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Supreme Court of Pakistan Upholds Arbitration as Key Dispute Resolution Mechanism

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Supreme Court of Pakistan Upholds Arbitration as Key Dispute Resolution Mechanism

Islamabad 13-01-2025: In a landmark judgment, the Supreme Court of Pakistan reinforced its pro-arbitration stance, setting a significant precedent for the enforcement of arbitration agreements and streamlining corporate dispute resolution mechanisms.

Delivering the verdict in the case Kausar Rana Resources (Pvt.) Ltd. Vs. Qatar Lubricants Company W.L.L. (QALCO), the three-member bench comprising Mr. Justice Syed Mansoor Ali Shah, Mr. Justice Irfan Saadat Khan, and Mr. Justice Aqeel Ahmed Abbasi highlighted the importance of arbitration in fostering party autonomy, reducing judicial backlogs, and promoting economic efficiency.

The Court emphasized that arbitration agreements represent the mutual choice of parties to resolve disputes outside traditional litigation. Courts are mandated to support the arbitral process rather than interfere unnecessarily.

The judgment clarified that the Company Bench of the High Court qualifies as a “Civil Court” under the Arbitration Act 1940, enabling it to accept and enforce arbitration awards and agreements. This ruling resolves ambiguity about the jurisdiction of special Courts in arbitration matters.

The case involved allegations of fraudulent share transfers. While the Lahore High Court dismissed the petitioners’ request for arbitration, the Supreme Court of Pakistan overturned this decision, directing the dispute to be resolved through arbitration under Section 34 of the Arbitration Act.

The Court called for a resolute shift toward arbitration and other forms of Alternative Dispute Resolution (ADR), citing their critical role in addressing Pakistan’s overburdened judicial system and fostering economic progress.

With the consent of the parties, the Court appointed Mr. Justice (R) Maqbool Baqar as the Arbitrator, directing him to conclude the arbitration within four months.

The judgment underlined arbitration’s role in reducing business disruptions, attracting foreign investment, and boosting investor confidence. The Court also urged the Federal Government to prioritize the enactment of a modern Arbitration Act to replace the outdated 1940 framework.

This decision reinforces Pakistan’s commitment to arbitration as a preferred mode of dispute resolution, aligning with international best practices. By upholding arbitration agreements and recognizing special Courts’ jurisdiction in corporate matters, the Supreme Court of Pakistan has paved the way for a more efficient and business-friendly legal environment.

Legal experts have hailed the judgment as a step forward in reducing judicial delays and promoting investor confidence, a move seen as critical for fostering economic growth and enhancing Pakistan’s competitiveness on the global stage.