Challenges to Commercial Arbitration of Pakistan: Judicial Intervention and Bad Faith of Parties

Abstract

This article explores key challenges to commercial arbitration in Pakistan: such as judicial intervention, and bad faith by the parties. It discusses how the Arbitration Act of 1940 allows judicial interventions, while Section 32 explicitly bars. However, courts sometimes overstep their bounds. The focus of this article is primarily on judicial intervention, though bad faith by the parties is also considered, as they also harm the arbitration process. The author believes that judicial intervention can be addressed. In contrast, eliminating bad faith entirely is a utopian idea. Morality should be left to the discretion of the parties, with judges responsible for upholding the law and ensuring the integrity of arbitration. Pakistan’s arbitration framework, governed by the Arbitration Act 1940 and the proposed Arbitration Act 2024, continues to suffer from significant gaps that hinder the effectiveness of commercial arbitration. One of the key shortcomings is the failure to fully incorporate the UNCITRAL Model Law, leaving the legal framework outdated and misaligned with international best practices. A critical issue is the broad scope for judicial intervention, particularly in appeals, which undermines the finality of arbitral awards and defeats the purpose of efficient dispute resolution. Strengthening the authority of arbitrators and limiting excessive court interference should be a legislative priority. Critical analysis and some important recommendations for a new draft bill are provided in this article. Moreover, jurisdictions such as Singapore, which have successfully modernized their arbitration laws to support a pro-arbitration approach, can serve as an inspiration.