Abstract
Arbitration is gaining prominence as a dispute resolution method in various commercial transactions of both international and domestic nature. However, the growing use of arbitration has given way to a number of concerns regarding procedural aspects, particularly in relation to the formalities that may be required to be followed for the amendment of pleadings. Typically, the procedure for such amendments is covered by the civil codes of different jurisdictions and is generally adopted in litigation procedures. While many countries have introduced domestic arbitration laws, these laws may be silent or fail to comprehensively address the procedural formalities to be followed for amending pleadings in arbitrations.
This article will investigate the process of amending pleadings in Pakistan seated arbitrations. It will examine whether the procedure that is followed in domestic courts for the amendment of pleadings is also applicable in the context of an arbitration seated in Pakistan.
Introduction
A dispute is an inevitable aspect of both international and domestic commercial transactions. Parties to such disputes are increasingly turning to arbitration as an independent and private dispute resolution mechanism. An arbitration has four essential features:
(i) it is an alternative to national courts;
(ii) it is a private method for resolving disputes;
(iii) the parties both select and control the process; and
(iv) the determination of the parties’ rights and obligations is final and binding.
Amongst these features, the third feature, i.e. party autonomy, is arguably of paramount significance and has garnered wide acceptance in arbitration laws.
In Pakistan, there are two contemporary pieces of legislation which set out the law of arbitration, namely:
- the Arbitration Act, 1940; and
- the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 (or the Foreign Arbitration Act).
The latter pertains to the recognition and enforcement of foreign arbitral awards, which have already attained finality under the laws of the seat of arbitration.
The Arbitration Act regulates all arbitrations seated in Pakistan and sets out the framework for, among others, the following matters:
- validity of an agreement to arbitrate;
- enforcement of an arbitration agreement;
- implied terms to an arbitration agreement;
- role of the court in the course of an arbitration;
- role of the arbitrators; and
- validity and setting aside of an arbitral award.
However, as will be discussed below, the Arbitration Act does not regulate the procedure to be adopted in the course of a Pakistani arbitration.
Arbitration Agreement
An arbitration agreement reflects the willingness of the parties to enter into an arbitration in case a dispute arises. The arbitration agreement is an expression of the parties’ intention to waive their right to approach a national court for the resolution of a dispute. Moreover, an arbitration agreement is the primary source of power for the arbitrators, providing them with the required jurisdiction and authority to decide the dispute. In the absence of an agreement to arbitrate, the arbitrator is rendered functus officio.
An arbitration agreement has been defined in the Arbitration Act[1] as:
“…a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not…”
Such a definition is similar to the one given under Article II (1) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the New York Convention) which is ratified by way of the Foreign Arbitration Act. Along with defining what an arbitration agreement is, the New York Convention[2] also places upon state parties a legal obligation to:
“…[R]ecognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.”
An arbitration agreement has the primary function of setting out the framework for the resolution of disputes by the parties outside the jurisdiction of national courts. A well-drafted arbitration agreement allows the parties to resolve the dispute efficiently and fairly. This is especially true where the parties have chosen ad hoc arbitration. Where the parties have chosen institutional arbitration, the relevant institution will have its own model arbitration clause, along with rules and practices which the parties, more often than not, will adopt.
In both types of arbitration, the arbitration agreement should include certain essential requirements. Margaret L. Moses[3] has explained these essential requirements as being the following:
- it is a written agreement;
- it will specify the number of arbitrators to be appointed;
- it will specify the seat of arbitration;
- it will specify the language of the arbitration;
- it will specify the applicable rules;
- it will specify the substantive law; and
- it will specify the law which will govern the validity of the arbitration agreement.
It is commonly understood that there is no need for a complex arbitration agreement. A simple and short arbitration clause in the main contract is sufficient to readily and clearly determine the dispute.
Significance of the Seat of Arbitration
The specification of the seat of arbitration is considered in an arbitration to be of great importance because, by choosing the seat of arbitration, parties decide the legal background in which their dispute will be resolved and the supporting legal framework. Primarily, the seat of arbitration will govern the following:
- the validity of the arbitration agreement;
- the regulation of the arbitration proceedings, including which court has, and can exercise, supportive and supervisory powers during the arbitration process;
- the nationality of the award for its ultimate enforcement; and
- the validity of the arbitral award.
The parties are encouraged to select a country which has an arbitration-friendly system, such as a country which is a party to the New York Convention, as it will be easier to enforce an arbitral award there. Furthermore, for the sake of neutrality, parties should select a country which is not the place of business of any one of the parties.
The Code of Civil Procedure, 1908
Prior to the enactment of the Arbitration Act, arbitrations seated in Pakistan were governed by the Second Schedule of the Code of Civil Procedure (CPC), 1908.
Procedure to Amend Court Proceedings
The amendment of civil pleadings in court proceedings is allowed under Order VI, Rule 17 of the CPC, which reads as follows:
“17. Amendment of pleadings. The Court may at any stage of the proceedings allow either party to alter or amend his pleadings in such manner and on such terms as may be just, and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties.”
Inapplicability of CPC to Arbitration Proceedings
The same provision, however, has been repealed by Section 49 and the Third Schedule of the Arbitration Act which, in turn, has been repealed by the Repealing and Amending Act 1945. As a result, provisions of the CPC are not applicable to Pakistan seated arbitrations. The same has been highlighted in a number of judicial precedents, such as Messers Haji Hasham Haji Ahmed & Bros v Messrs Trading Corporation of Pakistan Ltd Karachi[4] wherein the court held that the technical rules with respect to procedure provided in the CPC were “not extended to arbitration proceedings.” The Supreme Court of Pakistan made a similar ruling in A. Qutubuddin Khan v Chec Millwala Dredging Co. (PVT.) Limited.[5]
Komal Anwar[6] in her commentary and analysis of the Arbitration Act has suggested that the rationale behind the inapplicability of Order VI, Rule 17 is that litigation be reduced and the parties avoid all types of procedural law related to litigation. A similar line of reasoning was also voiced by the court in Abdul Sattar Mandokhal v Port Qasim Authority[7] in the following words:
“An agreement, whereby parties out of their own violation [sic: volition] agree for the resolution of present or future difference through the medium of arbitration, their intention is apparent, to avoid the technicalities and rigours of procedure and law as are applied in proceedings in Courts of law. Once parties have agreed to arbitrate, they cannot be allowed to import the rigours and technicalities of rules of procedure and intricacies of law in proceedings before the arbitrator.”
In M.S. Port Services (Pvt.) Limited v Port Qasim Authority,[8]the court ruled the following:
“…Although a general rule of Code of Civil Procedure applicable to all proceedings of civil nature, but the scheme of Arbitration Act, 1940 is to curtail litigation in regular Court to get disputes settled by avoiding all types of technicalities of procedural law.”
[Emphasis added]
In light of the above, one may reasonably conclude that since the technical rules of procedure under CPC are not applicable to Pakistan seated arbitration, the procedure for the amendment of pleadings under the CPC will also not be applicable. In Dr Mrs Azra Ali v Arif Ali,[9] the court specifically considered the powers of an arbitrator with regard to applications for amendment of the claim and held that the principles for the amendment of pleadings contained in the CPC, under Order VI, Rule 17, may not be followed by the parties in arbitration proceedings as they were not proceedings in a suit.
It is, therefore, evident that the CPC, and in particular Order VI, Rule 17, is not applicable to Pakistan seated arbitrations.
Amendment of Arbitration Pleadings
The amendment of arbitration pleadings is part of pleading formalities, the ambit of which is usually not covered in arbitration agreements. Whilst parties do at times choose national civil procedural rules, such rules are drafted for domestic court litigation and do not have the requisite degree of flexibility often considered necessary for arbitration. Where the parties have not decided upon a procedure, the relevant tribunal may feel compelled to do so. The procedure adopted by the tribunal should be reasonable as well as fair and seek the agreement of the parties.
It is pertinent to note that the Arbitration Act does not address the procedure to be adopted in an arbitration and is, consequently, silent on the mode and method of how an amendment of arbitration pleadings should be made. It may be argued that such silence grants the parties with the flexibility and autonomy needed to decide the relevant procedure to amend arbitration pleadings. This means that where the arbitration pleadings need to be amended, the parties should be able to make the necessary amendment without the consent of the tribunal.
Experience dictates that this does not mean that the parties have unfettered discretion to amend their arbitration pleadings, as this may lead to the introduction of a new issue which will result in the change of the nature of the claim brought to arbitration. Tribunals may feel that such unfettered right will result in the violation of the principles of natural justice and fairness. Thus, the tribunal ought to accept, within the boundaries of natural justice, such an amendment without leave, where the amendment of arbitration pleadings:
(i) further clarifies the position of the relevant party;
(ii) aids the tribunal in determining the actual issues between the parties; and
(iii) is within the scope of the claim referred to arbitration, i.e. does not change the nature of the claim.
Conclusion
In a Pakistan seated arbitration, where the parties have not decided the arbitration procedure, the tribunal has the power to determine the necessary procedural matters, subject to the parties’ agreement. The tribunal may not apply the CPC since arbitration proceedings are not akin to national court proceedings. The procedure for arbitration proceedings will differ since a great degree of autonomy is available to the parties, including procedural flexibility. If the tribunal decides, as a matter of procedure, that the parties need to receive the consent of the tribunal before amending their arbitration pleadings, the degree of flexibility which the parties should be able to enjoy will, undoubtedly, be restricted.
Moreover, the efficiency of the arbitration proceedings may be hindered as the parties will need to wait until the tribunal makes its decision whether to allow for the amendment of arbitration pleadings. If the tribunal decides to refuse the amendment of the arbitration pleadings, the relevant party may feel that it has not been given a proper opportunity to be heard, considering that such a procedural order may neither be appealed nor set aside as it is not an award. If the party’s place of business is Pakistan, this may result in satellite litigation regarding a breach of the party’s fundamental right to a fair trial.
As a general rule, the consent of the tribunal should not be a requirement for the amendment of arbitration pleadings, however, it ought to be considered on a case-by-case basis. The parties should be allowed to amend their arbitration pleadings as long as the amendments do not change the nature of the claim in dispute.
References
[1] Arbitration Act 1940, s 2 (a).
[2] New York Convention 1958, Article II (1).
[3] Margaret L. Moses, The Principles and Practice of International Commercial Arbitration, (Third Edition, United Kingdom: TJ International Ltd. Padstow Cornwall, 2017).
[4] Messers Haji Hasham Haji Ahmed & Bros v. Messrs Trading Corporation of Pakistan Ltd Karachi (1977) PLD Karachi 480 [13].
[5] Qutubuddin Khan v Chec Millwala Dredging Co. (PVT.) Limited (2014) SCMR 12689.
[6] Komal Anwar, Fundamentals of International and Domestic Arbitration: Detailed Commentary and Analysis on the Arbitration Act 1940 and the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 (Pakistan: Pakistan Law House, 2019).
[7] Abdul Sattar Mandokhal v Port Qasim Authority (2001) YLR 758 [12].
[8] M.S. Port Services (Pvt.) Limited v. Port Qasim Authority (2006) CLC Karachi (SB) 1678.
[9] Dr Mrs Azra Ali v Arif Ali (1993) PLD Karachi 683.
Co-authored by:
- Ali Naveed Arshad: MCIArb, Partner, KILAM Law Barristers and Corporate Consultants, Islamabad, Pakistan;
- Faiza Asad: Barrister, Senior Associate, KILAM Law Barristers and Corporate Consultants, Islamabad, Pakistan; and
- Hamna Sajjad: Trainee Lawyer, KILAM Law Barristers and Corporate Consultants, Islamabad, Pakistan.
The views expressed in this article are those of the authors and do not necessarily represent the views of CourtingTheLaw.com or any other organization with which they might be associated.
