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Arbitration and Alternate Dispute Resolution


Alternate Dispute Resolution, loosely known as ADR, is a body of dispute resolution mechanisms apart from litigation in courts. These methods also refer to "outside court settlements" and are a great way to resolve disputes in an efficient, quick, and cost-effective manner. Arbitration is one of these mechanisms and requires the parties to let an arbitrator resolve their disputes. This Alternate Dispute Resolution mechanism was codified into our law due to ratification of the New York Convention of 2006. The following are the answers to some commonly asked questions for which will provide you with a better understanding of Arbitration and Alternate Dispute Resolution.

What are the mechanisms of Alternate Dispute Resolution?

The following are the mechanisms of Alternate Dispute Resolution:

  1. Mediation

  2. Arbitration

  3. Negotiation

  4. Conciliation

  5. Early neutral evaluations



What is conciliation?

In this mechanism of ADR, a conciliator helps two parties negotiate and resolve their conflicts in an informal manner. Moreover, in conciliation the parties are not under any obligation for reaching a settlement.



What is mediation?

In this process, a neutral person is appointed as a mediator for resolving the disputes between the parties. The mediator becomes the bridge of communication between parties who even refuse to talk to each other in a civil manner. Moreover, the mediator does not provide legal advice, nor acts like a counselor, and most importantly he never takes any sides.



What is negotiation?

In negotiation, the disputing parties negotiate and resolve their conflicts without the intervention of a third party.



What are the laws that govern the concept of Arbitration in Pakistan?

As of now, there are two acts of law governing the concept of arbitration in Pakistan, such as The Arbitration Act, 1940 and the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011. Moreover, there are provisions in the Civil Procedure Code, 1908 which promotes arbitration as an alternate dispute resolution mechanism for civil cases.



Are there different types of arbitration? If so, what?

There are two types of arbitration recognized in Pakistan, such as, with the intervention of the court, and without the intervention of the court. The former occurs when one party to the dispute is willing to resolve the dispute while the other does not want to resort to arbitration. However, the latter occurs where both the parties are willing to resolve the dispute via arbitration.



Why should I choose Arbitration over court proceedings?

Court proceedings are lengthy and costly as compared to arbitration. An arbitration proceeding is decided within a month while it can take years for the dispute to resolve in court. Moreover, court proceedings are carried on in order to determine who wins and who loses. However, arbitration ensures that the decision is a win for all.



What is an arbitration clause?

An arbitration clause is a separate clause in a contract/ agreement through which the parties to that contract/ agreement bind themselves to resort to arbitration in case a dispute arises before they go to the court.



What is an arbitration agreement?

Section 2(a) of The Arbitration Act, 1940 defines an arbitration agreement as a written agreement which binds the parties to resolve their present or future conflicts via arbitration whether an arbitrator has been decided therein or not.



What are the requirements or essentials of an arbitration agreement?

The following are the essential requirements of an arbitration agreement:

  • It must be in written form.

  • Mutual consent of parties must be present.

  • All parties must have the legal capacity as per their personal law, such as the law of their country/ state.

  • It must arise out of a valid legal relationship, such as a contract.

  • The subject matter must be arbitrable.



Which subject matters are arbitrable?

In Pakistan, generally, the matters of civil nature are an arbitrable while, criminal cases are dealt via the courts.



What law shall be applied if parties are international?

If the disputed parties belong to different countries/ states, then the following laws can be applied to the arbitration proceedings:

  1. The law chosen by the parties in the arbitration agreement.

  2. The law applicable to the contract/ agreement.

  3. The law of the place where the arbitration proceedings are being held.



How to terminate an arbitration agreement?

The parties can terminate the arbitration agreement with mutual consent, either expressly or impliedly through their conduct. Expressed consent occurs when the parties enter into a new agreement upon the same matter. This consent is implied when a party files a lawsuit against the other without the other party objecting on the court’s lack of jurisdiction.



How is an arbitrator appointed?

The arbitrator can either be appointed by any of the party to the agreement or can be appointed by the concerned civil court. In the latter case, the arbitrator shall be appointed by the mutual consent of the parties. Moreover, the arbitrator is to be appointed in any manner which is agreed upon by the parties.



What is the importance of an arbitrator’s decision?

The decision of an arbitrator is known as an “award” and is binding upon the parties. However, the court has the power to correct and/ or remit the award in case of any error.



Can the award be challenged? If so, how?

Yes, the award can be challenged in a civil court having the jurisdiction to try a case on the subject matter of the arbitration proceedings. The party has to file an appeal. Moreover, the decision of that appeal shall be final and no second appeal shall arise from it.



I am not satisfied by the arbitrator. How to remove him/ her?

The court can remove the arbitrator if any of the parties submits an application to the court stating that the arbitrator has failed to reasonably use his powers in settlement of the dispute. Moreover, the arbitrator can also be removed if he has misconducted the proceedings or himself.


Information contained in the above FAQs is for general understanding purposes only and may have altered or have become incorrect owing to variation in factual aspects and evolving laws, therefore, should not be treated as an alternate to professional legal advice.  

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