New arbitration law to be designed

The Ministry of Law, Justice, and Human Rights will prepare a draft of a new arbitration law and submit it to the prime minister. The law will address both domestic and international arbitration and deal with the enforcement of domestic arbitrating awards and limits in line with international best practice.
According to official sources, the government has also decided to submit the new arbitration law to the parliament to develop an independent institution to promote and administer domestic arbitration.
The government is taking this step to enhance investor protection in the light of promulgating an ordinance that ratifies and implements the New York Convention on the recognition and enforcement of foreign arbitral awards of 10 June 1958. The government has agreed with the international donor agencies to submit it to the parliament.
Furthermore, in an update report, Asian Development Bank emphasised the need to establish alternative dispute resolution mechanisms, such as mediation or conciliation for smaller technical disputes or arbitration for larger disputes. Alternative dispute resolution modalities permit the disputing parties to choose their own arbiters. As this enables the involvement of technical experts, it is often the mode of dispute resolution preferred by investors in complex commercial cases, even in industrial economies.
ADB observed that the weaknesses in the court system constrain contract enforcement. This deters investors from entering into private participation in infrastructure arrangements, which are contractual by definition. While judicial reforms are ongoing, addressing weaknesses in the judiciary may take a long-time.
Moreover, even within a court system that is efficient overall, contract enforcement through the courts can be costly and time-consuming. Though, the Pakistan Civil Procedure Code includes a provision that allows the authorities to develop a policy and regulatory framework for mediation and conciliation, no such operational framework exists as yet. As a result, judges and practitioners are not knowledgeable in conducting mediation and conciliation proceedings efficiently and expeditiously.
The Law on Arbitration was enacted in 1940, but it has substantial weaknesses, such as the ability to approach a court for settling an award, which defeats the purpose of arbitration. As a result, the law has not worked in practice.
Furthermore, in 2005 the President promulgated the Ordinance on the Recognition and Enforcement of Arbitral Awards to ratify the 1958 New York Convention. While this was a noteworthy development that sent a positive signal to investors, the ordinance is merely an emergency law with limited tenure: ordinances lapse after 120 days unless extended or superseded by a new law.