The Arbitration Mess
“There is an Arbitration Act, 1940.” That is the information I provide to my students when we have to touch upon the relatively volatile topic of arbitration in Pakistan. This topic comes after having discussed all the mechanisms and laws that exist in other jurisdictions, so it is a fair assessment that the frustration level increases as Pakistan’s arbitration jurisprudence is talked about.
This piece is not going to talk about Reko Diq or the various other arbitration proceedings in which we have sufficiently demonstrated our incompetence at the fabled practice of arbitration. Unfortunately, such incompetence does not just extend to our own ability to serve as counsel in arbitration, but even to hire the appropriate firms anywhere in the world to represent us. There is enough bitterness to go around pertaining to this which, for the moment, can be shelved away.
When the students do ask these questions though, I have to fill them in on the basics. First is the dispute resolution clause itself, which hopefully exists in some manner or form. Then there is the interpretation and implementation of the clause. Here we need to pause a bit, because I have to show the students a potential sample of the clause. I can provide them with an excellent example of a multi-tiered dispute resolution clause that any decent firm may have integrated into a contract. I can show them the ICC’s clause, or the IBA’s, or my own organization ADR-ODR International’s clause that ought to have been used, but while looking at their faces one realizes a little honesty is probably best. They will rarely see a good clause.
I have to narrate the story of a contract that I had to deal with where the clause was polite enough to have the heading of arbitration. It was an engineering contract, where the clause stated that any dispute would be resolved by the contractor’s CEO, which raised a good round of discussion regarding whether such a clause was even competent or enforceable. It was signed after all. Eventually, though, we reach the one sample clause most commonly seen in nearly all mid-level government contracts, which decries that any dispute shall be resolved by arbitration under the Arbitration Act, 1940.
Here is where all the previous information I have given to the students about arbitration seats, governing laws, institutional rules and other exciting aspects of arbitration gets deflated a bit as their faces ask me what they would do with such a clause. The answer naturally is to live with it and be grateful for at least this much.
So, we resume our earlier list of requirements, now that we have an arbitration clause. In an arbitration, there needs to be this clause, then a selection of an arbitrator, or arbitrators. How this selection happens requires another unfortunate dive into the politics of retired judges and the dominance of the arbitration market by them and a few other senior folks. This is the status quo that is almost ready to pop like a bubble.
Nevertheless, once the arbitrator(s) has been picked, there is the formality of fee. Then the decision regarding location, since centers created in Pakistan do not seem to cross the threshold of neutrality that one would deem essential. There are no rules as yet either, so one predominantly wings it. I have been informed that the Punjab ADR Act, 2019 will cure all our complaints but painfully, that piece of legislation is still stuck without any implementation. Nevertheless, after the arbitration is conducted and the award is signed comes the difficult part. It is the truly painful conversation one has to experience as a Pakistani practitioner when standing at an international forum such as the ICC and watching a foreigner approach and guffaw, “Aren’t you the people who tried to reject an arbitration award even after you ratified the New York Convention? So what do you do with domestic awards, just fling them…?” The person would then continue to laugh at his own words while the surrounding environment would awkwardly laugh with him and simultaneously look at me to assure me they are not as diplomatically ill-equipped to repeat the same words. There may even come an apology from the same person next day. One would offer him coffee afterwards. Yet the reason it goes in deep is the simplest reason of all. It is true.
So why bother with it all? This is the first decent question asked by the students. I tell them because it’s the future, because the knowledge and practice of arbitration is all that will remain in the following decades. ADR is a fundamental requirement for any jurisdiction now and like all other sustainability needs of our world now, there can be no appropriate dispute resolution system that can survive, if litigation is not truly used as the last resort. Nearly everyone else has moved on from stone-age, yet we insist on it, hoping that the fad will pass.
I can tell them all these things, but the truth for them is that these are merely words. However, these are not just complaints by a practitioner tired of the failure of litigation providing pipe dreams. There exists a faint glint of hope that we are latching on to because I had no interest in penning down this article if I didn’t have a solution to follow up on.
I am in a position to tell my students that the groundwork is being laid. I tell them that we are planning to introduce an entire arbitration course, the first module of which is going to be conducted in Dubai in March 2020. I can also tell them that the course includes a module purely for counsel involved in arbitration so that the students can actually benefit from arbitration instead of waiting till they are grey to be actually deemed worthy of being arbitrators. This is something that we are working to fix through The ADR Initiative by advocating to establish an independent panel of dispute resolution experts within the ADR Act, at judicial academies and at international dispute resolution organizations like ADR-ODR International.
This will begin to expand the field for more arbitrators, including engineers, architects, businesspersons and other professionals who can weigh in on specialized disputes. We are also planning to work with the judicial academies and judges on the implementation of awards so that arbitral awards don’t perfunctorily get set aside. We are also going to provide the necessary support and enabling infrastructure to whoever may be interested in establishing their own dispute resolution centers so that a healthy market starts developing. IBA in Karachi is already establishing a center in conjunction with its business school. While this should be enough to ferment a little spark among students to be mindful of the future, I am sure there are numerous other things that we can and will do as well.
I am sharing all of this because I believe I am writing to an enlightened and legally savvy audience here. I also had to warn my students that all the incumbents would be working to dissuade them. Vested interests aside, most do it out of habit for fear of too much change. No one needs any evidence of where the legal profession has steered off to and where things have gone wrong. It is also the reason for the mass exodus of minds and dangerous import of brawn. There is always going to be someone who suspects the rationale and motivation behind all the actions we have taken. I do not have an interest in relaying what it has taken for me personally to bring all this to fruition, though it is disheartening at times. But that’s alright. It is part of what the incumbents call ‘ragra‘ and I cannot roll my eyes enough to even express my unkind sentiments over that phrase.
The fact now is, there is a sea of progress and change, along with the growing darkness of ignorance. There is enough potential to grow within it all. Starting the ADR Initiative was not a planned effort but a reluctant requirement. In an ideal world, it should not be necessary. Soon, hopefully, that reality may come and I would like to welcome everyone.
We successfully conducted our first Mediation Course in November last year in Lahore. We are hosting the first Arbitration Course in Dubai at the DIFC with ADR-ODR International, in March. Our next Mediation Course is scheduled in April in Islamabad. Our work with the private sector, the High Courts, the British Council, the Judicial Academies and various other stakeholders is also beginning. Please let’s fix this mess so that the next batch of students, given a year or ten, have a better story to hear from us.
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