Legal Principle & Question Decided

Ruling Summary: This decision was rendered by the Lahore High Court on 2024-12-04, officially reported as 2025 CLD 241. In this matter between SpaceCom International, LLC and Wateen Telecom Limited, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.

Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.

Full Judgment Text & Judicial Ruling

Court Name: Lahore High Court Judge(s): Shahid Karim Title: SpaceCom International, LLC vs Wateen Telecom Limited Case No.: Civil Original No.25854 of 2023 Date of Judgment:2024-12-04 Reported As: 2024 LHC 5494, 2025 CLD 241 Result: Application Dismissed

JUDGMENT

JUDGMENT Shahid Karim, J:-. This judgment will decide an Application under Section 6 of the Recognition and Enforcement (Arbitral Agreement & Foreign Arbitral Award) Act, 2011 ("the 2011 Act"). It has been brought by SpaceCom International LLC (SpaceCom) a private company incorporated under the laws of Virginia in the United States of America and seeks enforcement of the award against the respondent-Wateen Telecom Limited (Wateen). Facts and Background: 2. SpaceCom is a global information and communications technology systems integrator or global satellite service provider. It engages in the design, provisioning, integration, and operation of satellite communication networks. The networks are used, inter alia, for mobile backhaul, telephony, and data services for remote locations and enterprise communication networks. As part of its service offering, SpaceCom leases satellite transponder capacity and provides network engineering and monitoring services. Wateen is a Pakistani public limited company and is involved in the provision of communications services, including voice, internet and multimedia, through satellite and fixed line networks to corporate customers and to the general public in Pakistan. 3. On 15 August 2014 SpaceCom entered into a Master Service Agreement with Wateen (SpaceCom Service Agreement No.: 30-07014) (the "2014 MSA"). The 2014 MSA related to the provision of leased transponder capacities on the ABS-7 (Asia Broadcast Satellite) and IS-904 (Intelsat) Satellites, and network management and monitoring services (the "Satellite Services") to Wateen. SpaceCom provided Satellite Services to Wateen, which used the Satellite Services to provide mobile backhaul

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(i.e. connectivity from remote mobile phone antenna towers, which have no fibre optic or copper wire connection, to its mobile switches and the rest of its network). 4. The 2014 MSA acted as an overarching contract between the parties, pursuant to which the parties entered into various service orders. Two service orders were issued and signed by SpaceCom and Wateen under the 2014 MSA, i.e. Service ID No.2001 ("SO 2001") and Service ID No.2002 ("SO 2002") (together the "Service Orders"). The Service Orders stated that they were issued on 31 July 2014. They were signed by SpaceCom on 15 August 2014, the same day as the 2014 MSA. Pursuant to the Service Orders, SpaceCom was to provide transponder capacity on the IS-904 satellite for a period of 26 months and on the ABS-7 satellite for a period of 24 months commencing 01 May 2014. 5. By way of background, it may be mentioned that the 2014 MSA was not the first agreement between the parties. The parties had previously entered into Master Service Agreement in 2007 effective from 25 September 2007 (the "2007 MSA") as well as revised Master Service Agreement No.67007-B in 2013 (the "2013 MSA") along with related service orders (Service ID Nos. 1007A and 1012B). Disputes under the 2013 MSA were resolved through a settlement agreement between the parties executed on or around 30 April 2014 (the "Settlement Agreement") which involved the payment of certain sums by Wateen to the Applicant as well as the parties entering into the 2014 MSA. The parties entered into the 2014 MSA, however, it is alleged by SpaceCom that Wateen failed to pay the full settlement sums on time in breach of its terms. 6. It may be noted that the detailed facts and history of events between the parties including their dispute formed the subject matter of the Award on the Merits along with Appendix I (Partial Award on Jurisdiction and Procedural Objection) mentioned below and are narrated in detail therein. 7. For the purposes of the instant Application, the relevant fact is that the parties agreed upon, executed, and entered into the 2014 MSA, which finally and uptill its termination governed the relationship between the parties superseding any previous MSA. SpaceCom submits that the parties not only accepted the obligations contained in the 2014 MSA but also acted upon the agreement. 8. SpaceCom states that differences arose between the parties during the subsistence of the 2014 MSA arising out of the fact that while Wateen profited from the Satellite Services provided by SpaceCom, it repeatedly failed to pay for them remaining consistently in default of its various contractual obligations to pay sums due to SpaceCom. 9. SpaceCom initiated arbitration with DIFC-LCIA (First RFA). DIFC-LCIA sought clarification on the applicability of the rules from both the parties by reference to the arbitration agreement which provided for arbitration "In Dubai, UAE pursuant to rules of arbitration of the Dubai International Financial Center (DIFC)" rather than expressly referring to the rules of DIFC-LCIA. It is pertinent to mention that DIFC has a separate court and a legal system which governs matters of arbitration and is the appointing authority in DIFC arbitration law. DIFC-LCIA, on the other hand, is an arbitral institution and differs from DIFC on that account. (These terms will be expanded in the later part. 10. In response to the Email by DIFC-LCIA, SpaceCom responded in the following terms: "Regarding your inquiry below, the Claimant responds that the language at issue was drafted by the Respondent. It was and remains Claimant's understanding that when the parties referred to "the Rules of Arbitration of the Dubai International Financial Centre", they in fact meant the Rules of the DIFC-LCIA. That said, the Claimant is not aware of any evidence relevant to this question. If the Respondent disagrees with the Claimant's understanding, the Claimant is willing to agree to proceed under the second scenario (arbitration under the DIFC Arbitration Law, with the DIFC court as appointing authority for the third arbitrator)." 11. A reading of the response, set out above, would show that SpaceCom itself was not clear regarding precise sweep of the arbitration clause relating to rules of arbitration and whether the

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rules of DIFC court or DIFC-LCIA would apply. Rather it was willing to engage with Wateen to agree to proceed for arbitration under either of the laws. During this period Wateen did not formally take a position. Correspondence was exchanged on the issue between the parties but it is the case of SpaceCom that Wateen failed to take any position and in the meantime SpaceCom emailed Wateen for appointment of the Arbitral Tribunal to which there was no response. This was done on 02.02.2016 and 04.03.2016. SpaceCom thereafter issued a second RFA due to Wateen's refusal to clarify. On 25.07.2016 Wateen claimed arbitration in Dubai UAE while refusing ad hoc arbitration. The contents of Wateen's refusal dated 25.07.2016 are set out below: "We are in receipt of your document entitled "Request for Arbitration", in respect of which, we have the following observations and reservations. Pursuant to Clause 14 of the MSA, any arbitration between the Parties is to be conducted in Dubai UAE, whereas you have erroneously and arbitrarily determined DIFC as the venue. We understand that the Dubai International Financial Centre is a special economic free zone forming an "offshore" jurisdiction separate from mainland" Dubai. The reality is that the contract was not executed in the Dubai International Financial Centre, neither party is based in the Dubai International Financial Centre, the contract was not performed in the Dubai International Financial Centre, there is no connection whatsoever with the Dubai International Finance Centre, and we do not consent to it and any such attempt is clearly in contravention of the arbitration process envisaged in the MSA. Additionally you have asserted that the arbitration shall be subject to the "DIFC Arbitration Law". We see nothing in the arbitration clause to that effect and since your understanding of the seat/venue is also misconceived, we do not provide our consent to it." 12. The above position clarifies the stance of Wateen that the seat of arbitration is to be Dubai UAE which is mainland Dubai as distinguished from an offshore jurisdiction vesting in DIFC. Thus, for the first time on 25.07.2016 Wateen comes forth on its stated position with regard to the seat of arbitration and denies jurisdiction to vest in DIFC-LCIA. In the meantime SpaceCom filed arbitration claim form in DIFC court of first instance for declaration of DIFC seat and appointment of Arbitral Tribunal. To counter this, Wateen filed a suit in August 2016 in Lahore and obtained injunction in the Lahore suit. SpaceCom also sought an anti-suit injunction in DIFC court which was granted on 25.02.2017. The final anti-suit injunction was granted by DIFC court on 09.03.2017. While doing so, the court also confirmed DIFC as the seat of arbitration. On 14.03.2017 Wateen withdrew proceedings in the Lahore suit and made an application to the DIFC court on 09.04.2017 whereupon DIFC court issued a clarificatory ruling on 23.5.2017 reiterating its earlier ruling regarding seat of arbitration and the rules applicable thereto. On 09.08.2017 SpaceCom filed an amended request for arbitration and proceedings commenced through third RFA. Arbitrators: 13. As adumbrated, clause 14 contains the dispute resolution clause and provides that: "14. Dispute resolution. This agreement and any disputes arising hereunder shall be governed by the law of the Commonwealth of Virginia, without regard to the conflicts of laws provisions thereof. In the event of any dispute leading to arbitration or litigation hereunder, the prevailing Party shall be entitled to an award of attorney's fees and costs. Any dispute arising out of or in connection with this Agreement, or the breach, termination, or validity hereof, shall be resolved through arbitration in Dubai U.A.E pursuant to the Rules of Arbitration of the Dubai International Financial Centre (DIFC) by a panel consisting of three arbitrators. One arbitrator shall be appointed by each party, and the parties shall agree on the third, who shall be the chairman of the arbitration panel, provided that if the parties cannot agree on the third arbitrator, then the two selected arbitrators shall jointly appoint the third (failing which the third arbitrator shall be

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selected by DIFC). The decision of the arbitration panel shall be binding and judgment on the decision may be entered in any court empowered to enforce it." 14. It is clarified that the parties nominated their arbitrators and the third arbitrator was nominated by the two arbitrators appointed by the parties. Thus, neither DIFC court nor DIFC-LCIA nominated the arbitrators. The arbitration proceedings were registered as DIFC-LCIA arbitration No.DL 17109 and commenced on 9 August 2017. The seat of arbitration proceedings was the Dubai International Financial Centre (DIFC) which is a financial free zone within Dubai UAE. UAE is a contracting state to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention). The following awards were rendered by the Arbitral Tribunal: (i) "Award on the Merits dated 15 April 2020 in DIFC-LCIA Arbitration No.DL 17109 between SpaceCom International, LLC ("SpaceCom") and Wateen Telecom Limited ("Wateen") including Appendix 1 i.e. Partial Award on Jurisdiction and Procedural Objection dated 22 November 2018 between the same parties and Appendix II Interest Calculation; and (ii) Award on Costs dated 08 November 2020 in the same arbitration between the same parties. (The Awards above are hereinafter collectively referred to as the "Awards")" 15. The Application is accompanied by certified copy of and II and certified copy of the Award on costs dated 8 November 2020. 16. Prior to this on 29 March 2018, the Arbitral Tribunal notified the parties that it had decided that the arbitration proceedings would be bifurcated so as to deal with the respondents' jurisdictional and procedural objections first. Following a hearing on jurisdictional and procedural objections on 27 September 2018, the Tribunal issued its Partial Award on jurisdictional and procedural objection dated 22 November 2018 (the Partial Award). The Arbitral Tribunal held that: "267. The Tribunal awards, declares and orders as follows: (1) The DIFC Court's ruling and order in Claim No.ARB-010-2016 dated 09 March 2017 and 23 May 2017 are res judicata as between the Claimant and the Respondent and have preclusive effect in this arbitration; (2) Accordingly, the seat of this arbitration in the Dubai International Financial Centre and the arbitration rules applicable in this arbitration are the Arbitration Rules of the DIFC-LCIA Arbitration Centre; (3) The Claimant has not waived the right to pursue, and is not estopped from pursuing, arbitration against the Respondent pursuant to the Arbitration Rules of the DIFC-LCIA Arbitration Centre under the Master Service Agreement executed between the parties on 15 August 2014 (Spacecom Service Agreement No.30-07014); (4) The Tribunal declines to stay these arbitration proceedings; (5) The Respondent's challenge to the jurisdiction of this Tribunal relating to the applicable arbitration rules and the Respondent's procedural objection relating to the seat of the arbitration are dismissed; and (6) The issues of the parties' legal and other costs incurred is deferred to the merits stage of this arbitration." 17. According to the Arbitral Tribunal, DIFC court's ruling and orders in claim ARB-010-2016 dated 9 March 2017 and 23 May 2017 are res judicata as between the claimant and Wateen and have preclusive effect in the arbitration proceedings. Accordingly, it was held that the seat of arbitration was DIFC and the applicable rules would be the arbitration rules of DIFC-LCIA arbitral centre. Wateen's Defence and its rebuttal: 18. Wateen's defence under the 2011 Act is premised on Articles V (1)(d) and V(2)(b) of the Schedule to the 2011 Act which provides that: "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

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and enforcement is sought. Proof that:- (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;" "V(2)(b) The recognition and enforcement of the award would be contrary to the public policy of that country. 19. Article V (2)(b) provides the grounds on which recognition and enforcement of award may be refused at the request of the party against whom it is invoked. Two of the grounds invoked by Wateen are contained in the clauses set out above. Wateen alleges that the composition of arbitral authority for the arbitral proceedings was not in accordance with the agreement of the parties. Learned counsel for Wateen has elaborated upon this argument by reference to the arbitration clause and in particular the reference to the seat of arbitration contained in clause 14 which clearly states that any dispute arising out of the agreement shall be resolved through arbitration in Dubai, UAE pursuant to the rules of arbitration of Dubai International Financial Centre by a panel consisting of three arbitrators. Learned counsel laid much emphasis on the intention of the parties to establish Dubai UAE as the seat of arbitration and no other seat. According to the learned counsel, Dubai refers to the on-shore juridical seat of Dubai, subject to the federal arbitration laws of UAE, as distinguished from an off-shore jurisdiction, that is, Dubai International Financial Centre which has been established as a special economic free zone. Learned counsel for SpaceCom did not rebut the proposition that these were two different jurisdictions and were governed by separate streams of law. Indeed DIFC is a special economic free zone and has been separated from Mainland Dubai in the applicability of laws and in particular laws relating to arbitration. The rules of DIFC-LCIA which have been formulated by the arbitral institution set up in DIFC would be rules of arbitration in cases coming before DIFC courts in which arbitration is held under the auspices of DIFC courts. Therefore, the question is clearly one of jurisdiction and goes to the competence of DIFC-LCIA to embark upon arbitration in this matter where the parties had clearly mentioned Dubai UAE as the seat of arbitration. It is clear that the defence raised by Wateen is covered by Article V (1)(d) of the 2011 Act for this Court to determine whether the defence is sustainable and on that basis the recognition and enforcement of the Awards may be refused. Determination: 20. Learned counsel for Wateen while expanding his defence reiterated that the seat of arbitration is pivotal in any arbitration proceedings and cannot be brushed under the carpet. It constitutes a vital defence envisaged by the 2011 Act and is analogous to an exclusive jurisdiction clause. This Court ought to refuse the recognition and enforcement of the award on this basis. The seat of arbitration in this case was Dubai UAE and not DIFC which are different jurisdictions and have separate application of laws. Dubai is one of the seven emirates of the United Arab Emirates. Following Article 104 of the United Arab Emirates Constitution, 1971 ("UAE Constitution"), Dubai has its own judicial hierarchy comprising of the Court of First Instance (which hear all claims related to civil and commercial matters), the Court of Appeal, and the Court of Cessation, established since 1970. In relation to arbitration proceedings, as codes of procedures is a federal subject under Article 121 of the UAE Convention, the law applicable in Dubai was set out in UAE civil Procedure Code, enacted through the Federal Law No.11 of 1992. The Federal Law No.11 of 1992, in other words, sets out the procedural law applicable to arbitrations seated in Dubai. In 2018, UAE enacted Federal Law No.6 of 2018 (on arbitration0, which amended the Federal Law No.11 of 1992. Learned counsel referred to the constitutional amendment No.1 of 2004 which inter alia provides that; "...the order and the manner of establishing Financial Free Zones and the boundaries within which they are exempted from having to apply rules and regulations of the Union."

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21. It is clear in terms of the Constitution of UAE that the Union has the authority to establish financial free zones and the boundaries within which they are exempted from having to apply rules and regulations of the Union. By the federal decree No.35 for the year 2004, Dubai International Financial Centre was established as a financial free zone in the Emirates of Dubai which was followed by law No.9 of 2004 in respect of DIFC. Law No.9 of 20004 established a Centre, that is, DIFC which was meant to have financial and administrative independence and inter alia had dispute resolution authority as one of its attached bodies. It was envisaged that an Arbitration Institute would be established under the Centre to perform its functions independently in accordance with the Centre's laws and the constitution of the Arbitration Institute which will be promulgated by a resolution of the President. It was clearly provided by Article X that Centre establishments shall carry out their activities in accordance with the Centre's laws, Centre's Regulations and the licenses issued to them. By Article 13 it was unambiguously provided that the Centre's bodies and Centre establishments shall carry on their commercial activities in accordance with the Centre's laws and Regulations. By clause 2 of Article 13 it was specifically clarified that the Centre, Centre's Bodies, Centre establishment and their employees and their delegates shall not be governed in relation to matters within the jurisdiction of the Centre by the laws of the Emirates and the rules and regulations of any local government body. 22. A reference to the provisions of law No.9 of 2004 leaves it in no manner of doubt that DIFC established by the law would have an independent and separate existence and would be governed by its own laws as distinct from the laws of Emirates. DIFC Law No.10 of 2004 is, in essence, the civil procedure code applicable in DIFC. Article 30 of the DIFC Court Law 2004 allows the DIFC courts to not only apply the laws applicable in DIFC or such law as is agreed between the parties but not the laws applicable in the rest of UAE. DIFC Law No.1 of 2008, enacted in 2008 by the Ruler of Dubai was legislated as the arbitration law applicable in DIFC. Thus, it cannot be argued with any degree of certainty that DIFC and Dubai UAE could be referred to interchangeably as one and the same entity for clearly they have separate sets of laws. The intention to place them in different compartments has a palpable purpose and must be given effect as this would assume significance in the context of the defence set up by Wateen. To substantiate this argument, learned counsel for Wateen referred to a decision made by DIFC court in claim No.CFI 011/2009 decided in the judicial authority of the Dubai International Financial Centre by the court of first instance. In that case, the question squarely was whether the seat was DIFC or Dubai UAE. It was stated in the decision that different laws applied in DIFC as distinguished from Dubai UAE and the two terms were clearly not synonymous or interchangeable. Further if the parties want DIFC law to apply and DIFC courts to have jurisdiction over an arbitration, they should expressly select DIFC as the seat of their arbitration agreement. Tribunal's decision regarding jurisdiction: 23. It will be recalled that Wateen filed a suit before the Civil Courts at Lahore in August 2016. To counter that SpaceCom filed an anti-injunction suit in DIFC court. The DIFC court not only decided the plea of injunction brought by SpaceCom but also went on to decide the question regarding seat of arbitration. The suit was titled 'SpaceCom International LLP and Wateen Telecom (Pvt.) Ltd etc. and was fixed before the court of first instance DIFC courts. In the ruling rendered by Justice Sir Jeremy Cook it was held that: "...The law which governs the agreement is that of the Commonwealth of Virginia in the USA but no evidence has been put before me as to that law, so for current purposes it is to be treated as the same as the law in DIFC. That is the only law which can fall to be applied at present. If the position is that the DIFC is the seat of the arbitration, then the DFIC court is the supervisory court and its jurisdiction and power to grant the interim injunction is undoubted..."

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24. In the final ruling rendered on 09.03.2017 the issue relating to injunction as well as the seat of arbitration was decided but was more specifically elaborated in a ruling issued at later stage as a clarificatory ruling made pursuant to the request of the lawyers representing both parties in relation to orders and judgments given earlier and in particular the judgment of 25 February and the order of 9 March 2017. In the clarificatory ruling the following determination with regard to the seat of arbitration was rendered: "This and the judgment of the same date made it plain beyond doubt, that the Court had decided that the seat of the arbitration was the DIFC and that the parties were bound by an agreement to arbitrate in the DIFC under DIFC/LCIA Rules and could not arbitrate elsewhere. The ad hoc arbitration, commenced in case the Court should find that there was no binding agreement to arbitrate under DIFC/LCIA Rules, was therefore the subject of the injunction also." Thus, DIFC court decided that the seat of arbitration was DIFC and the parties were bound to arbitrate in the DIFC under DIFC-LCIA rules and could not arbitrate elsewhere. 26. Wateen joined issue before the Arbitral Tribunal and once again raised the question of jurisdiction reiterating its earlier stance regarding lack of competence in DIFC courts to enter upon arbitration proceedings asserting instead that the seat of arbitration had to be Dubai UAE as consented to by the parties in the arbitration agreement. The Arbitral Tribunal determined the said issue which is stated in the Award in paragraphs 184 to 196. The Tribunal laid much emphasis on the decision of 9 March, 2017 by DIFC court while making the final anti-suit injunction and holding that the seat of arbitration was DIFC. The entire discussion of the Tribunal hinged upon the decision of DIFC court. In paragraph 196 it was stated that:…

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