Scope Of Judicial Review In Arbitration
Pakistani courts have by and large supported the decision by parties to submit their disputes for resolution by a domestic forum of their own choice, especially those with international dimension. This approach is reflected in their reluctance to interfere with the arbitral process or to overturn or upset arbitration awards. The courts have sparingly exercised the statutory powers vested in them in this regard. The basic judicial approaches have been to hold the parties to their bargain, and to enforce the arbitration agreement in letter and spirit to ensure the sanctity of the arbitral process.
Thus, if a party to an arbitration agreement attempts to institute legal proceedings in a court of law, and the other side seeks stay of proceedings on the ground that recourse should be made to arbitration, the Courts have generally been quick to allow such an application. The desire to uphold the arbitration agreement, and force the parties to resolve their disputes before the domestic forum selected by them is all the more pronounced in the case of arbitration agreements with international dimension, i.e. where one of the parties is a foreign national or entity. In the words of Mr. Justice Ajmal Mian in a 1993 decision of the Supreme Court, the court’s approach should be dynamic and it should bear in mind that unless there are some compelling reasons, such an arbitration clause should be honored.
It is only in rare cases, where the objection is of such a nature that the defect is floating on the face of the award, that the courts have upheld the objection and declined to enforce the award.
Eckhardt & Co. GmbH V Muhammad Hanif (PLD 1993 SC 42, 52):
“…if Pakistan is to attain some respectability in the commercial world, it is necessary that transnational commercial agreements must be honoured and judicial process must not be used merely to delay the implementation of such agreements or judicial or quasi judicial decisions passed in disputes arising from such agreements”.
Meredith Janes Co. Ltd v Crescent Board Ltd (1999 CLC 437, 441):
“Increasingly, it is seen that the parties who are involved in Transnational or International Agreements agree to an arbitration clause at the time of entering into [the] agreement but when as a result of that agreement an award is made against them they raise frivolous objections and deliberately refrain from seeking remedy of appeal available to them under the agreement or other rules and attempt to delay or avoid payment under the award by simply initiating proceedings in a Court in Pakistan…. I do believe this is tantamount to abuse of the process of the Court… [and] may lead Pakistan into becoming pariah in the commercial world. In order to curb such tendency Courts ought not to entertain objections to a foreign Award i.e. executable in Pakistan unless these strictly lie within the four corners of Section 7 of Arbitration (Protocol and Convention) Act, 1937 and such assessment should be made from the Award itself. The Award should thus, be interfered with only if the error in it is apparent on the face of the award. Courts ought not to set themselves up as an Appellate Court or to go behind the award to reappraise the evidence. Additionally the Court should decline to entertain the objections to Foreign Awards unless all remedies available under the Arbitration”.
In the present context, an interesting case is the 2000 decision of the Supreme Court in the case of Hub Power Company Ltd. v Wapda (PLD 2000 SC 841) The Hub Power Company (or HUBCO) was supplying electrical power to WAPDA, the public sector utility, under a power purchase agreement.
The agreement had an arbitration clause providing for ICC arbitration at London. Disputes arose between the parties, and HUBCO wished to refer the matter to arbitration. WAPDA opposed this move on the ground that the issues raised by it, which were serious allegations of corruption, fraud and mala fide intention, were not arbitral. The matter was heard by a 5-member bench of the Supreme Court, and by a bare majority, WAPDA’s contention was upheld. However, the majority was careful to expressly note that the disputes raised by WAPDA were not commercial in nature, but were raised as very serious public policy issues which were essentially criminal in nature. So although in this case the Supreme Court did interfere with the arbitral process, it did so reluctantly (as indicated by the strong dissenting judgment) and drew a clear line with regard to commercial matters in respect of which arbitration proceedings would not be stopped.
In another case Society General De Surveillance S.A. v Pakistan (2002 SCMR 1694) the contract provided for arbitration at Islamabad under the 1940 Act. SGS, which had a claim of several million dollars against Pakistan, attempted to litigate the claim in Swiss Courts, but the latter were equally firm in holding the company to its contract to arbitrate in Pakistan. An application was made by Pakistan in the civil courts under the 1940 Act seeking to take the dispute to arbitration. SGS however, proceeded to file its claim for arbitration under the ICSID Convention on the basis of a Bilateral Investment Treaty entered into between Pakistan and Switzerland. Pakistan objected to such arbitration on the ground, inter alia, that the Washington Convention of 1965 under which the ICSID operated had not been incorporated into Pakistani municipal law. Interestingly, SGS, the foreign party, relied on the HUBCO case, and contended that arbitration in Pakistan could not proceed as there were allegations of fraud, corruption and mala fide intention against it. The stand taken by SGS was obviously self-contradictory: it did want arbitration, but on its own terms, i.e. outside of Pakistan, and not in terms of the actual arbitration agreement entered into between the parties which called for arbitration at Islamabad. An attempt was therefore, made to transform the HUBCO case from a shield into a sword. This attempt failed.
The Supreme Court held that the dispute between the parties was wholly within the four corners of the contract, i.e. was commercial in nature (the government having expressly stated that it would not press any claims in the nature of corruption and fraud) and hence the HUBCO decision had no application to the facts and circumstances of the case. It was further held that since the Washington Convention was not part of the municipal laws of Pakistan, no reliance could be placed on the same to defeat the express agreement between the parties to arbitrate at Islamabad under the 1940 Act.
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