Supreme Court Halted Implementation of IHC Decision Regarding Execution of ICC London Foreign Arbitration Rulings
Pakistan's Supreme Court suspends the enforcement of International Chamber of Commerce (ICC) London foreign arbitral awards in a case involving Frontier Holdings Limited, as per a two-judge bench led by Justice Syed Mansoor Ali Shah and Justice Aqeel Ahmed Abbasi. The decision comes after appeals were filed against an interim order issued by a division bench of the Islamabad High Court (IHC).
The apex court has ordered that the interim order of the IHC Division Bench remains suspended until a future court date, at which a three-member bench will hear the case. The original interim restraining order granted by a single judge of the IHC will remain in effect, according to the written order.
The dispute stemmed from a referral for arbitration under the auspices of the ICC, London, resulting in a rendered foreign arbitral award on 12.12.2024 and a subsequent costs award on 31.03.2025. The awards were later filed for enforcement under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011.
The Court explained that the enforcement of foreign arbitral awards can be refused by local courts on several grounds, such as violation of public policy, arbitrability issues, lack of due process, an invalid arbitration agreement, issues with the composition of the arbitral authority, awards that have not yet become binding or have been set aside, and awards that are inconsistent with international law commitments.
The petitioner argued that the IHC Division Bench's suspension of the interim relief granted by the single judge undermined the purpose of the Act and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. The Court's pro-enforcement mandate and the sanctity of arbitral awards were emphasized in cases such as Taisei Corporation v. AM Construction Company (Pvt) Ltd (2024 SCMR 640), Orient Power Company (Pvt) Ltd, Lahore v. Sui Northern Gas Pipelines Ltd. (2021 SCMR 1728), Government of India v. Vedanta Limited and Ors (AIR 2020 SC 4550), and Zeiler v. Deitsch (500 F.3d 157 (2007)).
Furthermore, the petitioner contended that the ICA brought before the Division Bench was not maintainable under Section 3(2) of the Law Reforms Ordinance, 1972, as orders passed under special laws with self-contained appellate mechanisms are not amenable to an ICA appeal.
The IHC Division Bench's order, which suspended the interim relief granted to the petitioners and effectively obstructed the enforcement of the foreign arbitral award, was deemed inconsistent with the pro-enforcement mandate of the Act, the Convention, and the established jurisprudence of the Court. Foreign arbitral awards are binding under international law, a commitment to which Pakistan has expressed agreement.
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In Pakistan, under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, a local court can refuse to enforce a foreign arbitral award on various grounds, as outlined in the Act and the New York Convention. However, the upcoming Arbitration Act of 2024 is expected to clarify and limit the broad interpretation of "public policy," which may help reduce instances where awards are deemed unenforceable.
The petitioner expressed concern that the suspension of the interim relief granted by the single judge by the IHC Division Bench may undermine the purpose of enforcing sports-related foreign arbitral awards, especially under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. The Court's decision to suspend the IHC's order is in contrast with the pro-enforcement mandate and the sanctity of such awards, as emphasized in cases involving sports disputes.
