The Peculiar Case of Pakistan

This April, Pakistan enacted the Investment Disputes Act to make awards under the ICSID Convention enforceable in Pakistan. This was following a ruling in SGS v. Pakistan before an ICSID Tribunal. The Bill was passed following an ordinance issued almost four years ago which has been renewed under successive regimes, before finding fruition in April. This puts Pakistan in a unique and unenviable position as it does not have a law to bring the New York Convention or the UNCITRAL Model Law into effect, but will now recognise ICSID awards.

Background

Arbitration in Pakistan is still largely governed by the 1940 Act which was enacted by the British for the undivided Indian colony. Though Pakistan has signed the NYC, the enforceability of foreign arbitral awards is unclear as the NYC has not been implemented. The first attempt to implement the NYC was made in 2005, when the new Arbitration Act was passed as an Ordinance (along with an Ordinance to implement the ICSID Convention in 2006, which is now the Investment Disputes Act) almost 50 years after they signed on the NYC.

Ordinances in Pakistan have a limited life under Article 89 of the Constitution and must be tabled before the Houses of Parliament within 4 months of issue. Owing to the declaration of Emergency, they never saw the light of day and in Sindh High Court Bar Association v. The Federation of Pakistan, they were repealed as they were not passed within the requisite period.

Enactment and Controversy

But, in April 2010 President Zardari controversially re-promulgated the repealed Ordinances along with 11 others while the National Assembly was still in session, in alleged violation of Article 89. On the expiry of successive 4 month periods, the Ordinances were granted further 4 month extensions until April this year when the Investment Disputes Act was finally passed.

However, there is no word on when the new Arbitration Act will be enacted, but it is expected to follow the Investment Disputes Act. Thus, Pakistan finds itself in a position where it has given full effect to the ICSID Convention while not bringing the NYC or the UNCITRAL Model Law into effect. In doing so, Pakistan is not only one of the few countries to have not implemented the NYC, but is probably the only country to have implemented the ICSID Convention, while not implementing the NYC.

Lessons for India?

Unlike Pakistan, India is not a party to the ICSID Convention. However, India still lacks a framework for the implementation of Investment Treaty Awards. The issues surrounding ITAs have been dealt with in some detail in this paper, co-authored by Deepak.

The enactment of the Investment Disputes Act in Pakistan is part of the larger trend of settling investment disputes through arbitration. It also underscores the need for a legislation or an adequate mechanism to deal with Investment Disputes in India.