The Dispute Resolution Review: Pakistan
Introduction to the dispute resolution framework
Pakistan's judicial system is divided broadly into a hierarchical structure starting with the civil courts as the courts of first instance (including civil courts and the district courts). Appeals from the civil courts lie to the High Courts and from the High Courts to the Supreme Court. The superior courts are constituted under the Constitution of the Islamic Republic of Pakistan (Constitution) and the civil courts under the Civil Courts Ordinance 1962.
All laws in Pakistan are enacted in accordance with the Constitution;2 the Constitution also guarantees specific fundamental rights3 the violation of which is to be protected by the superior courts.4 Laws are divided into substantive and procedural laws; civil and criminal proceedings in Pakistan are governed by the Code of Civil Procedure, 1908, which includes its rules (CPC), and the Code of Criminal Procedure 1898 (CrPC), respectively. For the purposes of this chapter we have focused on the former.
The different provinces and Islamabad Capital Territory have enacted slightly differing provisions with regard to the pecuniary jurisdiction of courts situated within their territory.5
Special courts and tribunals conferred with exclusive jurisdiction over, inter alia, rent, intellectual property, environmental and labour matters are constituted under special laws; rules and regulations enacted under the majority of special laws incorporate provisions of the CPC and the CrPC (for penalising offences thereunder). Civil courts tribunals fall under the supervisory jurisdiction of the concerned High Court. Decisions of the High Courts are binding on all courts subordinate to them and decisions of the Supreme Court are binding on all courts.
Apart from appellate jurisdiction, High Courts in Pakistan are empowered under Article 199 of the Constitution to issue writs of various natures in the exercise of their powers of judicial review of executive action, subject to there being an adequate remedy provided in law and in order to protect the violation of fundamental rights. Generally, matters involving disputed questions of fact that require the recording of evidence are not entertained by High Courts in the exercise of constitutional jurisdiction. The High Courts also enjoy original civil jurisdiction as company courts and banking courts under the relevant laws. Proceedings in the High Courts are generally governed by the CPC and by High Court rules and orders. Contractual disputes with public bodies are entertained by the High Courts in the exercise of their constitutional jurisdiction on narrow grounds.
Apart from its appellate jurisdiction, the Supreme Court is also conferred with jurisdiction to directly entertain petitions challenging laws and administrative actions alleged to be violating fundamental rights provided a matter involves a question of public importance.6 Proceedings of the Supreme Court are governed by the Supreme Court Rules 1980.
All civil proceedings are also governed by the Limitation Act 1908 and the Qanun-e-Shahadat Order, 1984 (law of evidence) (QSO). Statutory limitations are bound to be, and are, enforced strictly by courts. Special statutes also provide for special limitation periods to be applied.
Domestic arbitration is governed by the Arbitration Act 1940 (Act 1940), while two statutory instruments deal with the recognition and enforcement of foreign arbitral agreements and awards.7 Referral of disputes to mediation by the court has long been on the statute books but has recently seen stricter implementation through a statutory amendment and the focused training of mediators and alternative dispute resolution (ADR)-specific workshops.
The year in review
The promulgation of the Punjab Commercial Courts Ordinance, 2021 (PCCO) was one of the most important legislative developments in 2021. The PCCO provides for the establishment of dedicated commercial courts and appellate forums in Punjab. These courts have the exclusive jurisdiction to try commercial disputes and dispose of them within a period of 180 days from the date of filing of such suit. The PCCO includes provisions that allow for e-filing of pleadings and written submissions, as well as recording evidence and conducting hearings through electronic means.
This year, the Code of Civil Procedure (Punjab Amendments) Ordinance, 2021 (Amendment Ordinance) introduced several amendments to the Code of Civil Procedure, 1908, specifically applicable to the province of Punjab. The Amendment Ordinance was challenged as being ultra vires in a writ petition before the Lahore High Court on the ground that its provisions are contrary to the provisions of the First Schedule of the CPC, which had been enacted by the Lahore High Court in exercise of its delegated powers under the CPC and Constitution. The petition was allowed, and the Amendment Ordinance was held to be without lawful authority, of no legal effect and unconstitutional.8
Another important jurisprudential development was the fact that the Supreme Court upheld a decision of the Lahore High Court pertaining to arbitration, specifically that an arbitral award passed in another contracting state is a foreign award under the New York Convention, irrespective of the fact that the governing law of the arbitration agreement is Pakistan law. 9
i Overview of court procedure
As mentioned above, for the purposes of this chapter we have focused on civil proceedings governed by the CPC. The CPC includes its procedural rules that govern all matters, including institution of a suit, evidence, discovery and inspection, appeals, revisions and execution, as are conducted in all courts (bar the Supreme Court) in the appellate hierarchical structure mentioned in Section I.
The CPC confers jurisdiction on civil courts to entertain all suits of a civil nature excepting suits of which their cognisance is either impliedly or expressly barred. Civil courts are, generally, the courts of first instance; claims arising out of contractual breaches and domestic arbitration-related matters are instituted here.
Contractual disputes with public bodies are entertained by High Courts in exercise of their constitutional jurisdiction in exercise of the power of judicial review of administrative actions on narrow grounds. Applications for the recognition and enforcement of foreign arbitration-related matters are filed in the concerned High Court. The High Court also acts as a court of appeal from orders of some special courts and tribunals. Proceedings in the High Courts in Pakistan are governed by the CPC, High Court Rules and Orders, and rules and regulations made under special laws when they are exercising jurisdiction in their banking jurisdiction, etc.
An appeal from the order of a single judge of a High Court lies to a division bench of the court subject to the provisions of the Law Reform Ordinance. An appeal from a division bench lies to the Supreme Court in the form of a petition for leave to appeal. Proceedings in the Supreme Court are regulated by the Supreme Court Rules, 1980.
ii Procedures and time frames
A civil suit is instituted in the relevant court of first instance through filing of a plaint along with all supporting documents. Notices to all defendants are required to be issued in accordance with the prescribed procedure, allowing 30 days for filing of a written statement and reply. If an interlocutory application has also been filed, the court has discretion to grant ad interim relief while dispensing with the requirement of issuing a notice until the decision of the main application. After the filing of the written statement, issues requiring determination of facts and law are framed by the court based on the pleadings of the parties. Thereafter, the evidence of the plaintiff is recorded followed by that of the defendant. After conclusion of the evidence stage, both parties are invited to submit oral arguments, following which the court pronounces its judgment and decree.
There are prescribed time limits for the various stages described above; however, these are rarely enforced. Courts grant adjournments liberally and the final decision in a civil suit can take between five to 10 years. The superior courts are far stricter in enforcing appearances and submission of replies and arguments, and the time frame for the conclusion of cases is thus considerably shorter.
iii Class actions
Parties may file a joint suit in accordance with Order I, Rule 1 CPC if the right to claim arises out of the same act or transaction or a series of acts or transactions where, if such persons brought separate suits, any common question of law or fact would arise.
It is more common for litigation of this nature to be filed in the form of public interest litigation through a constitutional petition in the concerned High Court or directly in the Supreme Court.
iv Representation in proceedings
The CPC allows for a party in person or through his or her recognised agent or pleader to make any appearance, application or act in or to any court, except where otherwise expressly provided by any law for the time being in force. A defendant may also appear in person, by a pleader duly instructed or by a pleader accompanied by some person able to answer all such questions.
In suits by or against a corporation, any pleading may be signed and verified on behalf of it by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case and is duly authorised directly through the articles of association accompanied by a resolution of its board of directors.10 For parties not resident in the local limits of the jurisdiction of the court, representation may be through persons carrying on trade or business for and in the names of such parties, connected with such trade or business only, where no other agent is expressly authorised to do so. Authorisation to appear and represent foreign persons or entities require public notarisation or legalisation at the concerned embassy of Pakistan situated in the foreign country.
v Service out of the jurisdiction
The CPC provides for service of summons on a defendant in a suit relating to any business or work against a person who does not reside within the local limits of the court's jurisdiction to be made on any manager or agent who, at the time of service, personally carries on such business or work for such person within such limits. The CPC also provides for service of summons on a defendant residing outside the limits of the territorial jurisdiction of the court through the court possessed with jurisdiction over the territory in which the defendant resides, irrespective of whether the defendant is a natural person. Service on a defendant who resides outside Pakistan and has no agent in Pakistan empowered to accept service shall be addressed to the defendant at the place where he or she is residing and sent to him or her by post.
vi Enforcement of foreign judgments
The procedure for the enforcement of a judgment of a foreign court is provided for exclusively under Section 44-A CPC: the decree has to have been passed by a superior court of the United Kingdom, or any reciprocating territory declared as such from time to time, by notification of the federal government. A certified copy of the decree along with a certificate from such superior court stating the extent, if any, to which the decree has been satisfied or adjusted, is filed in a district court; the court shall then execute the decree as if it had been passed by the court itself. Such decrees are enforceable subject to the condition that under such decree a sum of money is payable, not being a sum payable in respect of taxes or other charges of like nature or in respect of a fine or other penalty and does not include an arbitration award.
The execution of the decree shall be refused by the district court if it is shown to the satisfaction of the court that the decree falls within any of the exceptions specified in clauses of Section 13 CPC.
vii Assistance to foreign courts
High courts of Pakistan are empowered to provide assistance to foreign courts with respect to appointing a commission to examine witnesses, record evidence, or both; Rules 19–22 of Order XXVI of the CPC provide a detailed procedure to be followed.
viii Access to court files
All court proceedings are conducted in public, and any member of the public can obtain information about ongoing or completed proceedings for a nominal fee.
ix Litigation funding
The practice of legal financing by a disinterested third party in litigation is not common in Pakistan. No rules or regulations have been enacted to regulate such practice. As per law and practice, litigants are responsible to pay the expenses of the litigation and the fee of their counsel. However, theoretically it would be possible for litigants to arrange third-party funding on their own; there is no prohibition in law to bar this practice.
In Pakistan, bar councils are mandated to regulate and reform the legal profession. A total of five bar councils have been established under the Legal Practitioners and Bar Councils Act, 1973 (PLPBCA). The Pakistan Bar Council has codified the standards of professional conduct and etiquette to be observed by advocates in Chapter XII (Canons of Professional Conduct and Etiquette) of the Pakistan Legal Practitioners and Bar Councils Rules, 1976 (PLPBCR).
i Conflicts of interest and Chinese walls
Bar councils in Pakistan are charged with protecting the interests of lawyers while simultaneously being responsible for maintaining a code of conduct that lawyers must abide by. Rules 134, 147 and 148 of the PLPBCA govern conflicts of interest. According to Rule 134 of the PLPBCR, it is the duty of every advocate to uphold the dignity of his or her profession as well as his or her own dignity and high standing as a member of the profession.
There is no specific rule dealing with Chinese walls in the PLPBCR. The Sindh High Court has held that if two advocates appearing for different parties have conflicting interests, or share the same premises or same law firm, or both, then neither confidence nor confidentiality of information given by clients could be guaranteed.11 The Court urges bar councils to implement rules governing the conduct of advocates in a situation where two advocates sharing the same premises or the same law firm and appearing for two different parties. In Pakistan, the burden of setting the boundaries and permissibility of Chinese walls falls on individual law firms. They have the corporate, social and ethical responsibility to ensure that their individual advocate interpretation does not cross ethical boundaries, leading to misconduct.
ii Money laundering, proceeds of crime and funds related to terrorism
The PLPBCR does not contain specific provisions pertaining to an advocate's obligations regarding money laundering. However, on 27 March 2010, Pakistan enacted the Anti-Money Laundering Act, 2010 (AML), last amended in September 2020. The AML serves to prevent money laundering, to combat the financing of terrorism, and to ensure the forfeiture of property derived from or involved in money laundering or any such monies that are financing terrorism. The AML has appointed the bar councils as the regulatory authority for legal professionals in money laundering matters.
iii Data protection
Article 14 of the Constitution guarantees the right to privacy. Pakistan introduced its first Personal Data Protection Bill in July 2018 via the Ministry of Information Technology and Telecommunication; the latest amendments are still pending approval. The Bill governs the collection, processing, use and disclosure of personal data and provides for punishments for violations of the data privacy of individuals. The Bill proposes the appointment of the Personal Data Protection Authority of Pakistan as the authority primarily responsible for data protection. Additionally, Article 9 of the QSO requires licensed advocates to not disclose clients' data obtained during the course of their engagement.
iv Other areas of interest
Pakistan's legal practice laws, specifically in reference to ethical obligations, are a developing area of law. Although broad guidelines have been instituted, it is the duty of an advocate to navigate these murky waters in determining a balance between an advocate's service to his or her clients, respect for the courts and the necessity of maintaining a reasonable standard of ethics.
Documents and the protection of privilege
The law of evidence in Pakistan is codified under the QSO; legal privilege is governed under Articles 9–12 thereof.
Under Article 9 of the QSO, advocates are not permitted to disclose any communication, the contents or conditions of any document, or any advice given by them to their client that they have obtained or become familiar with for the purpose of, or during the course of, their professional employment. The exception to this is any communication made for the furtherance of any illegal purpose or any fact that shows that any crime or fraud has been committed. Article 10 of the QSO extends this protection to interpreters, clerks and servants employed by an advocate.
While the Pakistan Legal Practitioners and Bar Councils Rules, 1976 do not have any specific rule that deals with legal privilege, the court has held that a collective reading of Chapter XII – Canons of Professional Conduct and Etiquette of Advocate, makes it clear that an advocate is bound to maintain confidentiality about the facts that come into his or her knowledge as a result of engagement.12
The protections under Article 9 of the QSO only apply to advocates. Under the PLPBCA, advocates are defined as an 'advocate entered in any roll under the provisions of the Act'. If an in-house lawyer is not enrolled as an advocate under the Act, she or he would not be liable under the provisions of Article 9. As foreign lawyers do not fall within the definition of advocates under the PLPBCA, the protection provided under Section 9 is not applicable to them.
ii Production of documents
Documents may be filed along with the plaint or written statement, or at the first or at a subsequent hearing in support of the pleadings of the respective parties. The court can reject in limine such documents that are irrelevant or inadmissible. An objection to mode of proof must be taken before a document is marked as an exhibit, and cannot be raised for the first time in appeal unless the law prohibits such documents being received in evidence.
Discovery and inspection in civil cases is governed under Section 30 and Order XI of the CPC. Under Section 30 the court has the power to order the admission of documents and the discovery, inspection and production of documents as evidence.
The court can, at any time during the pendency of a suit, order the parties to produce any documents that it deems relevant to the subject matter of the suit, provided they are not privileged under Article 158 of the QSO.13 Any objection to answering an interrogatory or portion thereof may be taken in the affidavit in answer on any ground, including that it is scandalous or irrelevant or not exhibited bona fide for the purpose of the suit, or that matters inquired into are not sufficiently material at that stage.14 Upon an objection, the court may order that an issue or question in dispute in the suit may be decided before such a discovery or inspection is required.15 If a party who is a defendant in a suit refers to a document in his or her pleadings that is not produced in evidence thereafter on the grounds that it relates to only the defendant's title, the court has discretion to deem it sufficient for not producing it in evidence or to be put in evidence on terms the court thinks fit.16 The court is also empowered to, of its own motion, summon as witnesses strangers to the suit.17
The court may appoint a commission upon the request of a party to examine any person resident beyond the local limits of its jurisdiction upon its satisfaction that the evidence of such person is necessary. The CPC also provides for the procedure if a foreign court requires the examination of witness in Pakistan.18
With regard to electronic records, if the court deems their production to be relevant then it could theoretically pass such an order under Section 30 or Order XXVI CPC, or both.
Alternatives to litigation
i Overview of alternatives to litigation
In Pakistan, arbitration is the most common alternative dispute resolution (ADR) process as the laws related thereto are fairly well developed. Recent amendments to the CPC have provided for the mandatory referral of certain disputes to mediation as a preliminary measure. The heavy caseload and backlog of cases in all courts has given rise to parties' increasing preference for arbitration, especially for contractual and commercial disputes.
Domestic arbitrations in Pakistan are governed by the Act 1940; no rules have been enacted thereunder; therefore, parties may agree upon a procedure or adopt the rules of a particular arbitral institution. In 2019, the Punjab Alternate Dispute Resolution Act (PADRA) was promulgated to ensure the delivery of 'inexpensive and expeditious' justice for local arbitrations. With regard to appeals lying from the enforcement of domestic arbitral awards, Section 30 of the Act 1940 provides the grounds on which an award can be wholly or partially set aside by the court; the order of the court in this regard may further be appealed.
With respect to a case settled through ADR under PADRA, a subsequent judgment passed by the primary court cannot be challenged in any court of law.19
Two statutory instruments in Pakistan govern foreign arbitrations:
- the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 (REA 2011) for the enforcement of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and;
- the Arbitration (International Investment Disputes) Act 2011, enacted to give effect to Pakistan's ratification of the International Convention on the Settlement of Investment Disputes between States and Nationals of other States.
REA 2011 provides for a party seeking enforcement of a foreign arbitral award to file an application before the relevant High Court; enforcement may be refused only on the grounds stated in Article V of the New York Convention.20
Recently, the Lahore High Court held that an arbitral award passed in another contracting state would be a foreign award under the New York Convention irrespective of the fact that the governing law of the arbitration agreement is Pakistan law.21
Courts in Pakistan are tilting towards a pro-enforcement policy in respect of both local and foreign arbitral awards and agreements. Some recent judgments that have reversed prior practice include the following:
- The Supreme Court has significantly narrowed the ambit within which an award may be set aside under the Act 1940.22
- Under REA 2011, the discretion previously accorded to the court to entertain or refuse an application to stay proceedings in matters covered by an arbitration agreement has been removed altogether; the court is now bound to refer a matter to arbitration.
- The Lahore High Court has streamlined its procedures for enforcing foreign arbitral awards, and has further held that the policy of the REA 2011 requires it to dispose of issues in enforcement proceedings by the usual test for summary judgment, and not by a regular trial.23
The Center for International Investment and Commercial Arbitration is Pakistan's first international arbitration centre to offer ADR services.
In 2002, the resolution of disputes through mediation and conciliation became part of statutory law through the enactment of Ordinance XXXIV of 2002 inserting Section 89-A into the CPC.
The Alternative Dispute Resolution Act, 2017 requires certain civil matters to be referred to mediation if the parties agree (applicable in the Islamabad capital territory). This law was implemented in Punjab in 2018 through the insertion of Order IX-B in the CPC, which mandates the referral of a specific nature of disputes to a preliminary round of mediation.
Since 2017, in the wake of judicial reforms, the Lahore High Court has been taking initiatives to mainstream court-annexed mediation, a procedure whereby judges refer cases to mediators assigned by the Lahore High Court. According to data compiled by the Lahore High Court, since 2017, 30,688 cases had been referred to mediation, out of which 14,239 references had been successfully mediated by January 2019.24 Official ADR centres are operative in all 36 districts in Punjab, manned by judges who serve as mediators. In 2017, the Asia Foundation conducted a series of training sessions on ADR skills for judges nominated by the Lahore High Court, which included mediation training for judges from Punjab.
iv Other forms of alternative dispute resolution
Unlike litigation and arbitration, expert determination is not governed by legislation or procedural rules (other than those agreed between the parties). Expert determination is often included in contracts pertaining to the construction and energy industry as a mechanism to resolve disputes prior to the initiation of arbitration.
Under the Act 1940, an umpire or referee must be appointed according to the procedure specified in the Act (First Schedule).
In Pakistan, two forms of ADR have been practiced in the past century: traditional ADR and public body ADR. Traditional ADR, which includes the Panchayat (village council) system in Punjab and the Jirga system in Khyber Pakhtunkhwa and Balochistan, was competent to deal with minor offences. Following this, conciliation courts were established under the Conciliation Court Ordinance 1961, and such courts took over the traditional functions dispensed by ADR. However, in rural and remote areas of Pakistan, the Panchayat system is still quite popular.
Outlook and conclusions
The promulgation of the PCCO indicates that the government has recognized the necessity for swift resolution of commercial disputes and the requirement of special expertise for matters relating to commerce, trade, and business. This has been a welcome step for encouraging foreign investment and for the business environment in general.
In terms of jurisprudential development, the above referred Supreme Court's authoritative decision regarding foreign arbitral awards also reflects Pakistan's judicial system's recognition and enforcement of the sanctity of contract, especially in the context of foreign investment.
The judiciary and executive's pro-enforcement of contracts, awards and agreements and pro-foreign investment approach, coupled with the legislature's proactive measures to facilitate business, promise to create a more conducive business and investment environment in Pakistan.
1 Asma Hamid is the founder of, and Zainab Kamran is a senior associate and Sana Azhar and Mahnoor Ahmed are associates at, Asma Hamid Associates.
2 Article 8.
3 Articles 8–25, Chapter II.
4 Article 199 and Article 184(3).
5 Courts of district judges generally exercise appellate jurisdiction. One important exception is in the district of Karachi, where the original jurisdiction to hear civil claims valued at more than 15 million Pakistani rupees has been conferred upon the Sindh High Court.
6 Article 184(3).
7 Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 (REA 2011) for the enforcement of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and Arbitration (International Investment Disputes) Act 2011, enacted to give effect to Pakistan's ratification of the International Convention on the Settlement of Investment Disputes between States and Nationals of other States.
8 PLD 2021 Lah 544.
9 2021 SCMR 1728.
10 2005 CLC 731.
11 2000 YLR 1102.
12 2016 PTD 2043,
13 Article 158 of QSO 1984, Order XI Rule 12 and Rule 14 of CPC, 1908; 1988 CLC 1532, 2011 CLC 1405.
14 Order XI, Rule 6 CPC.
15 Order XI, Rule 20 CPC.
16 Order XI, Rule 15 CPC.
17 Order XVI, Rule 14 CPC, see also 2003 MLD 1332.
18 Order XXVI, Rules 19-22 CPC.
19 Section 15, PADRA; according to Section 14: 'When the outcome of the ADR is returned to the court and the court finds that the matter has been partially or completely resolved, in accordance with law, the court shall pronounce judgment and in case of a civil dispute pass a decree in terms of the settlement.' Where the outcome of ADR is not clear, the court may ask the ADR person to provide the required clarification.
20 Section 7, REA 2011.
21 2019 CLD 1082.
22 2018 SCMR 662.
23 PLD 2018 Lahore 597.