Arbitration Act, 1940 & Recognition and Enforcement Act, 2011

What it is

Two statutes carry arbitration in Pakistan. The Arbitration Act, 1940 governs domestic arbitration — arbitrations seated in Pakistan under Pakistani law. It is a pre-independence statute built on the English model of its day, and it keeps the courts close to the process: a domestic award has no force of its own until it is filed in court and made a rule of court, and it can be attacked under sections 30 and 33 on grounds including misconduct of the arbitrator or of the proceedings. In practice the rule-of-court stage has been where domestic awards go to be relitigated, and enforcement timelines run in years.

The Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 gives permanent statutory effect to the New York Convention, which Pakistan ratified in 2005 and had implemented through successive ordinances until 2011. It vests jurisdiction in the high courts. Where a party to a foreign arbitration agreement is sued in Pakistan, section 4 requires the court to refer the parties to arbitration unless the agreement is null and void, inoperative or incapable of being performed — a mandatory stay, unlike the discretionary stay under section 34 of the 1940 Act. Foreign awards are enforced as judgments, and refusal is confined to the Convention grounds. Investment treaty awards under the ICSID Convention travel under a separate statute of the same year.

What changed

Neither Act has been recently amended; the movement is in reform and case law. A new arbitration bill modelled on the UNCITRAL Model Law — the product of a law-reform committee and intended to replace the 1940 Act — was introduced in the Senate in 2024 and referred to committee. As of mid-2026 it has not been enacted [current status of the Arbitration Bill TO BE VERIFIED BY REVIEWING LAWYER]. Until it passes, the 1940 Act remains the domestic regime.

The courts, meanwhile, have moved in a pro-enforcement direction on foreign awards. The Supreme Court has held that foreign awards are enforced under the 2011 Act on its own terms, without importing the 1940 Act's machinery, and that the refusal grounds are to be construed narrowly [Taisei Corporation v A.M. Construction Company — CITATION — TO BE VERIFIED]. As of mid-2026 the practical gap between the two regimes is wide: a foreign-seated award is materially easier to enforce in Pakistan than a domestic one.

Who is affected

Every party that writes an arbitration clause into a Pakistan-related contract is affected, and the seat decides which world the party lives in: Pakistani companies and public entities arbitrating domestically under the 1940 Act; foreign investors, lenders and trading counterparties holding foreign-seated awards under the 2011 Act; and any party sued in a Pakistani court in breach of an arbitration agreement, whose stay rights differ sharply between the two statutes.

What to do

Choose the seat deliberately, at drafting stage, with enforcement in mind — a foreign seat brings the 2011 Act and its narrow refusal grounds. Draft the clause precisely: seat, rules, language, number of arbitrators. If sued in Pakistan despite an arbitration agreement, apply for a stay at the first appearance and before taking any step in the proceedings; delay can forfeit the right under the 1940 Act. Holders of domestic awards should budget realistic time for rule-of-court proceedings and objections. Parties negotiating long-term contracts should track the pending bill before assuming the 1940 regime will still govern at the time of any future dispute.