IN Pakistan, the Arbitration Act, 1940, serves as a foundational document to resolve contractual disputes through Arbitration. However, the absence of expertise qualification criteria for arbitrators has inadvertently led to concerning practices, as anyone can be appointed as an arbitrator. Adjudicating commercial disputes has become a lucrative side hustle, particularly for retirees from public offices who rely on personal connections to secure arbitrator appointments, thereby undermining the principle of merit-based selection. As commercial disputes involving large sums of money are arbitrated, the lack of expertise criteria for arbitrators has turned arbitrating into a profitable business.
In the absence of stringent expertise criteria, arbitrators often find themselves acting more as mediators or conciliators rather than strictly interpreting the law, contracts and evidence. This can lead to favouritism, particularly when significant sums of public funds are involved, resulting in potentially severe losses for the public exchequer. The limited grounds for challenging arbitral awards further complicate matters, leaving aggrieved parties with little recourse.
Additionally, arbitrators are entitled to their fees even if their awards are later invalidated due to incompetence. This highlights a dire need for reform in the current legal framework for arbitrators’ qualifications. Implementing expertise criteria would ensure that arbitrators are selected based on merit rather than personal connections or financial interests, thus maintaining the integrity, fairness and accountability of the arbitration process. A major step towards modernizing domestic arbitration in Pakistan is the forthcoming enactment of the Arbitration Act, 2024, which largely draws from the UNCITRAL Model Law on International Commercial Arbitration. Section 14 read with First Schedule of the proposed bill addresses qualifications and conflict disclosure; however, the absence of expertise criteria for arbitrators raises concerns especially in complex commercial disputes. Many arbitral institutions, such as American Arbitration Association, Singapore Institute of Arbitrators, London Court of International Arbitration and International Centre for Settlement of Investment Disputes, have mandatory expertise criteria for empanelling arbitrators, along-with any qualifications agreed upon by the parties.
The Arbitration Council, under the proposed High Court Arbitration Regulations, 2024, will manage the registration and empanelment of arbitrators. A standardized system will boost the credibility of arbitration proceedings and enhance international recognition of Pakistani awards. However, the importance of expertise criteria is crucial, especially given sections 6 and 9 of the 2024 bill, which introduce strict limitations on judicial intervention. Incorporating expertise criteria would ensure effective adjudication by setting minimum thresholds for qualifications, thereby reducing the risk of flawed awards and restoring confidence in the arbitration process. The mandatory expertise criteria proposed for inclusion in the 2024 Bill are: (i) Adequate arbitration training (ii) Educational degrees appropriate to field of expertise (iii) Professional experience appropriate to field of expertise (iv) Membership in any recognized arbitral institution.
In the pursuit of justice and economic stability in Pakistan, the arbitration legal framework must evolve to meet the demands of the modern era by incorporating expertise qualification criteria for arbitrators. Incorporation of expertise criteria will boost investor’s trust, offering them increased assurance and safeguards for their investments. By embracing reforms that prioritize fairness, integrity, credibility, efficiency, reduced risk and accountability, we can foster a culture of trust and confidence in dispute resolution through arbitration, ultimately contributing to Pakistan’s socio-economic development.
—The writer is a leading construction arbitration lawyer, based in Islamabad.
