Thursday, November 24, 2011

Pakistani Case Law on Foreign Arbitral Awards

1.        Eckhardt & Co., vs. Mohammed Hanif, PLD 1993 SC 42 (Towards the end of Justice Ajmal Mian’s opinion)
 “that unless there are compelling reasons, arbitration clause should be honoured as generally the other party to such an arbitration clause is a foreign party.  Section 34 of the Arbitration while dealing with an application in relation to a foreign arbitration clause the Court’s approach should be dynamic. With the development and growth of International Trade and Commerce and due to modernization of communication transport system in the world, the contracts containing such an arbitration clause are very common now a days. The rule that the Court should not lightly release the parties from their bargains, that follows form the sanctity which the Court attaches to contracts must be applied with more vigor to the contract containing a foreign arbitration clause. We should not over look the fact that any breach of a terms of such a contract to which a foreign company or person is a party, will tarnish the image of Pakistan in the comity of nations
Foreign award was announced against plaintiff-company and without filing of any appeal plaintiff sought suspension of enforceability of the award ---Validity---Question as to whether arbitrators were justified in issuing direction to plaintiff to make payments to defendants was a question which was open to adjudication before proper forum in appeal---High Court while hearing application under S.5 of Arbitration (Protocol and Convention) Act, 1937, could not sit in appeal against award passed by arbitrators in terms of arrangement between the parties -award had become final, the moment it was pronounced unless the party against whom such award was passed had preferred appeal and got the same set aside-Plaintiff -company did not have any cause of action to invoke jurisdiction of High Court under the provisions of Arbitration (Protocol and Convention) Act, 1937---Suit was dismissed in circumstances.

3.       Pacific Lloyds v. Blessed Enterprises 2007 CLD 661 (KARACHI-HIGH-COURT-SINDH) (Penultimate paragraph in the Judgment)
Addressing the objection of the Plaintiff that the award was not final the Court held: “Merely because the certificate referred to has not been obtained will not rob the award of its finality and even otherwise provision of clause (d) of sub section (1) of Section 7 requires that the award must have become final in the country it was made a fact which is not under dispute”.
4.       CONTICOTTON S.A. CO. Vs. FAROOQ CORPORATION 1999  CLC  1018     (KARACHI-HIGH-COURT-SINDH) (Discussion on foreign arbitral awards in last four paragraphs)
Foreign Arbitration Award---Enforcement---Principles---Making award rule of Court--Parties, which were members of Liverpool Cotton Association, entered into contract of sale of cotton subject to Liverpool Cotton Association Rules, whereby defendant/exporter agreed to supply 1050 bales of cotton to plaintiffs/importers---Defendant according to the agreement shipped 582 bales and parties agreed to the supply balance quantity up to specified date on condition that if defendant would fail to supply balance quantity in time, contract between parties would be closed on that day on basis of market difference---Defendant/exporter failed to make shipment of balance quantity of cotton up to specified date for reasons that Government of Pakistan had temporarily suspended export of cotton on account of poor crop of cotton--Plaintiffs refused to accept excuse of defendant, served formal notice on defendant of their intention to proceed to arbitration to close out unfulfilled part of contract as per Rules of Liverpool Cotton Association and appointed their arbitrator---Arbitrator appointed on behalf of defendant fully participated in arbitration proceedings and arbitrators gave their award whereby defendant was directed to pay difference of amount---Appeal of defendant against award of Arbitrators was dismissed for non-payment of requisite fee for filing appeal within time---Plaintiff filed award in Court to make it rule of Court ---Validity--Award was objected to by defendant contending that due to suspension of export of cotton by Pakistan Government, it had no liability for non-delivery of balance quantity of cotton and that due to such prevention, force majeure clause in contract of sale had come into effect which had rendered contractual clause invalid including arbitration clauses---Legality---Suspension of export of cotton being temporary, it could not be said that contract between parties had become impossible for performance or it had become frustrated at relevant time---Public Notice whereby export of cotton was temporarily suspended, by no stretch of imagination could be construed as a declaration to the effect that export of cotton had become illegal---Reliance of defendant/exporter on S.23 of Contract Act, 1872, was misconceived---Objections raised by defendant/exporter to award being baseless, same was ordered to be made rule of Court---Courts ought not to entertain objections to foreign award, executable in Pakistan unless those strictly lay within four corners of S.7 of Arbitration (Protocol Convention) Act, 1937.

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