Lahore High Court Upholds Arbitration Clause in Business Dispute
Islamabad 11-05-2024: In a significant ruling, The Lahore High Court, Rawalpindi Bench emphasized the pivotal role of arbitration in resolving business disputes, setting a precedent for promoting alternative dispute resolution (ADR) in Pakistan. The case [F.A.O. No. 88 of 2023] revolved around a dispute between two real brothers and business partners involved in the manufacturing and sales of wood furniture under the name of M/s Unique Wood Working Company. Despite a partnership deed with a clear arbitration clause, one party initiated civil proceedings, prompting the other to file an application under Section 34 of the Arbitration Act, 1940.
Mr. Justice Jawad Hassan, presiding over the case, delved into the nuances of arbitration law, particularly focusing on Section 34, which allows parties to seek a stay on legal proceedings in favor of arbitration. The court scrutinized whether certain actions, such as requesting adjournments or filing a power of attorney, constituted a waiver of the right to arbitration. Citing legal precedents, including judgments from the Supreme Court of Pakistan, such as "Pakistan International Airlines Corporation v. Messrs Pak Saaf Dry Cleaners" and the "PIA case," Justice Hassan elucidated the criteria for determining whether a party's actions indicated a clear intention to proceed with litigation over arbitration.
The court concluded that the appellant's actions did not unequivocally demonstrate an intention to abandon arbitration, thus ruling in favor of upholding the arbitration clause. The judgment highlights the court's commitment to promoting ADR mechanisms, such as arbitration, as a means to facilitate expeditious and amicable resolution of disputes, essential for fostering a conducive business environment and attracting foreign investment in Pakistan. This landmark judgment underscores the significance of arbitration agreements in contractual disputes, reaffirming the legal framework that prioritizes ADR as a preferred method for resolving commercial conflicts in Pakistan.
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