Embracing Alternative Dispute Resolution in Pakistan: the Need of the Hour

By Mohammad Wamiq Anjum - Pakistan

The historical backdrop of Alternative Dispute Resolution (ADR) in Pakistan reveals the long-standing presence of traditional dispute resolution mechanisms such as jirgas and panchayats. (Khan) These community-based councils of wise elders have historically been instrumental in resolving marital and family disputes. However, the evolving landscape of modern society has rendered these traditional methods inadequate for addressing the complexities of commercial, civil, and trade-related conflicts. Furthermore, the vulnerability of these mechanisms to external influence has raised concerns about the legitimacy and reliability of their rulings.

With a history spanning 77 years, ADR in Pakistan has traversed a tumultuous path marked by both successes and setbacks. Today, the imperative for ADR is more pronounced than ever as it grapples with the country's contemporary legal landscape. In this article, we will explore the exigency and relevance of ADR in Pakistan's legal framework, shedding light on its evolution and the compelling need for its revitalization in addressing the multifaceted nature of disputes in the modern era. 

Understanding ADR: Exploring the Current Landscape in Pakistan

ADR encompasses various methods to settle disputes outside of traditional court proceedings. Standard ADR processes include mediation, arbitration, and neutral evaluation. These confidential, less formal, and cost-effective processes empower parties to play a pivotal role in resolving disputes, fostering creative solutions, and improving relationships.

In Pakistan, the legal system's inefficiencies have led to a substantial backlog of approximately 2 million cases, eroding public trust and impeding the legal framework. Consequently, legal professionals and stakeholders increasingly recognize the need for alternative dispute resolution mechanisms, particularly arbitration, to alleviate these issues.

The increasing backlog of court cases has intensified the demand for more effective dispute resolution mechanisms. Among the array of Alternative Dispute Resolution (ADR) methods, arbitration has distinctly emerged as a preeminent choice. This method provides a structured approach that balances the formality of litigation with a streamlined process designed to expedite resolutions and alleviate burdens on the judicial system.

In Pakistan, as legal professionals advocate for reform, arbitration is rapidly becoming the preferred avenue for addressing both commercial and civil disputes. This shift not only aims to restore faith in the judicial system but also significantly mitigates processing delays. The framework governing arbitration in Pakistan is established by "The Arbitration Act, 1940." This pivotal legislation is instrumental in resolving conflicts by reducing the burden of litigation in courts and fostering amicable settlements through trusted intermediaries (J.M.S).

The statute was promulgated on March 11, 1940, by the Governor-General of the Indian Council and was subsequently adopted by the newly independent state of Pakistan to consolidate and revise the existing arbitration laws. The Arbitration Act came into force on July 1, 1940, and introduces three distinct categories of arbitration: (a) arbitration without court intervention (Chapter II, Sections 3–19), (b) arbitration initiated only through the court (Chapter III, Section 20), and (c) mediation in cases under court jurisdiction (Chapter IV, Sections 21–25) (Dr Khurram Faizan).

While an exhaustive discussion of each provision of the Arbitration Act falls beyond this article's scope, it is crucial to recognize that this Act functions as a comprehensive code governing all arbitration-related matters under Pakistani law. It affords parties significant latitude to navigate essential issues, enabling them to select the procedural rules governing the arbitrator's conduct, set timelines for issuing final and interim awards, and choose the arbitrators themselves. This flexibility applies to both domestic and international entities, ensuring that arbitration can be tailored to meet their specific preferences.

The support for arbitration is further entrenched within case law. The Supreme Court has clarified the definition of "Arbitration Agreement," underscoring its significance in contract integration for maintaining contractual independence (Messers Parks Pakistan (pvt Ltd) Vs Privatization commissioner). Additionally, ADR has been recognized as one of the swiftest routes for resolving civil disputes (Khan Ahmed vs Mumtaz). The apex court has emphasized that consent from the parties must be free from coercion to engage in ADR, as illustrated in the case of Ansari Sugar Mills Ltd vs. FoP through the Secretary Revenue (Ansari Sugar Mills Ltd V. FoP through Secretary Revenue). This ruling affirms that, once the court's jurisdiction has been invoked, a party possesses the vested right to compel the involvement of another party in ADR proceedings, a principle further supported in the recent judgment (J.).

The support for ADR extends beyond case law; the Pakistan Parliament and provincial assemblies have also taken significant steps to promote these mechanisms. For instance, Section 195-C of the Customs Act, 1969, introduces an ADR option and establishes a committee aimed at resolving relevant disputes within 90 days. Amendments to the Civil Procedure Code in 2020 have created a regulatory framework for mediation in civil matters, complemented by the Punjab ADR Act (2019) and the Sindh ADR Act (2017), which facilitate the adoption of ADR practices. Furthermore, the International Arbitration Act (2017) provides a robust legal framework for international commercial arbitration by aligning with the UNCITRAL Model Law.

Despite these positive advancements, challenges persist. Courts often refer cases to arbitrators—usually retired judges of High Courts—without specifying an arbitrator in the agreement (A). While ADR is traditionally perceived as both cost-effective and expedient, courts sometimes impose substantial arbitration fees, which can reach millions of rupees for each party, creating a significant financial burden for the aggrieved. Moreover, parties that are not aggrieved may resort to delay tactics, extending the duration of arbitration proceedings unnecessarily. It is worth noting that a sole arbitrator possesses the same authority as a judge within ordinary judicial proceedings. Generally, the arbitrator announces an award to the parties before sending it to the court for objections. Should the parties disagree with the award, the court retains the authority to adjudicate the case according to its own merits, which can lead to further delays (J).

ADR in Foreign Counties & Recommendations

Alternative Dispute Resolution (ADR) remains an elusive concept in Pakistan, especially when contrasted with foreign countries that actively embrace and promote negotiation and ADR processes. Such methodologies are crucial not only for streamlining the litigation process but also for conserving the resources of the courts and the parties involved.

Globally, the role of arbitration is significant, influenced by diverse economic, cultural, and legal factors. In the United Kingdom, for example, ADR was championed by the Civil Mediation Council (CMC) and a former Lord Chancellor's initiative in 2001, which resulted in savings exceeding six million pounds by incorporating ADR clauses into government contracts. Australia has similarly adopted mediation as its preferred approach, particularly for commercial disputes. Here, mediation is often favored over arbitration due to its voluntary nature and the absence of an appeals process. This is further supported by practitioners like Neville Rochow, who highlighted the efficiency and successful outcomes achieved through mediation in Australian courts.

In China, cultural values rooted in Confucian ideals encourage a preference for mediation and conciliation rather than litigation. Judges frequently guide parties toward resolving disputes through negotiation, reflecting a long-standing emphasis on harmony. In parallel, Islamic principles advocate for conciliation methods; noted legal scholar Stephen York emphasizes that mediation and conciliation are favored within Islamic contexts. (York)

India provides a compelling model with its implementation of "Lok Adalats" under the Legal Services Authorities Act of 1987, which have successfully resolved millions of cases. This approach yields socio-economic benefits, as arbitration significantly alleviates the burden on traditional courts, fostering economic growth by lowering dispute resolution costs. (Presentation of Lex Mundi College of Mediators)

Recommendations for Effective ADR Implementation

Legal Harmonisation is of paramount importance for effective ADR implementation. It details the process of how jurisdictions can benefit from harmonising arbitral procedures by tailoring laws that respect the specificities of cultural customs, whilst still adhering to international standards, as demonstrated in the U.K. and India. Another recommendation is Technological Integration: the adoption of technology in arbitration processes such as virtual hearings and digital platforms, which can enhance accessibility and efficiency as evidenced in various global practices. Transnational Enforceability also serves as a robust implementation of international treaties like the New York Convention, and is therefore essential for improving the global enforceability of arbitration awards, thereby ensuring effective resolution in cross-border disputes. Finally, Stakeholder-Centric Approaches, which focus on the engagement of stakeholders including arbitrators and legal representatives, can lead to meaningful reforms by addressing practical challenges and enhancing the overall ADR framework.

Conclusion

As Pakistan navigates the complexities of dispute resolution, embracing the principles and methodologies of ADR could significantly transform its legal landscape. By learning from successful implementations in other jurisdictions and applying tailored strategies that resonate with local cultural values, Pakistan can enhance the efficiency of its legal processes. In doing so, it stands to not only conserve judicial resources but also foster economic growth, making judicial relief more accessible to all. The journey toward a more robust ADR framework is not merely a legal imperative but a socio-economic opportunity that holds promise for the nation's future.

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