Newsletter By Mandviwalla & Zafar
This is the first edition of M & Z Newsletter which will be issued quarterly to keep our clients and colleagues abreast with the ongoing cases and landmark decisions, new transactional approaches and industry trends in corporate and commercial law matters. M & Z takes pride in recently launching SM Zafar’s book on “Understanding Statutes”. Senior lawyer and Senator, Dr SM Zafar, a former Minister of Law of Pakistan, is and has been the mentor and integral part of M & Z and his book “Understanding Statutes” leaves his legacy and labor of love for the legal fraternity. In his own words this book is “to trail the blaze of this journey… fascinating as object and goal was and is dispensation of justice according to law”. I had the privilege to be a small part of his trail blazing journey.
M & Z continues to play its role in the development of law and public interest undertaking numerous issues in superior courts. One of the most recent issues decided by august courts was the interpretation of the concept of “government” under the Constitution of Pakistan which includes the Prime Minister and cabinet Ministers. We have recently obtained judgments to protect Margalla Hills and also won the cause of safeguarding our heritage sites in Lahore. In civil matters with respect to scope of civil rights and obligations in private public partnership contracts we obtained a High Court order, that the same have to be interpreted in light of principles of Article 10A with right to fair trial. In corporate matters we structured complex LNG supply terminal transactional documents, set up contractual framework for low-cost housing schemes in Punjab with foreign donors and engaged in multifaceted banking transactions.
In year 2016 our co-founding Senior Partner Syed Ali Zafar as Supreme Court Bar President compiled civil laws which required amendments and undertook many activities for the welfare of legal fraternity including providing ADR facilities to both lawyers and litigants. In this connection I have worked with Mr. SM Zafar to set up a privately owned International Arbitration Centre Pakistan (IACP) in Gulberg, Lahore which will provide facilities for mediation and arbitration, to lawyers and litigants, with a panel of renowned arbitrators and M & Z will continue to support activities of the IACP in encouraging ADR and arbitration.
In the beginning of the year 2017 our co-founding Senior Partner Mehmood Mandviwalla, as President SAARC Law, chaired a high profile SAARC Law Conference in Karachi which was inaugurated by the honorable Chief Justice of Pakistan and was well attended by senior jurists and lawyers from SAARC countries. The honorable Chief Justice highlighted the need for regional corporation in developing law in the South Asian region and stressing on the need for ADR as a means to provide early redress to public. The event was also addressed by Justice Atif Saeed Khan Khosa, the Chief Justice of Sri Lanka Justice K. Sripavan, keynote speaker K.K. Venugopal, senior Advocate Supreme Court of India and Syed Ali Zafar ASC.
Huma Ejaz Zaman
Arbitration & SAARC Forum
Syed Ali Zafar
When it comes to alternative dispute resolution, there is a clear difference in the mindset and jurisprudence of what are economically developed nations on one hand and developing ones on the other.
In 2005, M & Z organized an international conference on arbitration in Islamabad, aptly titled “Privatization of Justice”. The British expert/participant at the event, representing the Western point of view, aptly relied on the classic words “Imagine there’s no countries” from John Lennon’s famous song “Imagine” to highlight the concept of international arbitration in today’s modern world.
The ideal of international arbitration is a transnational world in which disputes are settled without conflict of laws and opposing legal systems. The ultimate aim is that international arbitration should dwell in an ethical no man’s land with no supranational authority to oversee it, no governments to influence the decisions, no domestic courts with jurisdiction over the matter, except to help the arbitration process and with its own international arbitration laws, rules and standards, which are not controlled by national legislation. That is why the phrase “imagine there’s no countries” entails extra-territorial effect.
The viewpoint of the developing world was aptly expressed as far back as 1983 by Judge Keba Mbaye that this notion that there is a system of international justice was not shared by countries in Africa, Asia and Latin America: they still see arbitration as a foreign judicial institution imposed upon them by Europe and America. This seems to be the view of most countries in Asia, certainly of the SAARC countries, and countries in Africa and Latin America. Among countries in the developing world, most notably India and Pakistan, our psyche has been a “pro-court” psyche, in accordance with which arbitration is just something we tolerate within our jurisdictions. It is an exception to court litigation, and courts have generally adopted a paternalistic approach when dealing with arbitration proceedings and awards. Some have even gone so far as to term this paternalistic attitude “school masterly”.
In fact, there is actually a name for this anti-arbitration psyche, which is called the Section 28 mentality. As we may be aware, Section 28 of the Contract Act 1872 provides that every agreement which restricts a party from having their dispute decided through legal proceedings in courts shall be void with one statutory exception with regard to disputes to arbitration under the Pakistan Arbitration Act 1940. Even our courts view arbitration as a rival system rather than acknowledging its complementary nature. Lawyers, too, have not made arbitrations work and the attitude is that in all arbitrations, whether domestic or foreign, is to try and win if one can, but if one cannot do so, then challenge the award and file appeals upon appeals all the way to the Supreme Court. In Pakistani law, as it was made in 1940, the British imported the concept of “challenge to an award” and gave jurisdiction to the courts to correct patent legal errors on the face of the award. To have imported this questionable jurisdiction into a mindset of Pakistan where arbitration was not viewed with favour, in a pro-court atmosphere, was a great mistake. Many judges and lawyers still do not recognize or accept the thin line between challenging an award on merits and errors of law apparent on the face, and normally a mixed question of fact and law is debated in the court of first instance and all the way up to the Supreme Court, thereby totally nullifying the finality concept of an award.
The result is that domestic arbitration, as a means of dispute resolution, has failed in Pakistan. Currently, the arbitration institution in the Chamber of Commerce and Industry in Karachi is attracting an average of 3 cases a year, while the arbitration institution of the Federation of Pakistan Chamber of Commerce and Industry has only an average of 2 cases per year. There has been no invitation to the international organizations like ICC, ICDR or others to create any arbitral venues in the country. As things stand currently in Pakistan, the domestic treatment of arbitration is appalling. As far as international arbitration is concerned, it is viewed with lurking suspicion, which emanates from the fear that our judicial system could be colonized. This is why a variety of cases in Pakistan, such as the Uzin case, clarify that even if there is an arbitration clause in a foreign country, legal proceedings filed in court will not be stayed on the ground of inconvenience and hardship. In this regard, while there has been a change of law in Pakistan, with latest legislation enacted, we have yet to see how this is applied consistently. However, the Flame Maritime case before the Karachi High Court has been reason for optimism, where an arbitration award that had become final in England had been upheld, with the court having rejected all grounds to nullify the award.
The fact is that developing countries have rarely been the venue of international arbitrations. They have hardly produce arbitrators. Most institutions like the Court of Arbitration of the ICC, LCIA and the American Arbitration Association were based upon a sort of exclusive club membership, extended to retired judges, lawyers and experts from these countries. As a consequence, the concept of arbitration has been largely developed by the West and for the West. There would have been no benefit to countries like Pakistan, unless we had prepared ourselves. It was because of this that the Supreme Court of Pakistan rightly, in the famous case of Rupali Polyester, decided that, under our Arbitration Act 1940, read with the then Arbitration (Protocol and Convention) Act 1937, an international arbitration, even if conducted in London with an award rendered by non-Pakistani arbitrators, irrespective of where the seat of arbitration was, would still be subject to the jurisdiction of the Pakistani courts. The Indian Supreme Court also, in another famous case of National Thermal Power/Singer case, decided the same.
At the time when arbitration was just a seed, the developing world might have benefitted, not from throwing itself unguarded into the international arbitration landscape, but in preparing ourselves for the emerging new field of arbitration by developing arbitration centers and cultivating arbitration experts. In fact, SAARC would have been the ideal forum for this, particularly in terms of capacity building of local and affiliated arbitration centers. One could have looked at establishing a SAARC Arbitration Centre competing with the rest of the world – or if that was not possible then various local arbitration centres affiliated with each other. This was the time we should have prepared ourselves for the future, with the government undertaking law reforms and should have begun the training of arbitrators, arbitrators, mediators, legal and other experts, and created a viable domestic alternative. It is pertinent to mention that in 2005 the Privatization of Justice Conference was attended by a wide cross-section of society. At the conference, everyone from the Prime Minister to the Chief Justice of Pakistan was present – there was also unanimous consensus at this conference that we would work towards strengthening domestic arbitration, without which there was no hope of our success in the international arena. However, nothing was achieved ultimately except the promulgation of Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 in compliance with the New York Convention 1958.
It becomes imperative that we start today for what we should have done 2005 onwards for pressing reasons. An obvious reason relates to a common goal that we shared in our legal systems of the SAARC region, and in fact worldwide – the issue of justice delayed as justice denied. We have been trying to innovate ways and means of how to ensure that speedy justice is available to the real beneficiaries of the system, which is the public without abrogating the principles of fairness and falling into the trap of disposal of cases only. Many countries have shown the way, which is to strengthen the system of arbitration. In this way, they view arbitration as a partnership with the courts and as an integral part of the legal system, and have managed to shift more than 90% of the load of commercial disputes to the private sector. Arbitration has direct relevancy to the economic success of a country. It is now an established fact that confidence that the business community of the world will have to do business in a country depends upon how strong the autonomy, independence, transparency and effectiveness of its dispute resolution system is. The lack of a strong and vibrant domestic and international arbitration system in the country is a deterrent with regard to investment. The business persons spend a great deal of time and money on contracts, business agreements, technology exchanges and commerce in general and are weary of the independence and expertise of domestic courts, and would rather have their disputes disposed off through arbitration. Where international contracts are concerned, it is unlikely that corporations, states and individuals would wish to use the court systems of the home states of their counterparts. As a result, fear of the unknown furthers the pull towards arbitration as domestic court procedures can be avoided altogether for resolving party disputes. Further, arbitration awards are binding and final – the fact that they cannot be appealed before any court provides an additional incentive to parties to engage in this alternative means of dispute resolution. The element of finality also entails some degree of speed, in comparison with lengthy court proceedings. And this is where Pakistan and other South Asian countries are still lacking.
Lastly, but arguably most importantly, ease in enforcement is one of the key characteristics that make arbitration so popular. Domestic courts in different states are often unwilling to recognize and enforce one another’s judgments. The New York Convention 1958 has widespread acceptance in the international community. Consequently, it is far easier to enforce arbitration awards internationally than it would be to pursue the enforcement of judgments from national courts. Moreover, this also avoids altogether fear of nationalist judges, in conformity with the globalization of trade, growing awareness of the look and feel of arbitration.
There is an apprehension among the legal fraternity of Pakistan that their scope of income would be greatly reduced if arbitrations became more entrenched within our system. Truthfully, arbitration would actually work towards lessening the burden on our already overburdened judiciary, while lawyers would be able to tap into a relatively new area, where few have expertise, thereby opening the doors for higher income generation. For all these reasons, it is said, rightly so, that the golden age of arbitration has arrived. As rightly said by Victor Hugo some 150 odd years ago that, “An invasion of armies can be resisted, but not an idea whose time has come.” Many countries have entered into multilateral and bilateral treaties, binding themselves to procedures regarding the recognition and enforcement of foreign arbitral awards. The world is now talking about establishing an international arbitration court.
The developments regarding arbitration are working at a fast pace. Other than the established centres of arbitration like London, Paris and New York, other countries like Singapore, Dubai and China, realizing the potential of arbitration, and arbitration centres, have stepped in a big way into the arena and are now competing. Malaysia, Indonesia and Qatar are not far behind. As a result of a concerted international effort to harmonize arbitration laws and construct an acceptable international framework, the United Nations Commission on International Trade Law (UNCITRAL) came into being which has paved the way for a new paradigm of minimal curial interventions of domestic courts, and hundreds of bilateral and multilateral agreements are being concluded as a consequence. As predicted by a famous judge from Senegal, international arbitration would gradually obtain third world recognition. It is, therefore, time that we either shape up or lose it forever. Firstly we need to inculcate a spirit of arbitration and strengthen our domestic system. For this, both the mindset of the judges and lawyers must be changed and confidence given to the business and commercial world that arbitrations would be more efficient, faster and final. Secondly, we need to change laws. For example, of all the categories of laws, which play a role in the arbitration proceedings, the procedural law (lex arbitri) is of utmost importance. The procedural law has to ensure that the parties to the arbitration proceedings do not come across any procedural obstacles and that they are also ensured the fundamental features of arbitration. In Pakistan, under the Arbitration Act 1940 and the Code of Civil Procedure 1908, as it exists today, for example a number of vital points which are of core importance in the modern arbitration laws, have not been addressed, like power of the tribunal to decide upon its own jurisdiction, grant of interim measures by the tribunal and privacy and confidentiality of arbitration proceedings, etc. Pakistan can modernize, for example, its arbitration law in line with the English Arbitration Act 1996, and harmonize it further with the UNCITRAL model and thereby establish an arbitration-friendly jurisdiction. Thirdly, we must set up training centres for arbitrators and train lawyers who want to develop their expertise in this field.
There is a need for SAARC countries to develop institutional arbitration. This cannot be developed without government support and the commitment and support of the judiciary and legal community. Our courts also need to adopt the policy, as held by the Singapore Court of Appeal in the case of Subwito that the role of the court is now to support and not displace the arbitral process. This judicial tone has been echoed around the world. The Singapore government stands before us as a prime example of what ingredients are required to ensure the success of arbitration within this region: a forwardthinking legislature, a robust judiciary, an expanding corps of skilled arbitration lawyers, and a top-notch infrastructure. The Minister for Law in Singapore actually termed this sort of an environment an ideal “ecosystem” conducive to arbitration. We must similarly cultivate such an ecosystem within our nations and our region. In effect, must infuse within ourselves a spirit of arbitration.
We must decide, now, if we are ready to accept total autonomy of arbitration or whether we believe we require some measure of control over the process? It may be possible to proceed with accepting international arbitration with measures of control to ensure faith in our legal system.
Book Launch: Understanding Statutes
In the inaugural speech on the launching of book Understanding Statutes by the renowned lawyer Senator Dr SM Zafar, Justice Saqib Nisar, Chief Justice of the Supreme Court of Pakistan stated that judiciary has recently been burdened more than usual on account of institutions which are created under the Constitution or by law and are to perform their functions according to the law and their jurisdiction. In the performance of their duties they have to be aware of the issues of the society as people of Pakistan rely on judiciary for redress. He stressed that the judges of courts are conscious that they cannot correct everything and will have to determine what seems to be a more urgent need of the hour. Mr. SM Zafar has done a great job in producing a book, a treasure, from which both the legal fraternity and the members of the judiciary will benefit and discover the spirit of the law.
Author of the book Mr. SM Zafar said, as the judiciary is the creation of Constitution and the Constitution provides a federal democracy, therefore to protect the Constitution and to advance its objectives are the basic duties of the judiciary. Barrister Syed Ali Zafar (former President SCBAP) thanked Justice Mian Saqib Nisar for taking time out for the book launch and spoke highly of him stating that attending his court is a learning experience for all legal professionals in developing legal jurisprudence. Other speakers who spoke on the occasion were Senator Aitzaz Ahsan, Ahmer Bilal Sufi, Humayun Ehsan and Dr Parvez Hassan. They spoke on various aspects of the book and praised the author and his lifetime contributions to legal fraternity.
Mr SM Zafar while thanking the chief guest and the gracious speakers for their appreciation of the book, which took him three years to complete, also acknowledged contributions of his board of editors which included Justice (R) Munir A Sheikh, Justice (R) Syed Zahid Hussain, Barrister Syed Ali Zafar, publication contributor Huma Ejaz Zaman, research scholar Anam Shahid and the index maker. Understanding Statutes has been placed in renowned legal institutions including University of Punjab and School of Oriental African Studies (SOAS) London, UK library as well as esteemed chambers of senior judges and lawyers.
The book launch was organized by Mandviwalla & Zafar, Lahore office, which was attended by learned judges from the Supreme Court, High Court, senior lawyers of the bar and senior professors of law.
The views expressed in this article are those of the authors and do not necessarily represent the views of CourtingTheLaw.com