be enforced?

1. What counts as an arbitral “award” that can be enforced?

An award under Pakistan law has been described as a “decision of an arbitrator” made pursuant to proceedings which must have arisen out of a written arbitration agreement to submit a present or future dispute to arbitration (see the judgment reported as PLD 2010 Lahore 437).

The legislation presently applicable to domestic arbitrations in Pakistan is the Arbitration Act 1940 (1940 Act). Pakistan is in the process of devising new legislation for domestic arbitrations, which is only in bill form currently and has yet to be enacted.

Section 2(b) of the 1940 Act defines an award simply as “an arbitration award”, meaning an “award given following an arbitration” (see 1999 YLR 978). An “arbitration” under Pakistan law is equated with a “judicial determination”, which has been held to mean that “there must be a controversy, there must be presentation of the case from both sides, if necessary evidence must be brought on record and then there should be an application of mind by the arbitrator and a reasoned award must follow…these are necessary ingredients for an arbitration” (see 1999 YLR 978).

An essential ingredient of an award, therefore, is that it be preceded by an inquiry. It must follow a “judicial procedure keeping in view the principles of natural justice and the law of the land” (see PLD 1977 Lahore 672). Consequently, an award “must emanate from a judicial determination. If a dispute is referred to a person and if that person decides that dispute by holding an inquiry and coming to [a] decision then undoubtedly what that person decides would constitute an award. On the other hand, if a matter is referred to a person and he is not called upon either to hold an inquiry or to give a decision but by the exercise of his sagacity, knowledge or experience to bring about merely an understanding between the parties and restoring peace between them then he would only be discharging functions other than those of an Arbitrator” (see PLD 1971 SC 516).

A domestic award is ripe for enforcement once judgment and decree in terms of the award have been pronounced by court under the 1940 Act s17. It is then executed like a judgment and decree of a court under the Code of Civil Procedure 1908 (CPC).

A “foreign” award is considered as such in Pakistan where the governing law is that of another country, irrespective of whether proceedings took place in Pakistan or not (1994 PLD 525 Lahore).

The Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 (2011 Act) makes the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (New York Convention) a part of domestic law in Pakistan. Under this statute, a “foreign arbitral award” is defined as an award made in a contracting state to the New York Convention, and such other state as may be notified by the federal government.

2. Formal requirements that an award needs to conform with to be enforceable

Under the 1940 Act s14, the arbitrators or umpire shall give notice in writing to parties of having made and signed the award, and of any amount of fees and charges payable (or in practical terms, outstanding) in respect of the arbitration and award. The arbitrators or umpire shall, at the request of any party, or if directed by court, and upon payment of the fees, charges, and costs due in respect of the arbitration, award, or filing of the award, respectively, cause the award to be filed in court along with the arbitration record. The arbitration record refers to depositions or documents that have been proven during proceedings. The court shall then give notice to the parties of the filing of the award. Upon receipt of the notice, the parties shall have 30 days to file objections against the award (see Limitation Act 1908 Art 158).

If no objections are filed, and the court deems the award legally tenable, or objections are filed but dismissed, the court shall proceed to pronounce a judgment and decree in terms of the award by making it a rule of court, which shall then be executed like any other judgment and decree of a court under the CPC. It can be executed by the same court which passed it, or by another court to which it is sent for execution (see CPC s38).

With respect to foreign awards, a party will have to apply to court under the 2011 Act s5(1) in terms of Article IV of the New York Convention, to seek recognition and enforcement of the award. Once such application is accepted, the courts in Pakistan shall execute a foreign arbitral award in the same manner as a judgment or order of a court in Pakistan (the 2011 Act s6(1)). In simple terms, it means that a foreign arbitral award will be executed like a domestic award which has been made a rule of court.

3. Orders on interim measures: enforceability

a. Domestic awards

Arbitrators in Pakistan do not have powers to issue any interim orders. Under s41 read with the Second Schedule to the 1940 Act, the court has power to make orders in respect of:

• the preservation, interim custody, or sale of any goods which are the subject matter of the reference
• securing the amount in difference in the reference
• the detention, preservation, or inspection of any property or thing which is the subject of the reference or as to which any question may arise during proceedings, and authorising any person to enter any property in possession of any party to the reference, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, for the purpose of obtaining full information or evidence
• interim injunctions or the appointment of a receiver

An application under s41 can be made either at the same time as an application for reference to arbitration under s20, or any time during arbitration proceedings. Compliance with any court order passed as aforesaid is mandatory. Any failure to abide by a court order can result in initiation of contempt proceedings.

Section 18 of the 1940 Act empowers the court to pass any interim order after the award has been filed in court, if the court is satisfied that (a) a party has or is about to take steps to defeat, delay, or obstruct the execution of any decree that may be passed upon the award, or that (b) speedy execution of the award is just and necessary.

b. International commercial arbitration awards

The court has all the powers under the CPC in the exercise of its jurisdiction under the 2011 Act (2011 Act s3(3)). Consequently, all powers available to a civil court (ie, injunctions, stay of proceedings, attachment of property etc) would be applicable in these proceedings.

4. Emergency awards: enforceability

a. Domestic awards

There is no provision in the 1940 Act relating to emergency awards. The closest parallel is the inherent power of arbitrators under s27 to make an interim award, unless the arbitration agreement disallows the making of interim awards. An interim award does not refer to an award that will not be “final”; it will be a final award on only some of the matters forming part of the reference, with outstanding matters requiring further deliberation.

An interim award will go through the same stages of filing, objections, and execution, as a complete award. That can take considerable time. In that sense, it cannot satisfy the requirements of any “emergency” measures.

b. International commercial arbitration awards

There are no provisions relating to emergency awards under the 2011 Act.

Part II: resisting enforcement

5 a. How are awards set aside?

Under the 1940 Act s33, an application can be made to court to challenge the existence or validity of an award, or to have the effect of it determined. Such an application can be made in reliance on s30 of the 1940 Act, which sets out the grounds on which setting aside of an award can be sought.

An application under s33 may also (in addition or in the alternative to s30) pray for the award to be modified (s15) or remitted to the arbitrators (s16). To the extent that remittal is sought, the award (in part or whole) would have to be set aside prior to remittal to the arbitrators.

A foreign arbitral award cannot be set aside in the same manner. Recognition and enforcement of it can be refused pursuant to Article V of the New York Convention (and, consequently, the 2011 Act s7).

b. Can enforcement be resisted if the respondent has not formally applied to set aside the award?

Section 17 of the 1940 Act empowers the court to pronounce judgment and decree in terms of the award where the court “sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award”. Consequently, the court has an inherent responsibility to consider the award and determine whether any of the grounds for remittal or setting aside are met, irrespective of whether any application for it has been made or not. The respondent in that instance would not have a right to be heard, but the court may, in considering the award, decide to hear the respondent.

Enforcement of a foreign arbitral award can be resisted pursuant to Article V(2) of the New York Convention, as enshrined in the 2011 Act s7, if it is found by the court of its own accord that “(a) the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) the recognition or enforcement of the award would be contrary to the public policy of that country”.

c. Can non-parties seek annulment?

An application under the 1940 Act s33 can only be made by “a party to an arbitration agreement or any person claiming under him”. Consequently, non-parties cannot seek annulment of an award.

With reference to foreign arbitral awards, there is no reference to non-parties seeking annulment in Article V of the New York Convention.

Non-parties can, however, resist execution of an award in certain instances (as discussed below).

d. Grounds to seek setting aside

Section 30 of the 1940 Act lists the grounds for setting aside an award, which are that:

• An arbitrator or umpire has misconducted themselves or the proceedings.
• An award has been made after issuance of a court order superseding the arbitration, or after the arbitration proceedings have become invalid under s35. Section 35 relates to legal proceedings having been commenced upon the entirety of the subject matter of the arbitration reference, between all the parties to the reference, and a notice thereof has been given to the arbitrators.
• An award has been improperly procured or is otherwise invalid.
• Grounds for seeking remittal under s16 are:
• The award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred.
• The award is so indefinite as to be incapable of execution.
• An objection to the legality of the award is apparent upon the face of it.

Modification under s15 can be sought on the following grounds:

• It appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred.
• The award is imperfect in form or contains any obvious error which can be amended without affecting such decision.
• The award contains a clerical mistake or an error arising from an accidental slip or omission.

As stated above, recognition and enforcement of a foreign arbitral award can be refused in terms of Article V of the New York Convention, which differs from “setting aside” in the strictest sense.

e. Timelines to seek setting aside

As per Article 158 of the Limitation Act 1908, the limitation period for seeking to set aside an award under the 1940 Act, or seeking to have an award remitted for reconsideration, is 30 days from the date of service of filing of the award. There is, however, no timeline within which the court must decide the setting-aside application.

f. Grounds to resist enforcement

Enforcement of a domestic award is resisted on grounds for setting aside, remittal, or modification, which are discussed in response to question II(5)(d) above.

For foreign arbitral awards, grounds to resist recognition and enforcement are those provided in Article V of the New York Convention.

Third parties could resist execution (not enforcement) only to the extent of their rights in properties attached in execution proceedings (Order XXI, R58 CPC).

g. Which court to go to for setting aside?

For the purposes of the 1940 Act, the “court” generally means a civil court having jurisdiction to decide the questions forming the subject matter of the reference to arbitration.

For the purposes of the 2011 Act, the “court” means a High Court or such other superior court in Pakistan as may be notified by the federal government.

h. Formal requirements before court can grant setting aside

Under the 1940 Act, there is no formal requirement beyond hearing the parties (if an application has been filed), or reviewing the award pursuant to s17, before the court can grant setting aside. Pursuant to an application under s33, the court can also, where it deems just and expedient, set down the application for hearing on other evidence, and pass orders for discovery and particulars as it may do in a suit.

i. Do courts grant stay on enforcement as an interim measure?

In appellate proceedings in respect of the civil court having passed an order making the award a rule of court, the appellate court may suspend the judgment made under s17. This suspension would have the effect of staying execution proceedings seeking enforcement of the award.

The executing court has powers to stay execution proceedings (relating to domestic or foreign awards) for any reason prescribed under the CPC.

j. What is the appellate mechanism against the decision of the court of first instance?

Under the 1940 Act, once judgment and decree in terms of the award is pronounced, no appeal shall lie from the decree except on the ground that it is in excess of, or not otherwise in accordance with, the award (s17).

Under the 1940 Act s39, an appeal shall lie from the following orders only:

• an order superseding an arbitration
• on an award stated in the form of a special case
• modifying or correcting an award
• filing or refusing to file an arbitration agreement
• staying or refusing to stay legal proceedings where there is an arbitration agreement
• setting aside or refusing to set aside an award

The appeal shall lie to the court authorised by law to hear appeals from original decrees. In the normal course of events, that would be a District & Sessions Court. However, different provinces and federal territory have power to establish pecuniary jurisdictions of courts in their territorial limits. Consequently, it is possible that an appeal may lie to the High Court directly. There is no second appeal provided for in law. Depending upon whether the appeal is decided by the District & Sessions Court or the High Court, a challenge to that appeal may lie to the High Court in writ jurisdiction, or the Supreme Court in a civil petition.

For foreign arbitral awards, an appeal from the decision of the High Court shall lie to a Divisional Bench of the High Court, and to the Supreme Court from that.

Part III: enforcing foreign awards

6. New York Convention applicability

The New York Convention is applicable in Pakistan through the 2011 Act, which makes it part of municipal law.

7. Timelines for enforcement

The law does not prescribe specific timelines; however, experience indicates that enforcement can take between two to six years depending on the complexity of the issues, multi-party factors, any jurisdictional questions, etc.

8. Which court to go to? Relation with location of assets?

The application for recognition and enforcement must be filed in the High Court of a province where the award debtor resides or carries on business. PLD 2017 Quetta 29 has also directed the award creditor to approach the relevant High Court within the territorial limits of which the movable and immovable assets of the award debtor were located.

9. Can non-parties resist enforcement?

As indicated above, non-parties lack the legal standing to resist enforcement of an award. However, non-parties could resist execution proceeding to the extent of their rights in properties attached in execution proceedings (Order XXI, R58 CPC).

10. Compelling disclosure of local assets? How to identify assets available for enforcement?

The onus is on the award creditor to identify the assets of the award debtor. In practice, award creditors carry out private surveys/investigation to locate the award debtor’s assets. Once the award is recognised, the list of these assets is then filed with the executing court, for purposes of attachment and consequent execution. Please also see the answer to question IV(24) below.

11. Are third-party funded awards enforceable?

The law in Pakistan is silent on whether an award creditor can obtain third-party funding to enforce a foreign award.

Generally, under Pakistan’s civil law, the concept of “choses of action” exists but it has not been applied in relation to enforcement of foreign arbitral awards.

12. What interim reliefs are available pending enforcement of awards? Which of those reliefs are granted ex parte?

During pendency of enforcement proceedings, in terms of Order XXXVIII, R5 CPC, courts can direct parties to either furnish security or attach properties to prevent against judgment proofing. Once an award is recognised and enforced, there are wide powers available to an executing court to grant interlocutory reliefs under the CPC, including stay orders, interim injunctions, directions to furnish security amounts, attachment of movable or immovable assets before final judgment, and appointment of receivers.

Rule 11(1) CPC grants to the court the power to immediately attach property of the judgment debtor or to order their arrest on an oral application for immediate execution. In practice, however, courts will usually grant an ad interim attachment order subject to notice to grant the other party the opportunity to appear before ordering attachment.

13. Formal requirements for enforcement application: what documents need to be filed in court?

Under the 2011 Act s5 read with Article IV of the New York Convention, a duly authenticated original award (or certified copy thereof) and the original arbitration agreement (or duly certified copy thereof) are required to be filed in the court.

14. Enforcing awards that have been annulled/set aside at other courts. Enforcing when an annulment application is pending at a foreign court

If the award has been annulled or set side in a court of the country where the award was made, it is grounds for refusal of recognition and enforcement under Article V(1)(e) of the New York Convention read with s7 of the 2011 Act.

The position may be different where the proceedings against the award are merely pending and no final order has been issued, in which case a Pakistan court may recognise the award.

15. Once application for enforcement is allowed, how does the actual enforcement against assets work? What are the remedies available for tracing assets during enforcement proceedings including for assets disposed of by fraud?

As stated above, the award creditor will have to file execution proceedings, to execute the judgment enforcing the award like a court decree. The CPC will apply to these proceedings.

Order XXI, R41 CPC provides for the executing court to order examination of the judgment debtor as to his “property or means of satisfying the decree”, including the power to make an order for the attendance and examination of the judgment debtor, or officer or other person, “and for the production of any books or documents”.

In terms of Order XXXVIII, R5 CPC, courts can also direct parties to either furnish security or attach properties to prevent against judgment proofing.

Once the disposal of assets through fraudulent means has been established, appropriate proceedings can be instituted in respect of the fraud.

16. What is the procedure for repatriation of sums awarded after obtaining an order for enforcement?

The award creditor will have to choose a scheduled bank that will be authorised by the State Bank of Pakistan to repatriate amounts realised on the execution of the award.

17. Do courts grant orders for security for costs?

In terms of Order XXV, R1 CPC, an order for security for costs can only be made against a plaintiff resident abroad and in favour of a defendant.

18. Exchange control regulations: do they affect payments to foreign award holders?

Yes, if the sums are to be remitted outside Pakistan.

19. Enforcing awards from non-NY convention places

The 2011 Act describes a “foreign arbitral award” as an award made in a contracting state to the New York Convention, and such other state as may be notified by the federal government. Consequently, the federal government may notify awards from non-signatory states as capable of enforcement under the 2011 Act.

In addition, a foreign judgment in terms of the foreign award in a non-New York Convention country may be obtained in the said country, and execution of the foreign judgment may be sought in terms of the CPC.

20. Enforcing against sovereigns

A foreign award (including an ICSID award, as the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (1966) (ICSID Convention) was enacted into municipal law pursuant to the Arbitration (International Investment Disputes) Act 2011) can be enforced against the government of Pakistan (or its public bodies) in terms of the State Immunities Ordinance 1981 s10, which provides that the state is not immune from court proceedings in Pakistan relating to arbitration matters where the state has agreed in writing to submit a dispute to arbitration. This lack of immunity, however, does not apply to arbitration agreements between states.

21. Appellate mechanism available?

Yes, the judgment recognising and enforcing an award may be appealed before the Divisional Bench (comprising two judges) of the High Court and a further appeal lies to the Supreme Court of Pakistan.

Part IV: enforcing domestic awards

22. Timelines for enforcement

An award is made a rule of court under the 1940 Act s15, leading to issuance of a decree of the court. Section 48 of the CPC provides that an application to execute a decree must be filed within six years from the date of issuance of the decree. This limitation period does not apply in terms of s48(2)(a) “where the judgment debtor has, by fraud or force, prevented the execution of the decree at some time within six years immediately before the date of the application”. There is no timeline for the court within which execution must take place.

23. Which court to go to? Relation with location of assets?

Section 38 of the CPC provides that “[a] decree may be executed either by the court which passed it, or the court to which it is sent for execution”. “Court which passed the decree” means the court of first instance where the decree is passed in appellate jurisdiction, and where the court of first instance has ceased to exist or to have jurisdiction to execute it, the court which would have jurisdiction to try the suit (s37).

If the decree is specific to a property, it will be executed by the court within the territorial limits of which the property is situated.

24. Compelling disclosure of local assets? How to identify assets available for enforcement?

Section 60 of the CPC describes property liable to attachment and sale in execution of a decree, and includes properties “belonging to the judgment-debtor, or over which, or the profits of which, he has disposing power which he may exercise for his own benefit, whether the same be held in the name of the judgment-debtor or by another person in trust for him or on his behalf”.

Order XXI, R41 CPC provides for the executing court to order examination of the judgment debtor as to their “property or means of satisfying the decree”, including the power to make an order for the attendance and examination of the judgment debtor, or officer or other person, “and for the production of any books or documents”.

25. Are third-party funded awards enforceable?

Pakistan law does not treat third-party funded awards any differently.

26. What interim reliefs are available pending enforcement of awards? Which of those reliefs are granted ex parte?

During pendency of proceedings to make an award a rule of court, in terms of Order XXXVIII, R5 CPC, courts can direct parties to either furnish security or attach properties to prevent against judgment proofing.

Attachment of property, issuance of warrants of arrest, and appointment of receivers may all be granted in execution proceedings.

Order XXI, R11(1) CPC grants to the court the power to immediately attach property of the judgment debtor or to order their arrest on an oral application for immediate execution. In practice, however, courts will usually grant an ad interim attachment order subject to notice to grant the other party the opportunity to appear before ordering attachment.

27. Formal requirements for enforcement application: what documents need to be filed in court?

Under the 1940 Act, the award needs to be filed with an application praying for making it a rule of court.

If the award is made a rule of court, the judgment and decree issued by the court will be filed with an execution petition, seeking enforcement thereof.

Order XXI, R11(2) CPC requires, “save as otherwise provided by sub-rule (1)”, that every application for the execution of a decree shall be in writing, signed, and verified by the applicant or by some other person proved to the satisfaction of the court to be acquainted with the facts of the case. The sub-rule lists all particulars to be provided in tabular form and in which the court’s assistance is required, ie, by delivery of a property, attachment and sale of any assets, arrest and detention of the judgment debtor, or appointment of a receiver of the judgment debtor’s assets.

28. Filing for enforcement when application for annulment is pending

Pakistan courts will only make an award a rule of court after deciding any applications for setting aside, remittal, or modification.

Further, an execution petition may only be filed once an award is made a rule of court.

29. Once application for enforcement is allowed, how does the actual enforcement against assets work? What are the remedies available for tracing assets during enforcement proceedings including for assets disposed of by fraud?

Section 51 of the CPC empowers a court to enforce execution of a decree, and Order XXI of the CPC sets out the procedure for such enforcement. The powers enumerated in s51 include the power to deliver any property specifically decreed; to attach and sell or sell without attachment any property over which the judgment debtor has disposing power; to arrest and detain the judgment debtor, subject to certain conditions; to appoint a receiver; or to make such orders as enforcement of the decree may require.

Appropriate proceedings may be brought in respect of the fraud once particulars thereof are established.

30. Do courts grant orders for security for costs?

Order XXV of the CPC grants security for costs only where the plaintiff is resident abroad.

31. Appellate mechanism available?

Please see the answer to question II(5)(j) above. The Supreme Court is the highest appellate forum in respect of such matters.