the committee of (respectable and honourable) elder, whose decisions were accepted by the parties.[1]

Internationally, Mediation is the most frequent ADR service, whereby a mediator (impartial third person) finds the acceptable solution to the conflict between the parties. The process of mediation took place in complete confidentiality which is why it is getting more popular today rather than litigation.

The Court may, where it consider necessary having regard to the facts and circumstances of the cases, with the object of securing expeditions disposal of a case, or in relation to the suit, adopt with the consent of the parties alternate dispute resolution, including mediation and conciliation. [2] According to this section Courts in Pakistan have the power to refer any dispute to the alternate dispute resolution but that can only be done with the consent of the disputants. There are certain legislations in Pakistan especially in the field of Family law where it is must to refer the dispute to the mediation or conciliation before going to the Courts. A similar approach had been taken in the industrial employment law where a union cannot go on strike unless the dispute has been negotiated and if the negotiation fails the same has been referred to mediator.

In appropriate case Courts may ask the parties to consider the option of ADR to resolve their dispute. If the Courts do not ask the parties for ADR and parties themselves think to go for ADR they can apply to the Court for appropriate directions.

The settlement of disputes by means of ADR can:

a. Significantly helps litigants to save costs;

b. Save litigants the delay of litigation in reaching finality in their disputes;

c. Enable litigants to achieve settlement of their disputes while preserving their existing commercial relationships and marker reputation;

d. Provide litigants with a wider range of solutions than those offered by litigation; and

e. Make a substantial contribution to the more efficient use of judicial resources.[3]

ADR in the 21st century means finding domestically and internationally a quick, inexpensive and more effective alternate system to litigation which is not only time consuming but also expensive. Concerned about efficiency of national Court system in cross border dispute, foreign investor normally prefer mediation or arbitration as preferred dispute resolution. Dispute settlement through Arbitration/ ADR is not only domestic but also an increase growing international phenomena in the context of cross border transactions. [4]

ARBITRATION

Arbitration a form of `ADR’ may be defined as, "parties who are in dispute agree to submit their disagreement to a person whose expertise or judgment they trust"[5] Arbitration does not have a limited scope. It can cover disputes between corporations, individuals and even States.

In the arbitration proceedings the parties to the dispute appoint arbitrator(s) and refer their dispute to him, who after listening the parties and going through the record announce their decision which is binding upon those who choose the arbitrator and are party to the dispute. Arbitration, in short, is an effective way of obtaining a final and binding decision on a dispute or series of disputes, without reference of Court of law.[6]

Commercial arbitration has been regarded as the most prominent instrument for dispute resolution. [7]Therefore the importance and application of the international Commercial arbitrations as increased. The most significant reason for the success of international commercial arbitrations is that it not only save the time but also help the parties to get justice in a speedy manner at a lower cost. A specific problem with regard to international commercial disputes is that Courts of more than one country might be competent to decide upon these disputes.[8]

Arbitral awards, like Court judgments and unlike other ADR decisions, are enforceable at law. As a matter of fact, an advantage of arbitration over litigation in international trade is that it is easier to enforce a foreign arbitral award than a foreign Court decision, not least because of the abundance of multilateral concentions and bilateral treaties facilitating enforcement of foreign awards. Moreover from different case law it can be easily concluded that national/enforcing Courts mostly prefer to enforce foreign arbitral awards than foreign Court judgment, since the former are the outcome of a private procedure, whereas the latter have the stamp of country's sovereignty. Nevertheless, the execution of an arbitral award made in a foreign jurisdiction is quite a complicated matter, arbitration may be used for resolving various types of disputes in international trade.[9]

The arbitration proceedings are not formal. It is said that `Arbitration is not like proceedings in a Court of law. There are no ushers, wings or gowns, no judge or judges sitting in solemn robes upon dais; no national flags, orbs, or scepters. There is simply a group of people seated around a row of tables, in a room hired for the occasion. If it were not for the stacked piles of lever-arch files, the law books, and the transcript writers with their microphones and stenotype machines, it might look to an outsider as if a conference or a business meeting was in progress. It would not look like a legal proceeding at all. [10]

Different laws govern arbitration proceedings.

(a) THE ARBITRATION ACT 1940

Domestic arbitration law in Pakistan is governed by the Arbitration Act, 1940. The Arbitration Act, 1899 and the relevant provisions of Civil Procedure Code were replaced by the Arbitration Act, 1940. The main feature of this Act was based on the English Arbitration Act 1899 and 1934.

The Act of 1940 was passed for the whole of British India. On 26.1.1950 the Act was extended to whole of the India with few exceptions. Arbitration and Conciliation Ordinance 1996 (Act 8 of 1996) replaced the 1940 Act and now Arbitration and Conciliation Act, 1996 governs the area. Pakistan is still governed by the Arbitration Act, 1940.[11]

This Act provides a method whereby parties to the arbitration can jointly appoint an arbitrator or each party can appoint an arbitrator who joins a neutral arbitrator. The Act provides three classes of Arbitration.

a. Arbitration proceedings without the intervention of the Court

b. Arbitration proceedings with the intervention of the Court, where either party to the arbitration can make an application to the Court for the appointment of the arbitrator.

c. Arbitration proceeding in the pending suits, the party to the suit apply to the Court to refer the matter to the arbitration and the Court then appoint the arbitrator.

Arbitrator has the power to summon the witness and record the evidence. According to the Act the arbitration proceedings need to the concluded in four months time, meaning thereby that the arbitrator shall announce and award in four months time. This time can be extended with the consent of the parties.

The Act is silent on the question of foreign awards. In the absence of any clear provisions, the Court had reluctantly laid down that the Arbitration Act could not be applied to foreign arbitration and awards.[12] The apex Courts of Pakistan made it clear that under the reasonable and fair interpretation of the Act they do not have control over the foreign arbitration.

b. NEW YORK CONVENTION 1958

Pakistan is signatory of New York Convention, this is the most significant law for the Recognition and Enforcement of foreign arbitral award is The New York Convention, 1958. An award is the outcome of arbitration proceedings which require enforcement, "the successful party in an international commercial arbitration expects the award to be performed without delay. This is a reasonable expectation. The purpose of arbitration, unlike mediation and most other methods of alternative dispute resolution is to arrive at a binding decision on the dispute. Once this decision has been made in the form of an award, it is an implied term of every arbitration agreement that the parties will carry it out"[13]

Such mechanism was provided by the New York Convention which came in 1958 and replaced the 1923 Geneva Protocol and the 1927 Geneva Convention,[14] The Convention has been recognized as a major development in the field of international commercial arbitration, therefore, it is said that the `the single most important pillar on which the edifice of international arbitration rests'.[15] The importance of convention holds its feet in the boarder perspective of commercial law therefore it is said that perhaps could lay claim to be the most effective instance of international legislation in the entire history of commercial law'[16]

The New York Convention does not only deals with the recognition of an award but also help in the enforcement of the same. The "distinction may be drawn at the outset between: (i) the enforcement of an award in the State that is the 'seat' of the arbitration; and (ii) the enforcement of an award which is regarded as a 'foreign' or 'international' award because it was made outside the territory of the State in which recognition or enforcement is sought. Enforcement of an award in the country that is the seat of the arbitration is usually a relatively easy process. It generally involves the same processes as are required for the enforcement of an award in a domestic arbitration. Enforcement of an award that is regarded by the place of enforcement as a 'foreign' or 'international' award is a more complex matter,"[17]

According to Article 1 "Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought”[18]

The Convention requires each contracting state to recognize and enforce the award without any hurdles, and no special procedures would be required to enforce a foreign award if those procedures are not required to enforce a domestic award.[19]

The convention facilitates in the smooth enforcement and recognition of the award and plays an important role in the commercial arbitration.

Article V lay down certain grounds by which the enforcing Courts may consider to refuse or not to refuse the enforcement of an award. The Courts usually avoid going deeper into the interpretation of the convention, Courts prefer to give purposive approach to the convention to the grounds mentioned in this Article. If they fail to do so, it might frustrate the very purpose of the matter.

c. THE ARBITRATION (PROTOCOL AND CONVENTION) ACT, 1937

The Act of 1937 dealt with the execution of foreign arbitral awards. This Act has been repealed by the Recognition and Enforcement of (Arbitration Agreement and Foreign Arbitral) Awards Ordinance, 2005, Pakistan, which came into force to incorporate the New York Convention of 1958 in to the laws of Pakistan.

Most of the litigation related to foreign arbitration took place under the Act of 1937, so it is very important to comment on it. This Act was pursuant to the Geneva Protocol on Arbitration Clauses of 1923 and Geneva Convention on Execution of Foreign Arbitral Awards of 1927 (the Geneva Convention).

This Act has a limited scope and applied to a very particular class of foreign arbitral awards. The word 'foreign award' was narrowly defined in the Section 2 of the Act.[20] The Courts of Pakistan has interpreted the term 'foreign arbitration' as an arbitration of foreign land, by the foreign arbitrators, to which the foreign laws were applied and in which a foreign national was involved. Thus certain parameters should be fulfilled to consider an award as a foreign award under this Act. Courts in Pakistan found difficulty to consider an award as a foreign award which can be seen in the case of YANGIZE (LONDON) LIMITED V BARLAS BROTHER (KARACHI)[21], wherein the Supreme Court of Pakistan held that the award made by the London Court was not a foreign award within the meaning of this Act.

d. RECOGNITION AND ENFORCEMENT (ARBITRATION AGREEMENT AND FOREIGN ARBITRAL) ACT, 2011

Pakistan ratified New York Convention on 14.07.2005 and promulgated the Recognition and Enforcement (Arbitration Agreement and Foreign Arbitral) Awards Ordinance 2005. Since 2005 the Government of Pakistan kept the ordinance alive[22] through consecutive Ordinances. On 15th July 2011 this Ordinance got the permanent basis in the municipal laws of Pakistan through an Act namely Recognition and Enforcement (Arbitration Agreement and Foreign Arbitral Awards) Act, 2011.

Section 4 of this Act[23] deals with the enforcement of arbitral agreements as mentioned in the Article II (3) of the New York Convention. Certain judgments of Pakistani Courts confused the international business community, like Supreme Court in the case of ECKHARDT & CO MARINE GMBH, WEST GERMANY V MUHAMMAD HANIF[24] refused to enforce foreign arbitration agreement on and held 'No hard and fast rule can be laid down or line of demarcation can be drawn to say in what cases refusal can be made. Each case has different facts and grant or refusal of stay is dependent upon particular facts and circumstances of each cases. The Court can make objective assessment and come to the conclusion whether stay of legal proceedings can be granted or refused.[25] This judgment raised a question in the international business community that whether the arbitration agreement is enforceable in Pakistan but to tackle this, the Ordinance in Section 4(2) stated that arbitration agreement is enforceable unless, 'it is null and void, inoperative or incapable of being performed'. This section undermined the discretionary power of the Pakistani Courts as held in the case of TRAVEL AUTOMATION (PVT) LTD V ABACUS INTERNATIONAL (PVT) LTD wherein it was held that the section 4 (2) has taken away the discretion of the Pakistani Courts in enforcing arbitration agreement except where the arbitration agreement is in itself null and void, inoperative or incapable of being performed.

The Act applies to the 'foreign arbitral award' as defined in the Section 2(e), "An arbitral award made in a Contracting State and such other state as may be notified by the Federal Government, in the Official Gazette."[26]

This Act does not apply to those awards in respect of which the Pakistani law has been applied. It applies only to those awards in respect of which the arbitration has not been conducted according to the Pakistani law. However, if an arbitration has been conducted in a foreign country according to the Pakistani law, Pakistani Courts may take the literal interpretation of Art. V(1)(e) of the convention, which allow the Court to refuse recognition and enforcement of award if, "The award has been set aside or suspended by the competent authority of the country in which or under the law of which, that award was made."

Professor Varady, Barcelo and von Mehren elaborated this provision of the Convention as under:

'The New York Convention only indirectly indicates the relevant criteria for determining 'the domesticity’. According to Article V(1)(e), the recognition and enforcement may be refused if the award has been set aside by a competent authority 'of the country of which or under the law of which the award was made. It follows that a distinction has been drawn between countries whose competency for setting aside may be "accepted and given force in a member-state of the New York Convention if it was affected in the country in which the award was rendered or in the country under the law of which the award was rendered.... This means that if the order of setting aside an award is granted by a Court which assumes jurisdiction on a ground other than of the place of the award or of the law under which it was rendered. For example, the domicile of the defendant-the setting aside judgment would not be relevant in other countries party to the New York Convention.'[27]

Pakistani Courts interpret Article V(1)(e) in accordance with its internationally accepted interpretation, so the enforcement of foreign award given under the Pakistani law should only be challenged under the provisions of the convention. However, if the Pakistani Courts exercise the power to set aside an award on grounds that are not complied with convention, a Court of another member state would still retain the right to enforce the award.

[1]. `An important form of village council in the Indian-subcontinent which usually consists of group of influential older men acknowledge by the community as it governing body. Their decision is accepted by the parties to the dispute and no body can disagree with the decision because in that case one may have to face social rejection by the society". Arbitration/ADR versus Litigation By Surridge & Beecheno available at http://www.hg.org/articles/article_1530.html

[2] Section 89A, Civil Procedure Code, 1908, Tenth Edition 2010, pg253

[3] Chapter 17, Alternate Dispute Resolution, Civil Procedure, Volume 2, The White Book Service 2003, pg 49, 17.2

[4] Arbilration/ADR versus Litigation By Surridge & Beecheno Available at http://www.hg.org/articles/article_l530.html.

[5] Redfern and Hunter.

[6] ibid.

[7] United Nations Conference on Trade and Development, Dispute Settlement: International Commercial Arbitration, UNCTAB/EDM/Misc.232/Add.38, (New York and Geneva: United Nations, 2005), at 36.

[8] "Exclusive Jurisdiction Clauses", which require disputes between the parties to be referred to a particular Court, and to be decided under particular law, might solve the problem. However, the validity of exclusive jurisdiction clauses varies from one country to another. Some national laws do not recognize the validity of these clauses, if a foreign Court decision is to be enforced in their territory.

[9] Pierre M. Genton, "the DRRB/DAB, a True Complement to Arbitration", GCC Commercial Arbitration Centre Bulletin, issue 7 (December 1997), at 18-20.

[10] Redfern and Hunter on International Arbitration 5th edition Section 1.04

[11] Arbitration/ADR versus Litigation By Surridge & Beecheno Available at http://www.hg.org/articles/article_ 1530.html

[12] Lockman Das Sat Lal v Parmeshri Dass AIR 1958 Punjab 258 and Nan Fung Textile Limited v Saqiq Traders Limited PLD 1982 Karachi 619.

[13] See Mustill and Boyd, Commercial Arbitration (2nd edn, Butterworths, 1989), 47; Expert report of Dr Lew, Esso/BHP v. Plowman (1995) 11 Arb Intl 282, 283. Also Redfern and Hunter on International Arbitration 5th edition section 11.01 available at hhttp://login.westlaw.co.uk/maf/wluk/app/document?src=doc&linktype=ref&&context=4&crumb-action=replace&docguid-I6A26F 18022E011DFAAF89D6DC5374E3D

[14] Red Fern Section 11.42

[15] Wetter, 'The Present Status of the International Court of Arbitration of the ICC: An Appraisal' (1990) 1 Am Rev Intl Arb 91.

[16] Mustill, 'Arbitration: History and Background' (1989) 6 J Intl Arb 43; see also Schwebel, 'A celebration of the United Nations’ New York Convention' (1996) 12 Arb Intl 823.

[17] Red Fern 11.18

[18] Article 1 NY 1958

[19] Article 3 of the New York Convention, 1958

[20] The Act defines the foreign awards as:

(1) In this Act 'foreign awards' means award on the difference relating to matters considered as commercial under the law in force in Pakistan made after the 28th day of July, 1924

a. In pursuance of an agreement for arbitration to which the Protocol set forth in the First Schedule applies, and

b. Between persons of whom one is subject to the jurisdiction of some one of such powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the official Gazette, declare to the parties to the convention set forth in the second schedule, and of whom the other is subject to the jurisdiction of some other of the Power aforesaid, and

c. In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by like notification, declare to be territories to which the said convention applies;

and for the purpose of this Act an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made.

(2) For the removal of doubt it is hereby declared that any notification issued under this section by Government of India before the fifteenth day of August, 1947, and in force on that day for the purpose of enforcement of foreign awards in British India, declaring any power to be a party to the said convention or any territory to be the territory to which the convention applies, shall be deemed to be a notification issued by the Central Government for the purpose of enforcement of foreign awards in Pakistan.

[21] Yangize (London) Limited v Barlas Brother (Karachi) PLD 1961 SC 573.

[22] Under Article 89(1) of the Constitution of Islamic Republic of Pakistan it is the power of President to promulgate Ordinance, if the National Assembly is not in session and there are sounds reasons to promulgate the Ordinance, after fulfilling all the parameters described in the Article 89.

[23] Section 4 of the Recognition and Enforcement (Arbitration Agreement and Foreign Arbitral Awards) Act, 2011 states, "Enforcement of arbitration agreement, (1) A party to an arbitration agreement against whom legal proceedings have been brought in respect of a matter which is covered by the arbitration agreement may, upon notice to the other parties to the proceedings, apply to the Court in which the proceedings have been brought to stay the proceedings in so far as they concern that matter. (2) On an application under subsection (1), the Court shall refer the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed."

[24] Eckhardt & Co Marine GMBH, West Germany v Muhammad Hanif, PLD 1993 Supreme Court 42

[25] Eckhardt & Co Marine GMBH, West Germany v Muhammad Hanif, PLD 1993 Supreme Court 42 at P.17& 18.

[26] Section 2 (e) of the Recognition and Enforcement (Arbitration Agreement and Foreign Arbitral Awards) Act 2011.

[27] T.Vardy, J.J. Barcelo and A. von Methren, International Commercial Arbitration, pp. 625-6, This is also quoted by Barrister Shahid Jamil in his Article, Pakistan's Implementation of the New York Convention, 2008.