Recognition and Enforcement of Foreign Arbitral Awards

The Supreme Court of Pakistan's decision in the case of Taisei Corporation vs. A.M. Construction Company (2024 SCMR 640) addresses crucial issues related to the recognition and enforcement of foreign arbitral awards under the Recognition and Enforcement of Arbitration Agreement and Foreign Award Act, 2011 ("2011 Act"). The judgment delves into the determination of whether an arbitral award is to be considered a "foreign arbitral award" and the retrospective application of the 2011 Act to arbitration proceedings commenced before its enforcement.

Key Issues:

Classification of the Award as a Foreign Arbitral Award: The primary issue was whether the arbitral award, made in Singapore under an arbitration agreement governed by Pakistani law, should be treated as a foreign arbitral award under the 2011 Act. The Lahore High Court had previously ruled that the award was not a foreign arbitral award, relying on the precedent set in Hitachi v. Rupali (1998 SCMR 1618). However, the Supreme Court emphasized that the 2011 Act adopts a territorial approach, where the seat of arbitration is the decisive factor. Since the arbitration took place in Singapore, a Contracting State under the New York Convention, the award qualified as a foreign arbitral award under the 2011 Act.

Retrospective Application of the 2011 Act: Another critical issue was the retrospective application of the 2011 Act to arbitration proceedings initiated before its enactment. The Court analyzed Sections 1(3) and 1(4) of the 2011 Act, which apply the Act to all arbitration agreements made before, on, or after its commencement, but only to foreign arbitral awards made on or after July 14, 2005. The Supreme Court ruled that the 2011 Act applied retrospectively to the award in question, as it was made after the specified date, regardless of when the arbitration proceedings commenced.

Pro-enforcement Bias of the New York Convention: The Supreme Court's decision highlighted the pro-enforcement bias embedded in the New York Convention, which the 2011 Act incorporates into Pakistani law. The Court underscored that this bias limits the grounds for refusing the enforcement of foreign awards and places the burden of proof on the party resisting enforcement. This aligns with the global trend towards minimal judicial interference in international arbitration, thereby promoting the effectiveness of arbitration as a dispute resolution mechanism.

Court's Conclusion: The Supreme Court allowed the appeal by Taisei Corporation, categorizing the award as a foreign arbitral award under the 2011 Act. Consequently, the proceedings initiated by A.M. Construction Company under the 1940 Act were deemed without jurisdiction, and the matter was directed to proceed under the 2011 Act. This ruling underscores Pakistan's commitment to international arbitration standards, ensuring that foreign arbitral awards are recognized and enforced in accordance with global practices. Legal practitioners and businesses engaged in international transactions should take note of this decision for its significant implications on arbitration in Pakistan.

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