October 6, 2011

Alternate Dispute Resolution Method in Pakistan

The relevant laws (or particular provisions) dealing with the ADR are summarized as under:
·          The Arbitration Act, 1940.
·         Articles 153–154 of the Constitution of Pakistan, 1973 (Council of Common Interest)
·         Article 156 of the Constitution of Pakistan, 1973 (National Economic Council)
·         Article 160 of the Constitution of Pakistan, 1973 (National Finance Commission)
·         Article 184 of the Constitution of Pakistan, 1973 (Original Jurisdiction when federal or provincial governments are at dispute with one another)
·         Sections 102–106 of the Local Government Ordinance, 2001.
·         Sections 10 and 12 of the Family Courts Act, 1964.

Arbitration in Pakistan:
Although no explicit mention of ADR is mentioned in the Constitution of Pakistan, a reference to commercial and financial activities can be pinpointed in the Constitution.
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.

Arbitration in Pakistan is still largely governed by the 1940 Act which was enacted by the British for the undivided Indian colony. Though Pakistan has signed the NYC, the enforceability of foreign arbitral awards is unclear as the NYC has not been implemented. The first attempt to implement the NYC was made in 2005, when the new Arbitration Act was passed as an Ordinance (along with an Ordinance to implement the ICSID Convention in 2006, which is now the Investment Disputes Act) almost 50 years after they signed on the NYC.

Pakistan Engineering Council Islamabad:
PEC Rules of Conciliation and Arbitration is one such document prepared by a team of experts comprising Employers, Constructors and Consultants and Legal Advisors in line with the advice by Planning Commission, Govt. of Pakistan. It is expected that use of this document will provide an equitable and just basis for settlement of disputes pertaining to construction and consultancy contracts expeditiously.
The Rules specified in the this document shall be applicable for all construction  and engineering services (consultancy) contracts to be executed in Pakistan irrespective of their source of financing and/or nationality of the constructors/consultants (engineering service providers).
Any dispute, controversy or claim arising out of or relating to a Contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in  accordance with the PEC rules of Arbitration in-force.
This indicates that there are a number of institutions which are working as an institution for conciliation. And this gives a reference that as contrary to Indian laws, in Pakistan, there is a specific requirement that parties referring to conciliation and the institution will be mentioned in the contract.
Recent Initiatives regarding ADR in Pakistan:
·         Code of Civil Procedure (CPC) which is the primary procedural law for civil matters in Pakistan, has been amended (under AJP) for providing enabling mechanism for Court Annexed ADR in Pakistan (Section 89-A).
·         Small Claims and Minor Offences Ordinance 2002 has been promulgated for providing exclusive forum (at the district level) for facilitating the resolution of smaller disputes. This law also provides ADR mechanism for facilitating the resolution and settlement of disputes within the framework of the formal court system. This could be transformed into an excellent forum for addressing disputes in the emerging justice sector in Pakistan;
·         Under the Access to Justice Program, the review of Arbitration Act represents a significant policy action. This review needs to be undertaken and capacity building initiatives put in place to promote effective arbitration regime in Pakistan.
·         A new local government system has been introduced in Pakistan, establishing elected local governments at the level of Union Council, Tehsil (Sub District Level) and the District level. The institution of Musalihat Anjuman (literally meaning conciliation forums) has been provided at the level of Union Councils for dispute resolution through ADR (including conciliation, mediation and arbitration). The finalization of the rules of Business for these bodies is essential to popularize the use of ADR.
In WAPDA v. Kot Addu Power Company[1] – Provisions of section 290 of the Companies Ordinance, 1984 vested statutory jurisdiction in High Court to take certain measures described there and ordered to resolve dispute inter-se shareholders or directors of a company – High Court dismissed the petition made under section 3 of the Arbitration (Protocol & Convention) Act, 1937 for reference of the dispute under the Act of 1937.

Pakistan has entered into Bilateral Investment Treaties with 36 countries which include dispute settlement mechanism between the host country and foreign investor, failing this through mutual consultations, where after the investor can refer the dispute to a competent court of the respective country or an ad-hoc arbitration panel established under rules of the UN Commission on International Trade Law (UNCITRAL) or to the Court of Arbitration of Paris International Chamber of Commerce (ICC). These mechanisms provide transparent, inexpensive, speedy and accessible dispute resolution to foreign investors. The International Center for the Settlement of Investment Disputes (ICSID) also provides facilities for conciliation and arbitration of investment disputes between contracting states and nationals of other states under the Convention for the Settlement of Investment Disputes and Pakistan is a member of the Center.

The Conciliation Courts (West Pakistan Amendment) Ordinance, 1966:
An Ordinance further to amend the Conciliation Courts Ordinance, 1961, in its application to the Province of West Pakistan.“(2-A)   Cases relating to matters falling under Section A of Part I and Section A of Part II of the Schedule, against any Government servant, shall be excluded from conciliation except where a certificate is granted by Government or an officer authorised by Government in that behalf to the effect that the Government servant had not acted in the discharge of his official duties”.

Alternative Dispute Resolution mechanisms and Arbitration provide alternate to litigation by avoiding lengthy and costly proceedings. They are best suited for commercial disputes as the relationship between the parties is expected not to suffer after exhausting such methods and the parties are more likely to settle their differences in a relaxed and friendly manner. In Pakistan, a more frequent use of such methods poses numerous problems which can be overcome by a collective effort by the Government, Judiciary and the Bar Councils.

[1] 2002 MLD 829

No comments: