Pakistan Arbitration Law: Stay of Proceedings & Enforcement of Foreign Arbitral Awards

A Comparative Study of Stay of Proceedings and Enforcement of Foreign Awards in Pakistan and International Regimes

Author: Qaneta Nauman

Abstract

Arbitration's effectiveness as a dispute resolution mechanism depends heavily on the willingness of domestic courts to support rather than undermine the very method, both before an arbitration begins and after an award is rendered. This paper examines Pakistan's arbitration framework through a comparative lens, focusing on two critical junctures: the judicial decision to stay court proceedings in favour of arbitration, and the judicial decision to enforce a foreign award. It argues that Pakistan exhibits an internal contradiction in its treatment of arbitration; a modern, Convention-compliant enforcement regime under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, operating alongside an outdated, discretion-heavy regime for staying domestic proceedings under the colonial-era Arbitration Act, 1940. Drawing on statutory analysis and case law from Pakistan, England, and Singapore, the paper compares Pakistan's discretionary stay-of-proceedings model with the mandatory-stay approach used in UNCITRAL Model Law jurisdictions, and examines how Pakistani courts have applied the closed-list enforcement grounds of the New York Convention. The paper concludes by considering the Draft Arbitration Act, 2024 as a legislative response to this asymmetry, and assesses whether it would bring Pakistan's domestic arbitration regime into closer alignment with prevailing international standards.

Introduction

Arbitration functions as an effective alternative to litigation only to the extent that domestic courts are willing to support, rather than supplant, the arbitral process. Two stages in the life of an arbitration reveal a legal system's true attitude towards it the pre-arbitral stage, where a court decides whether to stay its own proceedings in favour of arbitration, and the post-award stage, where a court decides whether to enforce the resulting award. Pakistan presents a striking dichotomy at these two moments. At the enforcement stage, Pakistani courts, guided by the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 (“the 2011 Act”), have increasingly aligned themselves with the pro-enforcement philosophy of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“the New York Convention”). At the pre-arbitral stage, however, courts continue to operate under the Arbitration Act, 1940 (“the 1940 Act”), a colonial-era statute that preserves wide judicial discretion to entertain or stay parallel litigation. This paper compares Pakistan's approach at both stages with that of Model Law jurisdictions  , principally England and Singapore to argue that Pakistan's arbitration regime is characterised by an internal contradiction: an internationally credible enforcement framework sitting atop a domestically obstructive procedural one. The paper further considers the Draft Arbitration Act, 2024, as a proposed resolution to this contradiction.

Literature Review

A. Section 34 of the Arbitration Act, 1940

Under Section 34 of the 1940 Act, a party to an arbitration agreement against whom legal proceedings have been commenced may apply for a stay of those proceedings, but the court will grant a stay only if it is “satisfied that there is no sufficient reason why the matter should not be referred to arbitration” and that the applicant was, and remains, “ready and willing to do all things necessary to the proper conduct of the arbitration.” The provision is thus expressly discretionary: the word used is “may,” not “shall.” Pakistani courts have layered further conditions onto this discretion. In Uzin Export Import Enterprises v M Iftikhar & Company Ltd, the Sindh High Court held that a stay under Section 34 requires, among other things, that the applicant have taken no step in the proceedings indicating an intention to abandon arbitration. Commentators have observed that Section 34 is “frequently used to stay arbitration proceedings,” but that recourse to the 1940 Act more broadly carries a reputation for “stifling arbitration proceedings” once a court accepts that the Act applies at all, even to agreements with an international character. In Eckhardt & Co Marine GmbH v Muhammad Hanif, the Supreme Court itself declined to stay proceedings notwithstanding an arbitration clause, illustrating the breadth of judicial latitude that Section 34 permits.

B. England and Singapore

By contrast, Section 9 of the (English) Arbitration Act, 1996 closely mirroring Article 8 of the UNCITRAL Model Law on International Commercial Arbitration provides that “the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.” The stay is thus the default outcome; refusal is the exception, and it is confined to narrow, defined grounds rather than an open-ended assessment of “sufficient reason.” The UK Supreme Court's recent decision in Republic of Mozambique v Credit Suisse International; Privinvest Shipbuilding SAL confirmed that English courts will construe the scope of “matters” referable to arbitration broadly and consistently with international practice, describing a “general international consensus” among common law jurisdictions applying similarly worded provisions. Singapore's International Arbitration Act adopts an equivalent mandatory-stay model, reflecting the same Model Law lineage.

C. Comparative Analysis

The contrast is one of structure, not merely of judicial temperament. Model Law jurisdictions treat the stay as a near-automatic consequence of a valid arbitration agreement, with the court's inquiry confined to the narrow question of the agreement's validity, operability, and performability. Pakistan's 1940 Act, by continuing to condition a stay on the court's own assessment of “sufficient reason” and the applicant's continuing readiness to arbitrate, invites precisely the kind of merits-adjacent, discretionary inquiry that the Model Law was designed to foreclose. This structural difference has practical consequences: it creates room for a reluctant litigant to resist a stay, prolonging parallel proceedings and undermining the certainty that parties sought when they agreed to arbitrate in the first place.

 Enforcement of Foreign Arbitral Awards: The 2011 Act and the New York Convention

A. Legislative History and Structure

Pakistan acceded to the New York Convention in 1958 but did not enact a coherent domestic statute to implement it until 2011, following a fifteen-year period, from 2005 onward, during which the Convention was given temporary effect through a succession of presidential ordinances. The 2011 Act now governs recognition and enforcement of foreign arbitral awards, vesting exclusive jurisdiction in the High Courts and providing, in Section 7, that enforcement “shall not be refused except in accordance with Article V” of the Convention. Section 8 further provides that, in the event of any inconsistency between the 2011 Act and the Convention, the Convention itself prevails. This is a materially different structural choice from Section 34 of the 1940 Act: refusal is confined to an exhaustive, closed list of grounds, and the burden of proof rests on the party resisting enforcement.

B. Judicial Application

Pakistani courts have, on the whole, applied this closed-list structure faithfully. In the Taisei Corporation litigation, the Supreme Court confirmed that the 2011 Act “leaves no room for the courts... to enter into the exercise of examining the merits of a foreign award on points of fact or law,” and that the burden of establishing an Article V ground lies with the resisting party. More recently, in enforcement proceedings brought by Trafigura against Cnergyico, the debtor invoked the public policy ground under Article V(2) and Section 7 of the 2011 Act, illustrating that this ground continues to be tested in practice even as courts maintain its narrow scope. This contemporary posture stands in contrast to the Supreme Court's earlier and widely criticised decision in Hub Power Company Ltd v WAPDA, in which unproven allegations of corruption in the underlying contract were held to render the dispute non-arbitrable as a matter of public policy  a decision now generally regarded within the legal community as confined to its own facts and unlikely to be followed.

C. Convergence with International Practice

On enforcement, therefore, Pakistan's trajectory has moved towards convergence with the pro-enforcement norms of Convention states such as England, whose own domestic implementation (Sections 100–103 of the Arbitration Act 1996) likewise confines refusal to the closed list of Article V grounds. The 2011 Act's exhaustive-grounds structure, and its recent judicial application, suggest that at the enforcement stage Pakistan has largely closed the gap with international best practice.

The Pakistani Paradox and the Draft Arbitration Act, 2024

The comparison above reveals a paradox: Pakistan's regime for enforcing foreign awards is structurally aligned with the New York Convention, yet its regime for staying domestic court proceedings in favour of arbitration remains rooted in a discretionary, pre-Model Law framework nearly ninety years old. This asymmetry has long been recognised as a source of inefficiency, compounding Pakistan's substantial civil case backlog and discouraging domestic commercial parties from viewing arbitration as materially different from litigation. In response, the Arbitration Law Review Committee, constituted under the Law and Justice Commission of Pakistan and chaired by a sitting Supreme Court judge, finalised a Draft Arbitration Act, 2024, modelled on the UNCITRAL Model Law and presented to the Federal Minister for Law and Justice in May 2024. The Draft Act is intended to repeal the 1940 Act, curtail the scope of judicial intervention at the pre-arbitral stage, and, notably, includes a proviso that enforcement proceedings “shall not entail a review on the merits of the dispute” a provision evidently aimed at preventing a recurrence of the expansive public-policy reasoning seen in the Hubco case. If enacted, the Draft Act would bring Pakistan's domestic stay-of-proceedings regime into structural alignment with the mandatory-stay model already operating in England and Singapore, thereby extending to domestic arbitration the same pro-arbitration ethos that Pakistani courts have already embraced in the context of foreign awards.

Research Questions

1. How does Pakistan's approach to staying court proceedings in favour of arbitration under Section 34 of the Arbitration Act, 1940 differ structurally from the mandatory-stay approach adopted in Model Law jurisdictions such as England and Singapore?

2. To what extent have Pakistani courts, in applying the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, converged with the pro-enforcement philosophy of the New York Convention?

3. Why does Pakistan's arbitration framework display a marked difference in judicial attitude between the pre-arbitral stage (stay of proceedings) and the post-award stage (enforcement of foreign awards)?

4. Does the Draft Arbitration Act, 2024 adequately address this asymmetry, and would its enactment bring Pakistan's domestic arbitration regime into closer alignment with international best practice?

Methodology

This paper adopts a doctrinal, comparative legal research methodology. It relies primarily on:

· Statutory analysis: a close textual comparison of Section 34 of the Arbitration Act, 1940 (Pakistan) with Section 9 of the Arbitration Act, 1996 (England) and the equivalent provision of Singapore's International Arbitration Act, alongside Article 8 of the UNCITRAL Model Law; and a parallel analysis of the Recognition and Enforcement Act, 2011 (Pakistan) against Article V of the New York Convention.

· Case law analysis: examination of reported judgments from the Supreme Court of Pakistan and the High Courts (e.g., Uzin Export Import Enterprises v M Iftikhar & Company Ltd, Eckhardt & Co Marine GmbH v Muhammad Hanif, Hub Power Company Ltd v WAPDA, the Taisei Corporation enforcement proceedings) to assess how courts have actually applied the discretionary and closed-list standards in practice, cross-referenced with leading English authority (Republic of Mozambique v Credit Suisse International; Privinvest Shipbuilding SAL).

· Secondary sources: law journal commentary, arbitration practitioner blogs (e.g., Kluwer Arbitration Blog), and law reform materials — particularly analysis of the Draft Arbitration Act, 2024 published by the Arbitration Law Review Committee.

· Comparative method: rather than a purely descriptive account of each jurisdiction, the paper places Pakistani provisions and case law side-by-side with their English/Singaporean/Model Law counterparts to identify structural divergences and convergences, and to evaluate proposed reform against that comparative baseline.

This is a qualitative, library-based (non-empirical) study; it does not involve primary data collection, surveys, or interviews.

Recommendations

1. Enact the Draft Arbitration Act, 2024 without dilution. Parliament should prioritize passage of the Draft Act in its current Model Law-aligned form, particularly retaining the shift from a discretionary ("may stay") to a mandatory ("shall stay") standard, so that Pakistan's domestic arbitration regime matches the pro-enforcement posture it already extends to foreign awards.

2. Narrow the public policy exception through express statutory language. To prevent a recurrence of the reasoning in Hub Power Company Ltd v WAPDA, the new legislation should retain and reinforce express language confirming that enforcement proceedings "shall not entail a review on the merits of the dispute," and ideally define public policy narrowly (e.g., limited to fraud, corruption proven to the required evidentiary standard, or fundamental due process violations).

3. Establish specialized arbitration benches or judicial training. Given that much of the 1940 Act's problems stem from ordinary civil courts applying an interventionist mindset to arbitration-related applications, specialized training or dedicated commercial/arbitration benches (as some jurisdictions have done) would help ensure consistent, pro-arbitration application of any new law.

4. Harmonize provincial and federal legislative competence. Since domestic arbitration falls within provincial legislative domain in Pakistan while international arbitration is federal, the reform process should ensure all provinces adopt compatible legislation to avoid a fragmented domestic arbitration landscape.

5. Monitor post-enactment judicial interpretation. Passing Model Law-based legislation is necessary but not sufficient England's own experience shows that even a well-drafted mandatory-stay provision requires ongoing appellate clarification (e.g., Republic of Mozambique v Privinvest). Pakistan's superior courts should be encouraged to develop consistent interpretive guidance early, to prevent the kind of fragmentation that characterized the 1940 Act's case law.

Limitations

1. Doctrinal scope only. This paper relies on statutory text and reported case law; it does not include empirical data such as caseload statistics, practitioner surveys, or interviews with arbitrators/judges that might reveal how these provisions function in practice beyond what is reported in judgments.

2. Draft legislation is not yet law. The Draft Arbitration Act, 2024 remains a proposal before Parliament as of writing; its final enacted form, if passed, may differ from the version analyzed here, and its practical application by courts cannot yet be assessed.

3. Limited comparative jurisdictions. The comparative analysis focuses on England and Singapore as representative Model Law jurisdictions; a broader study could usefully include other common law jurisdictions (e.g., India, given its shared legal history with Pakistan) or civil law approaches to stay of proceedings and enforcement.

4. Evolving case law. Some cited matters, such as the Trafigura v Cnergyico enforcement dispute, were ongoing at the time of writing; their final resolution may refine or alter the conclusions drawn here regarding judicial application of the public policy exception.

5. Access to primary sources. As a paper prepared without direct access to a full law library or subscription case-law database, citations rely on secondary reporting and commentary in places; readers should verify primary citations independently before relying on them for practice purposes.

Conclusion

A comparative reading of Pakistan's arbitration framework against Model Law jurisdictions such as England and Singapore reveals not a uniformly hostile or uniformly friendly judicial attitude towards arbitration, but a bifurcated one: internationally convergent at the enforcement stage, yet domestically discretionary and intervention-prone at the pre-arbitral stage. The source of this bifurcation is legislative rather than purely judicial — Pakistan operates under two separate statutes of very different vintage and philosophy. The Draft Arbitration Act, 2024, if passed, offers a credible path to resolving this asymmetry by importing the Model Law's mandatory-stay architecture into domestic arbitration, thereby aligning Pakistan's treatment of arbitration at both the pre-arbitral and post-award stages with prevailing international practice.

References

Statutes and International Instruments

Arbitration Act, 1940 (Act No. X of 1940) (Pakistan).

Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 (Act No. XVII of 2011) (Pakistan).

Draft Arbitration Act, 2024 (Pakistan) (Arbitration Law Review Committee, Law and Justice Commission of Pakistan).

Arbitration Act 1996 (UK).

International Arbitration Act (Singapore).

UNCITRAL Model Law on International Commercial Arbitration (1985), as amended (2006).

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958).

Cases

Uzin Export Import Enterprises v M Iftikhar & Company Ltd, PLD 1986 Karachi 1.

Eckhardt & Co Marine GmbH v Muhammad Hanif, PLD 1993 Supreme Court 42.

Hub Power Company Ltd v WAPDA, PLD 2000 Supreme Court 841.

Taisei Corporation v [enforcement proceedings], 2024 SCMR 640 (Supreme Court of Pakistan).

Trafigura v Cnergyico (enforcement proceedings, Pakistan, ongoing).

Republic of Mozambique v Credit Suisse International; Privinvest Shipbuilding SAL and others [2023] UKSC 32.

Secondary Sources

Global Arbitration Review, 'Pakistan', The Asia-Pacific Arbitration Review (2014).

Courting the Law, 'Law of Arbitration in Pakistan' (2017).

Delos Dispute Resolution, Guide to Arbitration Places (GAP), 2nd edn (Pakistan chapter).

SAHSOL, LUMS, 'Enforcing Foreign Arbitral Awards in Pakistan'.

International Bar Association, 'Enhancing Enforcement of International Arbitration Agreements and Foreign Arbitral Awards in Pakistan: A Positive Shift'.

Kluwer Arbitration Blog, 'Arbitration Revolution: Decoding Pakistan's Draft Bill on Arbitration Act 2024' (2024).

Kluwer Arbitration Blog, 'Pakistan's Draft Arbitration Bill 2024: Change After 84 Years?' (2024).

Kluwer Arbitration Blog, 'From Fluidity to Clarity? Pakistan's Arbitration Act of 2024 and the Future of Public Policy'.

FAQs

What is Pakistan's Arbitration Act, 1940?

The Arbitration Act, 1940 governs domestic arbitration in Pakistan and gives courts discretion to stay legal proceedings in favor of arbitration.

What is the Recognition and Enforcement Act, 2011?

It is the law implementing the New York Convention in Pakistan, allowing the recognition and enforcement of foreign arbitral awards.

What is a stay of proceedings in arbitration?

A stay of proceedings is a court order that pauses litigation so disputes can be resolved through arbitration according to the parties' agreement.

How are foreign arbitral awards enforced in Pakistan?

Foreign arbitral awards are enforced under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, subject only to the limited grounds for refusal under the New York Convention.

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