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Petitioner: Orient Power Company (Private) Limited VS Respondent: Sui Northern Gas Pipelines Limited through its Managing Director, Lahore
Court Name: Lahore High Court Judge(s): Ayesha A. Malik, Shahid Jamil Khan Title:Orient Power Company (Private) Limited vs Sui Northern Gas Pipelines
Limited through its Managing Director, Lahore Case No.: ICA No.210640/2018 Date of Judgment:2019-08-01 Reported As: 2019 CLD 1082, 2019 LHC 2518, PLD 2019 Lahore 607, 2022 PCTLR 22 Result: appeal dismissed Judgment Ayesha A. Malik J: The Appellant has impugned order dated 4.4.2018 passed by the learned Single Judge in COS No.16/2017 as the suit filed for the recognition and enforcement of a foreign arbitral award was allowed by the Court on 4.4.2018 in favour of the Respondent. 2. The basic facts of the case are that the Respondent filed COS No.16/2017 before the learned Single Judge of this Court under Section 6 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 ("Act") for the recognition of award dated 27.2.2017 and 13.6.2017(" the Award "). The Appellant was given several opportunities to file objections against the Award, failing which the right to file objections was closed on 21.3.2018. On 4.4.2018, an application under Section 6 of the Act, filed by the Respondent was allowed, such that the Award was recognized and enforced as the Court declared the Award binding on the parties. The matter is now pending in proceedings for execution of the Award. Arguments on the preliminary objection of jurisdiction of the High Court 3. The Appellant has impugned the order of 4.4.2018 as it was an ex-parte order. The Appellant contends that it has been denied a fair hearing in the case. Mr. Salman Akram Raja, on behalf of the Appellant argued that the Appellant's counsel was on an approved general adjournment from 12.3.2018 to 7.4.2018 during which dates the case should not have been fixed for hearing, yet the case was fixed for 21.3.2018 on which date the learned Single Judge closed the Appellant's right to file written objections against the Award. The case was then fixed for 4.4.2018, again during the general adjournment period when the impugned order was passed. Consequently the Appellant is aggrieved as the case proceeded without giving the Appellant a fair hearing or an opportunity to raise objections against the Award. Learned counsel further argued that the Appellant has a right to file objections under the Act and also has a right to invoke remedy under the Arbitration Act, 1940 ("1940 Act"). As per the Counsel arguments, this right has been recognized in the case cited at Taisei Corporation v. A.M. Construction
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Company (Pvt.) Ltd. (PLD 2012 Lahore 455) ("Taisei Case"), however the learned Single Judge without considering the aforementioned case held that the Court has no discretion in its power to recognize and enforce foreign arbitral awards under the Act except if a ground is made out under Article V of the Schedule of the Act, which basically means Act V of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards dated 10.6.1958 ("the Convention"). Learned counsel further argued that by doing so, the learned Single Judge proceeded with the matter without considering the issue of concurrent jurisdiction as decided in the Taisei Case in which it is held that 1940 Act is also applicable to foreign arbitral awards as there are no provisions equivalent to Section 14, 30 and 33 of the 1940 Act under the Act. Mr. Salman Akram Raja argued that the Court must harmoniously construe both the laws to ensure that the Appellants are not denied any right that is available under the law. It was also argued that the findings of the learned Single Judge that the Award is enforceable under the Act and objections should be filed in accordance with Article V of the Schedule to the Act is contrary to the earlier view taken in the Taisei Case. Under the circumstances, it is the case of the Appellant that the learned Single Judge could not have deviated from the earlier view and should have at least discussed the Taisei Case and explained why he disagreed with the findings, if at all, before proceeding to enforce the Award under Section 6 of the Act. 4. Learned counsel for the Respondent SNGPL, Khawaja Ahmad Hosain argued that the Award is a foreign arbitral award and this fact has been conceded to and accepted by the learned couns el for the Appellant during his arguments. He argued that in terms thereof the High Court has exclusive jurisdiction to recognize and enforce foreign arbitral awards under the Act. He also argued that under the Act, foreign arbitral award is defined in Section 2(e) to be an award made in a Contracting State, in this case being London which was the seat of the arbitration. Hence the relevant Court for enforcement is the High Court and as per Section 6 of the Act, the enforcement of foreign arbitral award is such that it is to be recognized and enforced in the same manner as a judgment or order of the Court. He argued that in terms of Section 7 of the Act, the recognition and enforcement of foreign arbitral award must be in accordance with Article V of the Convention and further that in terms of Section 8 of the Act, in the event of any inconsistency between the Act, the law or any Judgment of the Court, Article V of the Convention shall prevail to the extent of the inconsistency . Therefore, as per the arguments of the counsel for the Respondent, the Act is the relevant law and that the 1940 Act is totally irrelevant for the purposes of enforcement of the Award. Learned counsel also argued that reliance on the Taisei Case is totally misconceived because in that case the Court found that the award in question was a domestic award while relying on the "Hitachi Limited and another v. Rupali Polyester and others" (1998 SCMR 1618 ) whereas in this case it is a foreign arbitral award. Khawaja Ahmad Hosain argued that the learned Single Judge in the Taisei Case failed to take into consideration the fact that the law laid down in 1998 SCMR 1618 (supra) was based on the interpretation of Section 9 of the Arbitration (Protocol and Convention) Act, 1937 ("193 7 Act"), which specifically provided that where an agreement is governed by the laws of Pakistan then for the purposes of the 1937 Act such an award is not a foreign award. He explained that the 1937 Act specifically provided that if the governing law of a contract was Pakistan then an award under such a contract would not be a foreign award and in such cases the award would be enforced as a domestic award. However , as per his contentions the 1937 Act is not relevant, the relevant law is the Act and there is no such provision under this Act. Further that the definition of foreign arbitral award under the Act has specifically provided that a foreign award is one made in a Contracting State meaning thereby that the governing law of contract is not relevant. Hence, the only law that is applicable for the purposes of recognition and enforcement of the Award is the Act. Learned counsel also addressed arguments related to requiring a harmonious construction whereby he stated that no such construction is required because no provision of the Act has been challenged by the Appellant nor is there any ambiguity in the law. As per his contentions, the 1940 Act caters to domestic awards and there is no right available to Appellant to raise objections under the 1940 Act. He further argued that simultaneous remedies where one party seeks enforcement under the Act and the other party files objections under the 1940 Act before different forums totally defeats the mandate of the Act. 5. We have heard the learned counsel for the parties and have also gone throu gh the record. The preliminary objection raised is with respect to the jurisdiction of the High Court to recognize and enforce foreign awards. The
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basic question before the Court is whether the High Court has exclusive jurisdiction to recognize and enforce a foreign arbitral award under the Act and whether for the purposes of raising objections against the enforcement of a foreign arbitral award, the 1940 Act is relevant giving the civil courts concurrent jurisdiction. Opinion on the Preliminary Objection 6. The Act provides for the recognition and enforcement of arbitration agreements and foreign arbitral awards. It is based on the United Nation Convention on the Recognition and Enforcement of Foreign Award signed in New York on 10.6.1958 to which Pakistan is a signatory. Section 2(e) of the Act defines foreign arbitral awards to mean an award made in a Contracting State and such other State as may be notified by the Federal Government in the official gazette. In this case, both parties accept that the Award is a foreign arbitral award and the dispute is with respect to jurisdiction of the High Court and the manner in which the foreign arbitral award has to be recognized and enforced. 7. In terms of Section 3 read with Section 2 (d) of the Act, the High Court has exclusive jurisdiction to adjudicate and settle matters related to or arising from this Act for the purposes of enforcement of a foreign arbitral award. Section 6 of the Act requires an application to be filed before the High Court and the Court shall recognize and enforce it as a judgment or order of a Court in Pakistan. Section 6 of the Act is subject to Section 7, wherein enforcement cannot be refused except on the grounds given in Article V of the Convention. Therefore the Court can refuse recognition and enforcement of foreign arbitral award under Section 7 of the Act in terms of the grounds available in Article V of the Convention, which is appended to the Schedule of the Act. So far as the Act is concerned, it clearly provides that the High Court has exclusive jurisdiction for recognizing and enforcing a foreign arbitral award and also provides for the grounds on which any objection can be made. The dispute on jurisdiction has arisen due to the judgment given in the Taisei Case which gives concurrent jurisdiction to the civil court. 8. In the Taisei Case the basic facts were that a dispute arose under the contract and the matter was referred to arbitration. The governing law of the contract was Pakistan. It was an ICC arbitration and the seat of the arbitration was Singapore. The award was delivered on 9.9.201 1 in favour of Taisei. The respondents moved an application under Section 14 of the 1940 Act before the Civil Judge to challenge the award and also filed objections under the 1940 Act. Taisei moved an application under Order 7 Rule 10 of the Civil Procedure Code, 1908 on the ground that the civil court lacked jurisdiction as the award is a foreign award for which the Act has exclusive jurisdiction. The civil court rejected the application filed by Taisei and the order was challenged before the High Court in a civil revision. The question addressed by the High Court was with reference to the provisions of the 1940 Act, which as per the judgment have not been specifically repealed by the Act, hence are available in cases where the arbitration agreement is governed by Pakistan law. The Court after hearing the petition dismissed the case of Taisei and proceeded on the objections under Section 14 of the 1940 Act for the following reasons: (i) There are no specific provisions under the 2011 Act equivalent to the remedies available under Section 14, 30 and 33 of the 1940 Act for the respondents. Therefore the Legislature having not specifically repealed the provisions of the 1940 Act, under the 2011 Act means that the remedies under Section 14, 30 and 33 are available to the respondents. (ii) Any objection under Section 14, 30 and 33 of the 1940 Act must be made before the civil court as the court constituted under Section 2(d) of the 2011 Act has been created with the limited power of giving recognition and enforcement to a foreign arbitral award. The general power conferred on the civil court under Section 14, 30 and 33 remains available to a party af fected by an award before the civil court. (iii) The question as to whether an arbitration agreement where the governing law of the contract is Pakistan law has any implication on the determination of the question where the award is domestic or foreign, has been decided by the august Supreme Court of Pakistan in the case cited at 1998 SCMR 1618 (supra ). (iv) In the light of the judgment of the august Supreme Court of Pakistan, it was held by the Court that since in this case the governing law of the contract was Pakistan law the award in question was domestic award and could be dealt with in accordance with Pakistan law , meaning could be dealt with under the 1940 Act. (v) Finally the moving of an application under Section 6 of the 2011 Act does not divest the civil court of its jurisdiction to entertain and adjudicate upon the controversies moved through an application under the 1940 Act
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which otherwise are not entertain able by the court constituted under Section 2(d) of the 2011 Act. 9. Learned counsel for the Appellant has raised the same issues before us in this case. The relevant facts of this case are that on 18.10.2016 parties entered into a Gas Supply Agreement ("GSA" ) for supply of gas to the Appellant for its power generation complex. Differences arose between the parties and the matter was referred to the London Court of International Arbitrati on ("LCIA" ) for arbitration in terms of Clause 18.3 of the Agreement. After hearing both the parties the Award was passed on 27.2.2017 and subsequent Award was made with respect to costs on 13.6.2017. The Appellant moved an application under Section 14(2) of the 1940 Act raising objections against the Award before the civil court whilst the Respondent filed an application under Section 6 of the Act for the recognition and enforcement of the Award before the learned Single Judge. In the meantime, proceedings before the civil court under Section 14 of the 1940 Act were stayed on 12.12.2017 by the learned Single Judge of this Court. The impugned order proceeds to recognize and enforce the Award without adverting to the issue of the pending application or objections before the civil court under the 1940 Act after finding that no objections were filed before the High Court and that the High Court has exclusive jurisdiction to enforce foreign arbitral awards. 10. The question before us is whether there is concurrent jurisdiction between the High Court and civil court to enforce a foreign arbitral award under the Act and the 1940 Act. The relevant provis ion of the Act is Section 3 which provides for the jurisdiction of the Court which has been defined in Section 2(d) of the Act, meaning the High Court or any other Superior Court as notified by the Federal Government in the official gazette. In this case there is no dispute with reference to the fact that the High Court is the relevant Court as per Section 2(d) of the Act. Section 3 of the Act categorically provides that the High Court shall exercise exclusive jurisdiction under the Act, leaving little room for any other interpretation. The Act was enacted to give effect to the Conven tion which requires international awards to be recognized and enforced expeditiously , so as to prevent undue delay in settling disputes of contracting parties. In terms of Article I of the Convention, a Contracting State is obligated to recognize awards as binding and enforce them as per the procedure laid down in Article III in order to give effect to the terms of the Convention. The Act sets out the requirements to have a foreign arbitral award recognized and enforced. The purpose of the Act is to facilitate recognit ion and enforcement of foreign arbitral award in order to curtail litigation related to foreign arbitral awards which in turn delays the enforcement of awards and negates the very purpose for using arbitration as a dispute resolution mechanism. The Convention is based on a pro-enforcement policy which sets out to facilitate and safeguard the enforcement of foreign arbitral awards which is the mandate of the Act. The emphasis on pro-enforcement is highlighted by the inclusion of Section 8 of the Act which provides that in the event of any inconsistency between the Act and the Convention, the Convention shall prevail to the extent of the inconsistency. Section 8 of the Act endorses the mandate of the Convention and the commitment of Contracting States to encourage enforcement of foreign arbitral awards. Hence Section 3 grants exclusive jurisdiction to the High Court to fulfill the objective of the Act and the Convention. Section 3 of the Act has also been interpreted by a learned Division Bench of the Hon'ble Sindh High Court in Taisei Corporation v. A.M. Corporation Company (Pvt.) Ltd. (2018 MLD 2058) wherein it has declared that the High Court has exclusive jurisdiction to adjudicate and settle matters related to and arising from the Act. The Court also held that these words are clear and broad enough to encompass the question whether an award is foreign arbitral award or not as well as with reference to objections under Article V of the Convention. Therefore the Court found that Section 3 of the Act leaves little room to argue that recognition and enforcement of foreign arbitral award does not fall exclusively within the jurisdiction of the High Court and that there is a concurrent jurisdiction between the High Court and the civil court. Finally the Court noted that this is not a new concept because under the 1937 Act, the High Courts in Pakistan had exclusive jurisdiction to enforce and recognize foreign arbitral awards. This issue was directly addressed in G.M. Pfaff A.G. v. Sartaj Engineering Co. Ltd., Lahore and 3 others (PLD 1970 Lahore 184), Nan Fung Textiles Ltd. v. Sadiq Traders Ltd. (PLD 1982 Karachi 619) and Marines Limited v. Aegus Shipping Co. Ltd and 4 others (1987 CLC 1299) with reference to the 1937 Act which has been repealed by the Act giving the High Court exclusive jurisdiction under the Act. 11. We are of the opinion that the Act leaves little room for interpretation on the issue of exclusivity of jurisdiction of the High Court. Section 3 of the Act is clear and applicable to foreign arbitral awards, which has been clearly
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interpreted by division bench of the Sindh High Court in PLD 1982 Karachi 619 (supra ). We also note that the Taisei Case relied upon 1998 SCMR 1618 (supra) which case interpreted the provisions of the 1937 Act which was repealed under Section 10 of the Act in 2011 where after for the purposes of the enforcement of a foreign award the Act is relevant, even if the arbitration takes place in a foreign country and the governing law of the agreement is of Pakistan, in such cases the 1937 Act will not apply . With the repeal of the 1937 Act, a foreign arbitral award under the Act is one made in a contracting state regardless of the governing law of the contract. The Act being the relevant law in terms thereof the High Court has exclusive jurisdiction. That being so, we find that it is totally impractical to allow a party to seek enforcement of a foreign arbitral award before the High Court while at the same time allow the parties remedy before the civil court to enforce the same award. The outcome will not only cause conflicting judgments but also create uncertainty so far as the award is concerned. For instance the High Court may decide to enforce the award whereas the civil court may decide to set it aside under the 1940 Act. It could also mean that one party invokes the jurisdiction of the civil court to file objections against the foreign award, whilst the other party invokes the jurisdiction of the High Court for recognition and enforcement of an award, as in this case. This results in absurdity running contrary to the intent and purpose of the Act. Learned counsel for the Appellant, during the course of arguments through its partial written arguments on the issue of jurisdiction, has categorically stated that the Appellant's position is that the Award is a foreign arbitral award within the definition set out in Section 2(e) of the Act and for the purposes of the present case the Appellant accepts that the High Court has jurisdiction over the foreign arbitral award for recognition and enforcement of the award. Although this is a departure from the original arguments made before us, nonetheless the Appellant has conceded to the fact that the High Court has exclusive jurisdiction to recognize and enforce foreign arbitral awards. Therefore in view of the aforesaid, we find that the High Court has exclusive jurisdiction to recognize and enforce foreign arbitral awards which means it has exclusive jurisdiction to recognize and enforce the Award. Hence the preliminary objection is without merit. Objections against the Award under Article V of the Schedule of the Act 12. The basic dispute before us is with respect to the recognition and enforcement of a foreign arbitral award and the procedure of the Court to hear objections filed by the Appellant under Article V of the Convention as contained in the Schedule of the Act, since they were not considered by the learned Single Judge. In terms of the impugned order, no objections were filed before the Court, hence it proceeded to recognize and enforce the Foreign Arbitral Award under Section 7 the Act. Although the manner in which the case proceeded is under dispute by the Appellant, both the Counsel ultimately agreed and requested that the case be decided on its merits. Hence we proceed to examine the objections raised by the Appellant under Section 7 of the Act read with Article V of the Schedule of the Act. Section 7 of the Act reads as follows: Unenforceable foreign arbitral awards. The recognition and enforcement of a foreign arbitral award shall not be refused except in accordance with Article V of the Convention. Article V of the Schedule of the Act which basically means Act V of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards dated 10.6.1958 reads as follows: 1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity , or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case: or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration, can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
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(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority if the country in which, or under the law of which, that award was made. 2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the public policy of that country . In terms of Section 7 of the Act, the grounds for refusing to recognize an award are given in Article V of the Act. The Appellant relies on Article V Clause 1(c) and 2(b) as its grounds for objections to the recognition and enforcement of the Award. The first objection against the first claim: Article V (1)(c) of the Schedule to the Act 13. The Award deals with two claims; the first claim requires payment of Rs.104,13 3,296/- due under the Payment Agreement dated 11.1.2010. With respect to the first claim, the case of the Appellant is that the Sole Arbitrator had no jurisdiction over this claim as there was no arbitration clause under the Payment Agreement, hence the Award deals with matters beyond the jurisdiction of the Sole Arbitrator . Learned counsel for the Appellant argued that the parties entered into the GSA on 18.10.2006 with a dispute resolution…
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