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The Appointment of an Umpire should follow the Specified Mechanism given in the Contract --- Islamabad High Court, Islamabad

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The Appointment of an Umpire should follow the Specified Mechanism given in the Contract --- Islamabad High Court, Islamabad

Islamabad 27-07-2024: In a significant ruling, the Islamabad High Court set aside an order by the Civil Judge, Islamabad, which had appointed Mr. Justice (Retired) Abdul Shakoor Paracha as the umpire in an arbitration dispute between the Civil Aviation Authority of Pakistan (CAA) and LTH-JV. The decision came after CAA filed a civil revision petition challenging the appointment.

The dispute originates from a contract signed on July 24, 2008, between CAA and LTH-JV for the construction of the new Islamabad International Airport. The contract included an arbitration clause under the Arbitration Act, 1940, which required the appointment of two arbitrators and an umpire to resolve any disagreements.

Initially, Mr. Justice (Retired) Muhammad Sair Ali and Mr. Justice (Retired) Muhammad Ather Saeed were appointed as arbitrators, with Mr. Justice Tassaduq Hussain Jillani being named the umpire on September 27, 2016. However, due to further disputes, LTH-JV sought Justice Tassaduq Hussain Jillani 's recusal, citing apprehensions of bias, which he agreed to on April 27, 2023.

Following Mr. Justice Tassaduq Hussain Jillani's recusal, LTH-JV proposed alternative umpires to CAA, which insisted on Mr. Justice Tassaduq Hussain Jillani's continued role. Subsequently, LTH-JV filed an application under Section 8 of the Arbitration Act, 1940, leading to the Civil Court's order appointing Mr. Justice (Retired) Abdul Shakoor Paracha as the umpire.

CAA contested this appointment, arguing procedural lapses, including the failure to serve proper notice to the arbitrators for the appointment of a new umpire. The High Court agreed with CAA, emphasizing the need for strict adherence to the procedural requirements under Section 8 of the Arbitration Act.

Mr. Justice Miangul Hassan Aurangzeb, delivering the judgment, highlighted that the appointment of an umpire should follow the contract's specified mechanism. The Court noted that Clause 67.5 of the contract and Paragraph 2 of the First Schedule to the Arbitration Act, 1940, require arbitrators to appoint the umpire.

The Court further pointed out that LTH-JV failed to issue a notice to the arbitrators to appoint a new umpire after Justice Jillani's recusal, a critical procedural requirement under Section 8(1)(b) of the Arbitration Act. Without fulfilling this requirement, the Civil Court lacked the jurisdiction to appoint Justice Paracha as the umpire.

The Islamabad High Court allowed CAA's petition, setting aside the Civil Court's order dated April 26, 2024. The Court instructed LTH-JV to request the arbitrators to appoint a new umpire. If the arbitrators fail to do so within fifteen days of receiving such notice, LTH-JV may then apply to the Court under Section 8(2) of the Arbitration Act.

This ruling underscores the importance of procedural compliance in arbitration disputes and the judiciary's respect for the contractual mechanisms agreed upon by the parties.