Arbitration Act, 1940

The Arbitration Act, 1940 sets out the rules for resolving disputes through private arbitration in Pakistan, largely by involving the civil courts as a backstop and enforcer. Section 3 says that unless an arbitration agreement states otherwise, it automatically includes a set of standard implied terms listed in the First Schedule. Section 4 allows parties to agree that arbitrators will be appointed by a named third party rather than by themselves. Section 6 confirms that an arbitration agreement survives the death of one of the parties and can still be enforced by or against that person's legal representative, and Section 7 deals with what happens if a party to the agreement becomes insolvent.

Section 8 is a key protective provision: if the parties cannot agree on appointing an arbitrator (or a vacancy needs filling), any party can serve a written notice on the others requiring them to cooperate, and if no appointment is made within fifteen clear days, the Court can step in and appoint an arbitrator or umpire itself. Section 9 gives a similar right where each side is meant to appoint one of two arbitrators and one side fails to do so.

Sections 14 to 18 deal with the arbitration award itself: it must be signed and filed with the Court (Section 14), and the Court has the power to modify the award (Section 15), send it back to the arbitrators for reconsideration (Section 16), turn it into a formal court judgment (Section 17), and issue interim orders while arbitration is ongoing (Section 18). Later sections (per the table of contents, Sections 30 and 32-34) cover the limited grounds on which an award can be set aside, a bar on separately suing to contest an arbitration agreement or award, and the Court's power to stay ordinary legal proceedings where a valid arbitration agreement exists.

The First Schedule spells out the default terms built into every arbitration agreement unless excluded: arbitration is to a sole arbitrator unless stated otherwise; if there are an even number of arbitrators they must appoint an umpire within a month; the arbitrators must make their award within four months (or longer if the Court allows); an umpire who takes over must decide within two months; parties must submit to examination and produce relevant documents; and the award, once made, is final and binding on the parties.

This is a long-standing law from 1940 with a considerable amendment history, and later legislation (for example, dealing with recognition and enforcement of foreign arbitral awards) covers ground this Act does not. Readers should check the current official text for the full, up-to-date rules, particularly the sections on setting aside awards and jurisdiction that are only listed by title in this extract.