Rana Rizwan Hussain
Role of judiciary in a country is of vital importance to set an environment friendly to international arbitration. Pakistan is one of those countries which are known for their unfriendliness towards international arbitration. Although international and domestic arbitrations are governed under different law regimes but a friendly domestic arbitration practice serves as good base for international arbitration to grow. Out of several elements constituting to an arbitration friendly environment, eg developed arbitration law regime, developed arbitration institutions and training facilities for law professionals in arbitration etc, the role of judiciary stands paramount.
Pakistan faced a great deal of criticism due to HUBCO v WAPDA[1] and SGS v Pakistan[2] cases in which Pakistani courts played a role against the expectations of international arbitral community and passed anti arbitration injunctions. Pakistan also became the attention of international arbitration community in a case Dallah v Pakistan [2010] 3 WLR 1472 in which Pakistan is accused of causing delay in arbitration proceedings due to its unwillingness to arbitrate the matter. The said matter was disposed off by the ICC tribunal in Paris in almost eight years. Although, this matter was also taken up in Pakistani courts but no anti arbitration injunctions were issued in it. In the first two cases Pakistani courts are said to have breached the international arbitration law regime by intervening into the arbitral process by accepting the jurisdiction upon the matters where exclusive jurisdiction should have been allowed to the arbitral tribunals.
Certainly, these cases could be better addressed by the courts but contrarily what has been ignored so far is to analyse the overall judicial stand of Pakistani courts and judge the element of judicial bias in the light of overall court practice. A quick perusal of court decisions of Pakistan shows that majority decisions uphold the arbitration agreement and refuse the court jurisdiction in favour of arbitration proceedings. In case titled as Metropolitan Steel Corporation Ltd v Macsteel International UK Ltd PLD 2006 KAR 664, suit for recovery of money was filed by plaintiff against which defendant raised the objection that there was an arbitration agreement between the parties to refer all the disputes to arbitration and thus requested the court to refer the matter to arbitration. Plaintiff denied the contention and said that there was no agreement between the parties. Court looked into the detail and found that parties had agreed upon arbitration in the correspondence between them. Court stayed the proceedings of the suit in favour of arbitration and gave finding that the arbitration agreement could also be inferred from the correspondence between the parties and directed the parties to resort to terms of sale contract for the settlement of dispute. In another case titled as Islamic Republic of Iran Shipping Lines v Hassan Ali & Co Cotton (Pvt) Limited CLD 2006 153 Sindh High Court Karachi acting as the executing court of a foreign award gave finding that court while considering the enforcement of foreign awards merely acts as an executing court and while doing so it cannot go behind the award and sit as an appellate court and make appraisal of evidence. In the same line there are number of other precedents which uphold the arbitration agreements and enforce the foreign awards.[3]
Before giving an analytical view about the judicial bias in Pakistani courts, there is a need to draw a clear distinction between the element of ‘lack of judicial independence’ and ‘judicial bias’:
| Lack of Judicial Independence | Judicial Bias |
| Judiciary lacks its independence when it is influenced or dominated by any other organ of the state. | Judicial bias is an element which roots into the minds of the members of judiciary and has no further backing. |
| Lack of independence works for protecting the interests of influencing authority. | Judicial bias hinders sharing of power with any alternative mode of dispute resolution. |
| Lack of independence does not victimize arbitration system directly but arbitration may become an unwanted prey. | Judicial bias directly targets arbitration system as a rival and obstructs its progress. |
| Proof of lack of independent judiciary establishes the week institutional growth of the country. | Proof of judicial bias establishes a jurisdiction as an unfriendly jurisdiction for arbitration. |
The purpose of drawing distinction between both the elements is to draw attention to the fact that the effect of lack of judicial independence in the court decisions should not be mixed with the effect of judicial bias.
Supreme Court of Pakistan fought its battle of independence (known as the “lawyers’ movement”) against the establishment in the era of 2007-2009. The HUBCO and SGS cases were decided in between the years 2000-2002. A common element in both the cases was that in these cases, state or the state interest was directly involved. Hence, the element of influence upon the judiciary cannot be overlooked. While, the element of judicial bias can be rebutted in the light of majority judgments referred above and the receptivity of legal system towards ADRs including arbitration. There are enactments in Pakistan eg Co-operative Societies Act, 1925 and Electricity Act 1910 which specifically contain the provisions which allow the parties to resolve their disputes through arbitration. Pakistan Law Commission which works for development of law and justice in Pakistan consists of Chief Justices and senior judges of superior courts along with other law personalities, has approved various draft statutes, such as the Small Claims and Minor Offences Courts Ordinance, which recognize the ADR mechanism. This receptivity of top judicial body towards arbitration system negates the existence of element of bias for arbitration in the mindset of judiciary.
Irrespective of the discussion above HUBCO and SGS cases can also be considered as the exceptions to general practice which can take place even in the reputed arbitration friendly jurisdictions. As Dallah v Pakistan is one of the most recent examples, in which English court refused to enforce the award rendered by the French tribunal and based its refusal upon section 103(2)(b) of English Arbitration Act, 1996 which reflects article V(I)(a) of the New York Convention according to which recognition and enforcement of award may be refused at the request of the party if the arbitration agreement between the parties was not valid under the law to which the parties have subjected it to or failing any indication thereon, under the law of the country where the award was made. In Dallah case there was no express agreement upon the choice of law applicable upon the arbitration agreement, hence the tribunal should have decided the validity of arbitration agreement under the French law. While, the tribunal decided the validity of arbitration agreement under the principles of international law, which was rejected by the English court at enforcement stage. Although, the awards could be enforced at Dallah’s plea before the enforcing court that the principles of international law constitute to the part of French law, as the French law promotes the approach that arbitration agreements are governed under the transnational principles of law.
This example brings forth that exceptions to the general practice can also take place in reputed arbitration friendly jurisdictions. Although Pakistan has failed to develop a friendly image in the field of international arbitration but the responsibility of it is not upon the mindset of judiciary but upon other factors.
Supreme Court of Pakistan after being successful in its battle for the sake of rule of law has passed several bold decisions at national level without accepting any pressure or influence of any other body, which is admirable. January 2010 decision of declaring National Reconciliation Ordinance, 2007 void ab intio and non est which was aimed at providing unlawful relief to the political elite of the country is an example. In this sequence, if a matter relating to international arbitration comes to be dealt by the court, the best expectations are that the court would follow its independent approach and the decision passed would be reasoned and free from the effect of either of the elements discussed above.
[1] Judgment of Supreme Court of Pakistan, 14 June 2000 (Civil Appeal No 1398 and 1399 of 1999)
(Also reported internationally)
[2] Decision of July 3, 2002, Supreme Court of Pakistan
[3] Far Eastern Impex (Pvt) Ltd, Karachi v Quest International Nederland BV YLR 2009 KAR 334; Islamic Republic of Iran Shipping Lines through attorney v Hassan Ali & Co Cotton (Pvt) Ltd CLD 2006 KAR 497; Crescent Sugar Mills Ltd v Abdul Aziz etc PLD 1978 LHR 1396; Hassan Ali & Co Cotton (Pvt) Ltd v Poly Cotton SA 2-RUE Andrien Vallin 1201 Geneva, Switzerland and others PLD 1996 KAR 416; Pacific Lloyd Ltd through attorney v Blessed Enterprises through Proprietor CLD 2007 KAR 661; Flame Maritime Ltd v Hassan Ali Rice Export CLD 2006 KAR 697; Marines Ltd v AEGUS Shipping Co Ltd and others CLC 1987 KAR 1299; Meredith Jones & Co Ltd v Quetta Textile Mills Ltd CLD 2002 KAR 1191; Jugotekstil Imex v M/s Shams Textile Mills Ltd CLC 1986 KAR 879; Ralli Brothers & Coney ltd v Muhammad Amin Muhammad Bashir Ltd CLC 1987 KAR 83; QUINN Corporation and others v COTTON Export Corporation CLD 2004 KAR 1040; Alfred C Toepfer International GMBH v Pakistan Molasses Company and another CLD 2003 KAR 1666; M/s European Grain & Shipping Ltd v M/s Polychem Company Ltd PLD 1990 KAR 254; DAMPSKIBSSELSKABET NORDON AKTIESELSKALE v Ahmed Shipping Lines Ltd, Wallace Road Karachi PLD 1983 KAR 247; NAN FUNG Textiles ltd v Sadiq Traders Ltd PLD 1982 KAR 619; Hitachi Ltd and another v Rupali Polyester and other 1998 SCMR 1618; European Grain & Shipping Ltd v Polychem Co Ltd PLD 1990 KAR 254; There are also number of other judgments in support.
Writer is a practicing lawyer based in Lahore, lecturer of commercial law and founding partner at Hussain & Associates; hnachambers@gmail.com
Notice: – Article has been published with a law journal “JURIST” of University of Pittsburgh, United States in 2012. The author and the publisher have the exclusive right to republish or reprint this article. Any infringement of copyrights shall be strictly dealt with in accordance with law.
ranarizwanhussain 