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Arbitration Awards are Final and should not be Reviewed unless Clear Legal Errors Exist --- Islamabad High Court, Islamabad

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Arbitration Awards are Final and should not be Reviewed unless Clear Legal Errors Exist --- Islamabad High Court, Islamabad

Islamabad 22-03-2025: The Islamabad High Court (IHC) has dismissed an appeal filed by the National Highway Authority (NHA) against an arbitration award in favor of M/S Hussain Cotex Limited, reinforcing the binding nature of arbitration agreements and the limited scope of judicial review in such matters.

The dispute arose from a contract awarded by NHA to M/S Hussain Cotex Limited for the construction of a bridge over the River Chenab at Sher Shah, Muzaffargarh. The original contract stipulated a 30-month completion period, but NHA later instructed an early completion of one bridge within 18 months, altering the project’s methodology. The contractor claimed additional costs for this variation, leading to arbitration proceedings.

Following arbitration, the Sole Arbitrator ruled in favor of the contractor, concluding that NHA’s instructions constituted a contract variation, entitling the contractor to compensation under Clause 52.1 of the contract. Dissatisfied, NHA challenged the award before the Trial Court, arguing misinterpretation of evidence and legal errors. The Trial Court dismissed NHA’s challenge, prompting the present appeal.

Presiding over the appeal, Mr. Justice Muhammad Azam Khan ruled that:

Arbitration awards are final and binding unless they contain apparent legal errors or jurisdictional misconduct.
Courts have limited authority in reviewing arbitration decisions and should not function as appellate bodies.
Objections to an arbitration award must be filed within 30 days, as required under Article 158 of the Limitation Act, 1908.
Government agencies must respect arbitration awards instead of engaging in fruitless objections and appeals.

The Court relied on multiple Supreme Court rulings emphasizing arbitration’s finality, including:

Shahin Shah Vs. Govt. of Khyber Pakhtunkhwa (2022 SCMR 1810)
Federation of Pakistan Vs. Joint Venture Knocks K.G/RIST (PLD 2011 SC 506)
Lahore Development Authority Vs. Khalid Javed Co. (1983 SCMR 718)

Dismissing NHA’s appeal, the Court upheld the arbitration award, stressing that arbitration is a preferred mode of dispute resolution and should not be undermined by unnecessary litigation.