ISLAMABAD: Justice Syed Mansoor Ali Shah, the senior puisne judge of the Supreme Court, on Thursday expressed the hope that the federal government would swiftly enact arbitral legislation in the larger economic interest of the nation, and to ensure an effective and contemporary dispute resolution mechanism for the people.

Underscoring significant economic benefits of arbitration as a cost-effective, efficient and confidential means of resolving disputes, Justice Shah observed that arbitration alleviates the burden on courts, enhances business productivity and provides a faster resolution process, thereby minimising disruptions to businesses.

The observation came when the apex court was apprised about a pending draft bill for a new Arbitration Act, prepared by the Law and Justice Commission of Pakis­tan and submitted to the government on May 2, 2024. The bill, submitted by the Law Ministry, aims to modernise the outdated arbitral dispute resolution framework, which has remained largely unchanged since 1940.

The information came during the hearing of a dispute. Justice Shah, who presided over the three-judge bench, had taken up an appeal by Kausar Rana Resources (Private) Limited against a June 24, 2024, Lahore High Court judgement.

Hopes govt will soon introduce arbitral legislation to provide people an alternative dispute resolution mechanism

The controversy revolves around a dispute between the Qatar Lubricants Company WLL and Fawad Naeem Rana (respondents) before the LHC under the Companies Act 2017. The petition had sought rectification of the register of sharers under Section 126 of the Companies Act. It was alleged that owners of certain shares had fraudulently secured their transfer into Kausar Rana Resources (Pvt.) Ltd (KRR) and the register of sharers while relying on an illegal and void agreement of April 12, 2020.

The petitioners filed an application in the LHC under Section 34 of the Arbitration Act 1940, seeking stay of proceedings on the respondents’ petition. They urged the LHC to refer the matter for arbitration by any retired judge of a high court or the Supreme Court, in accordance with clause (13) of the agreement.

On June 24, the high court dismissed the petitioners’ application. Consequently, the petitioners approached the apex court for leave to appeal.

In his judgement, Justice Shah observed that the dispute as well as the request for referring the matter to arbitration pertain to alleged fraudulent transfer of shares, adding that the rectification of the register of members (shareholders) falls exclusively within the jurisdiction of the court established under the Companies Act.

Accordingly, the Supreme Court accepted the request and directed that the award made by the arbitrator be filed before the company bench for further proceedings in accordance with the Arbitration Act.

The judgement explains that the ability to enforce international arbitration awards strengthens trade and commerce. It says that arbitration’s stable and predictable dispute resolution mechanism promotes investor confidence, making the country an attractive destination for foreign investment.

These factors collectively foster a favourable business environment, drive economic growth and enhance the country’s competitiveness on the global stage, the judgement said, adding that while enforcing an arbitration agreement, ‘the courts’ role was not to pre-empt the jurisdiction of the arbitrators but to support the arbitral process and ensure that the parties adhere to their agreement.

By prioritising the arbitration, courts uphold the principle of party autonomy and reinforce the parties’ choice to resolve their disputes outside the traditional litigation.

This approach not only respects their agreement but also addresses inefficiencies inherent in the conventional judicial proceedings, Justice Shah observed, adding that courts should adopt a resolute stance of non-interference, encouraging arbitration and other forms of alternative dispute resolution, such as mediation, as the preferred modes of resolving disputes.

This judicial mindset is particularly vital for our country, where an overburdened judicial system and burgeoning case backlogs impose immense economic costs on both the judiciary and society. By respecting arbitration agreements and fostering an environment conducive to swift dispute resolution, courts can play a pivotal role in alleviating this crisis, the judgement said.

The ruling also directed that a copy of the judgement be dispatched to Attorney General for Pakistan Mansoor Usman Awan for onward correspondence and as a reminder to the ministry concerned.

Published in Dawn, January 3rd, 2025