Dispute Resolution & Arbitration

Majeed. Bhatti
Chief Engineer (Water Resources)
MM Pakistan
& Subiyal Abbas
 Objectives
• To provide a background to dispute resolution
and arbitration to civil engineers and MS- EM
Students of UOL.
 Organisation of Lecture
• Provide a broad background to methods of dispute
resolution.
• Briefly trace the history of arbitration.
• Outline the legal framework of arbitration, in Pakistan.
• Discuss the key elements of the arbitration law in
Pakistan.
• Outline the legal aspects of international arbitration.
• Trace the development of Pakistani law in the respect
of international arbitration.
• Furnish some guidance on writing an arbitration award.
 Dispute?

• Disagreement

• Interpretation

• Difference of opinion
Construction Disputes

Construction industry is a complex and has

competitive environment.

Different parties to the Contract have different

goals and the need to maximize profit. This
easily lead to conflicts which unmanaged
becomes construction disputes.
Bases for Construction Dispute?

• Change in Schedule
• Change in Scope
• Change in Design
• Force Majeure
• Specifications
• Interpretation of Condition of contract
 Methods of Dispute Resolution

Litigation Voluntary

Dispute
Resolution
Alternative
Dispute Enforced
Resolution
 Direct Negotiation

Negotiation
Mediation
Retrospective Conciliation

Mini-Trial
Procedure Dispute Resolution
Board (DRB)

Prospective Dispute Boards

Dispute
Adjudication
Arbitration
Board (DAB)
 Definitions‐1
• Litigation, n. The process of carrying on a
lawsuit.
• Alternative dispute resolution (ADR). A
procedure for settling a dispute by means
other than litigation, such as arbitration or
mediation.
 Definitions‐2
• Arbitration, n. A method of dispute resolution
involving one or more neutral third parties who
are usually agreed to by the disputing parties and
whose decision is enforceable.

• Arbitration Agreement. A contractual provision

mandating arbitration and thereby avoiding
litigation of disputes about the contracting
parties' rights, duties, and liabilities.
 Definitions‐3
• Conciliation, n. A settlement of a dispute in an
agreeable manner.

• Mediation, n. A method of nonbinding dispute

resolution involving a neutral third party who
tries to help the disputing parties reach a
mutually agreeable solution
 Definitions‐3
• Dispute Review Board (DRB), n. A DRB is a board
of impartial professionals formed at the beginning
of the project to follow construction progress,
encourage dispute avoidance, and assist in the
resolution of disputes for the duration of the
project.

• It is a real‐time ADR process for the resolution of

issues and claims, controlled by the owner and
the contractor.
 Definitions‐3
• Dispute Adjudication Board (DAB), n. A DAB is
a board of bipartisan professionals which
replace the engineer’s traditional role of a
decision maker or quasi‐arbitrator in the
settlement of disputes.
 FIDIC and Dispute Boards
• 1995‐1999
• 1995
• The popularity of the Dispute Boards increased
further when FIDIC adopted the Dispute Board
mechanism in the dispute resolution clause,
clause 20, of its Orange Book, issued in 1995 for
design/build projects.
• It is appropriate, however, to mention that the
type of Board chosen by FIDIC was not a Dispute
Review Board, but a Dispute Adjudication Board.
 FIDIC and Dispute Boards
• 1996
• Then, almost immediately, FIDIC published its
Supplement to the Fourth Edition of the Red
Book in November 1996, by which it provided
for the establishment of a Dispute
Adjudication Board to replace the engineer’s
traditional role of a decision maker or quasi‐
arbitrator in the settlement of disputes.
 FIDIC and Dispute Boards
• This significant change in FIDIC’s policy towards
the role of the engineer occurred as a result of
the strong criticism in the preceding years of the
role of the engineer as adjudicator or quasi‐
arbitrator.

• Much of the criticism related to the fact that the

engineer was appointed by the employer with
the contractor having no say in that appointment.
 FIDIC and Dispute Boards
• 1999
• In September 1999, the Dispute Board
mechanism was included as the first step in
the dispute settlement procedure for the new
suite of FIDIC’s standard forms of contract
conditions, the new Red, Yellow and Silver
Books.
From Simplest & Cheapest-Down to Upwards

Litigation
Arbitration

Dispute Boards

Conciliation
Mediation

Direct Negotiation
 Dispute Boards
1995
1995: The World Bank makes DBs mandatory
for all World Bank‐financed projects over US
$50M
1997
1997: Asian Development Bank & European
Bank for Reconstruction & Development adopt
DB
 Arbitration Essentials

1 2 5
3 4
• Arbitration Appointment Arbitration Award
Court
Agreement of arbitrators proceedings decree
 Public Procurement
PPRA §68. Arbitration
1) After coming into force of the procurement
contract, disputes between the parties to the
contract shall be settled through mediation
or arbitration.
2) The procuring agency shall provide for a
method of mediation or arbitration or both
in the procurement contract.
 Public Procurement
PPRA §68. Arbitration
1) It may be of interest to note the rules are
providing a clear option between mediation and
arbitration, while they have completely different
consequences.
2) Arbitration is a binding mechanism while
mediation is a method of assisted negotiations –
a consensual and voluntary mechanism with no
force of law behind its enforcement.
 Finality of Arbitration Awards
• On merits, generally no appeal lies against an
arbitration award.
• Award may be set aside on other grounds,
though, only some of which are:
– Misconduct
– Award not being reasoned and arbitrator’s failure
to suitably revise the award.
– Other reasons
 Appeal Against An Arbitration Award
• The jurisdiction of the courts is not appellate in nature
and an award passed by an Arbitrator cannot generally
be set aside on the ground that it was erroneous.
• It is not be open to the court to interfere with the
award merely because in the opinion of the court,
other view is equally possible.
• It is only when the court is satisfied that the Arbitrator
has been guilty of misconduct or the proceedings or
the award had been improperly procured or is
`otherwise' invalid that the court may set aside such
award.
 Historical Perspective‐1
• The origin of arbitration is lost in obscurity.
• Aristotle (384 BCE to 322 BCE) underlined the
benefits of conciliation.

• All major religions have recommended speedy

conciliation.
 Historical Perspective‐2
• In England merchants have resorted to
adjudication outside the Royal Courts from
the first development of national and
international trade.
• These included:
– Courts of the Boroughs
– Courts of the Fair
– Courts of the Staple Towns
 Historical Perspective‐3
• Commercial men were also elected to be part of the
tribunals
• Middle Ages (5th to 15th c. CE). Tribunals dealing with
commercial disputes. It was already acknowledged
that:
– people with special knowledge to the related trade would
be – on some disputes – better assessors to arbitrate on it
– and that the settlement of the commercial cases would be
speedier.
• These courts were the predecessors of modern
arbitration tribunals
 Legal Framework for Arbitration‐1
• Statutory Law
– Law made by the legislature
• Constitutional law
– Constitution of the country
• International law
 Legal Framework for Arbitration‐2
• Private Law
– Contract between the parties
• Common Law
– The body of law derived from judicial decisions, rather
than from statutes or constitutions;
• Equity
– In its technical sense, equity may ... be defined as a
portion of natural justice which, although of a nature
more suitable for judicial enforcement, was for
historical reasons not enforced by the Common Law
Courts, an omission which was supplied by the Court
of Chancery.
 Legal Framework for Arbitration‐3
Arbitration
• International Law
– Convention on the Settlement of Investment Disputes
(ICSID) between States and Nationals of Other States
(The Washington Convention), 1965; Ratified by
Pakistan in 1965
• National Statutes
– The Arbitration Act, 1940, (X OF 1940)
– Arbitration (International Investment Disputes) Act,
2011 (IX of 2011)
 Legal Framework for Arbitration‐4
Enforcement of Arbitration Awards
• International Law
– United Nation’s Convention on the Recognition
and Enforcement of Foreign Arbitral Awards 1958
(New York Convention)
• National Statutes
– Recognition and Enforcement (Arbitration
Agreements and Foreign Arbitral Awards) Act,
2011
 The Arbitration Act, 1940
Definitions:
In this Act, unless there is anything repugnant in the
subject or context,‐
a) “arbitration agreement” means a written agreement to
submit present or future differences to arbitration, whether
an arbitrator is named therein or not
b) “court” means a Civil Court having jurisdiction to decide the
question forming the subject‐matter of reference if the
same had been the subject‐matter of a suit, but does not,
except for the purpose of arbitration proceedings under
Section 21, include a Small Cause Court;
c) “reference” means a reference to arbitration
§2, Arbitration Act, 1940
 Powers of the Arbitrator
• Administer oath to parties and witnesses
1

• Seeks court’s opinion on questions of law

2

• Correct typographical mistakes in the award

3

• Interrogate parties
4
 General Principle of Powers
• There is an assumption, subject to three
limitations, that an arbitrator will have such
powers as are necessary for the discharge of
his obligations.
1. The parties to arbitration cannot confer such
powers upon the arbitrator that even they do
not posses
2. Arbitrator has no power over third parties
3. Arbitrator has no such powers as are reserved by
courts
 The Arbitration Act, 1940
Powers of arbitrator:
The arbitrators or umpire shall, unless a different intention is expressed
in agreement, have power to:

a) administer oath to the parties and witnesses appearing;

b) state a special case for the opinion of the Court on any question of
law involved, or state the award, wholly or in part, in the form of a
special case of such question for the opinion of the Court;
c) make the award conditional or in the alternative;
d) correct in an award any clerical mistake or error arising from any
accidental slip or omission;
e) administer to any party to arbitration such interrogatories as may, in
the opinion of the arbitrators or umpire, be necessary.

§ 13, Arbitration Act, 1940

 The Arbitration Act, 1940
Judgment in terms of award:
• Where the Court sees no cause to remit the award or any
of the matters referred to arbitration for reconsideration or
to set aside the award, the Court shall, after the time for
making an application to set aside the award has expired,
or such application having been made, after refusing it,
proceed to pronounce judgment according to the award,
and upon the judgment so pronounced a decree shall
follow and no appeal shall lie from such decree except on
the ground that it is in excess of, or not otherwise in
accordance with, the award.

§ 17, Arbitration Act, 1940

 The Arbitration Act, 1940
Powers of the Court to Modify the Award
The Court may by order modify or correct an award :
• (a)Where it appears that a part of the award is upon a
matter not referred to arbitration and such part can be
separated from the other part and does not affect the
decision on the matter referred; or
• (b) Where the award is imperfect in form, or contains
any obvious error which can be amended without
affecting such decision; or
• (c) Where the award contains a clerical mistake or an
error arising from an accidental slip or omission.
§ 13, Arbitration Act, 1940
 The Arbitration Act, 1940
§ 26‐A. Award to set out reasons:
1) The arbitrators or umpire shall state in the award the
reasons for the award in sufficient detail to enable the
Court to consider any question of law arising out of the
award.
2) Where the award does not state the reasons in sufficient
detail, the Court shall remit the award to the arbitrators or
umpire and fix the time within which the arbitrator or
umpire shall submit the award together with the reasons in
sufficient detail: Provided that any time so fixed may be
extended by subsequent order of the Court.
3) An award remitted under sub‐section (2) shall become void
on the failure of the arbitrators or umpire to submit it in
accordance with the direction of the Court.
Arbitration (Amendment) Act
1981
 The Arbitration Act, 1940
• An award shall be reasoned to fully illustrate
the questions of law involved
• Court may remit the award, if not so reasoned
• A revised award may be accepted by the court

§ 26 (A), Arbitration Act, 1940

 The Arbitration Act, 1940
Grounds for setting aside award:
An award shall be set aside on one or more of the following
grounds, namely:
a) that an arbitrator or umpire has misconducted himself or
the proceedings;
b) That an award has been made after the issue of an order
by the Court superseding the arbitration or after the
arbitration proceedings have become invalid under
Section 35;
c) That an award has been improperly procured or is
otherwise invalid

§ 30, Arbitration Act, 1940

 The Arbitration Act, 1940
Misconduct
Misconduct has not been defined by the
Arbitration Act. Common heads of misconduct
• proceeding ex parte, without justification;
• private inquiries by the arbitrator;
• absence of the arbitrator;
• delegation by the arbitrator, or the arbitrator
associating strangers with the arbitration;
 The Arbitration Act, 1940
Misconduct
• use of wrong criteria by the arbitrator;
• use of wrong material;
• to hear only one party in the absence of the
other;
• to fail to give notice of hearing;
• to amend the issues behind the back of the
parties, thereby causing prejudice;
• irregularities in the award.
 The Arbitration Act, 1940
Award to be signed and filed:
1) When the arbitrators or umpire have made
their award, they shall sign it and shall give
notice in writing to the parties of the making
and signing thereof and of the amount of
fees and charges payable in respect of the
arbitration and award.

§ 14, Arbitration Act, 1940

 The Arbitration Act, 1940
Award to be signed and filed:
2) The arbitrators or umpire shall, at the request of any party
to the arbitration agreement or any person claiming under
such party or if so directed by the Court and upon
payment of the fees and charges due in respect of the
arbitration and award and of the costs and charges of
filing the award, cause the award or a signed copy of it,
together with any depositions and documents which may
have been taken and proved before them, to be filed in the
Court, and the Court shall thereupon give notice to the
parties of the filing of the award.

§ 14, Arbitration Act, 1940

 The Arbitration Act, 1940
Award to be signed and filed:
3) Where the arbitrators or umpire state a
special case under clause (b) of Section 13,
the Court, after giving notice to the parties
and hearing them, shall pronounce its
opinion thereon and such opinion shall be
added to, and shall form part of, the award.

§ 14, Arbitration Act, 1940

 International Arbitration
• 1958 New York Convention
• Question of enforcing the New York
Convention in Pakistan
 Drafting the Arbitration Award‐1
Outline
• Basic Data
– Name(s) of the arbitrator(s)
– Place of arbitration
– The manner in which the tribunal came to be
appointed
– References to any decisions of a court including any
extension granted by the court in the time during
which award shall be handed down
– The names and addresses of the parties and their
legal representatives
 Drafting the Arbitration Award‐1
Outline (Continued)
– How the dispute arose
– Terms of arbitration tribunal, set out in full and
date on which they became effective
– The applicable law
– Adopted procedural rules
– The language of proceedings and reference to any
departure from them along with reasons for such
departure
 Drafting the Arbitration Award‐1
Outline (Continued)
– Brief chronology of the dispute
– Brief chronology of the proceedings
– The dates of various hearings
– Steps taken by the tribunal to ascertain the facts
– The date when the proceedings were closed
 Drafting the Arbitration Award‐1
• Outline (Continued)
• Written Position of the Parties
– Description of claims and counterclaims of each party
• Key Questions
• Substantive Summary of Proceedings Before the
Tribunal
– Description of the evidence lead and the law relied
upon by each party in support of its claim and in
rebuttal of the opponent’s claim
 Drafting the Arbitration Award‐1
Outline (Continued)
• The Facts
– A reasoned description of the facts, separating proven
and unproven facts, stating also the principles applied
• The Law
– A reasoned description of the principles of law
adopted, stating also the principles applied
• Application of Law to the Facts
– A summary of the conclusions reached
– A calculation of all relevant sums
 Drafting the Arbitration Award‐1
Outline (Continued)
• Dispositive Part of The Award
– Separate the dispositive part of award from the
rest of the text. It may begin like this:
”For these reasons, the arbitration tribunal makes the
following award: . . . . . ”
– The award shall be set out point‐by‐point.
 Language Note
• dispositive (dis‐poz‐ǝ‐tiv), adj. 1. Being a
deciding factor; (of a fact or factor) bringing
about a final determination.
 Drafting the Arbitration Award‐1
Outline (Continued)
• Typical wording take the following form:
1. That claims 1, 2 and 3 of the Claimant [name]
are upheld and the Respondent [name] shall pay
the Claimant Rs. , by [date];
2. That claims 4, 5 and 6 of the Claimant [name]
are rejected;
3. That claims 7, 8 and 9 of the Claimant [name]
are upheld and the Respondent [name] shall pay
the Claimant Rs. , by [date];
 Drafting the Arbitration Award‐1
Outline (Continued)
4. That the Respondent [name] shall pay the Claimant
interest on the amount awarded under paragraph 1
above at the rate of [ %], per annum from [date] until
the date of full payment;
5. That the Respondent [name] shall pay the Claimant
interest on the amount awarded under paragraph 3
above at the rate of [ %], per annum from [date] until
the date of full payment;
6. That all other claims of the Claimant and Respondent,
including claims by way of defense and counterclaims,
are dismissed.

For award as to interest, see Section 34(1) of The Code of Civil Procedure.
 Drafting the Arbitration Award‐1
Outline (Continued)
• A minor grammatical point ‐ look at each
disposition and read it with the introductory
line so that the whole is a grammatical
sentence, bearing in mind that a clause
following the word "that" may need to be in
subjunctive mood (because it is sub joined!).
 Drafting the Arbitration Award‐1
Outline (Continued)
• Sign the award, stating your name, position,
date and place and affix the seal of your
office, where applicable.
 Drafting the Arbitration Award‐1
Outline (Continued)
• Annexed Documents
– Make all documents to be attached, a part of the
award, through reference.
– Attach a schedule of annexed documents and
attach all such documents after signing them.
 Drafting the Arbitration Award‐1
Outline (Continued)
• Covering Letter
– Address the covering letter to the court or the
parties to the dispute, as applicable under section
14 of the Arbitration Act.
 Drafting the Arbitration Award‐2
• Format
– Provide titles to all sections.
– Number all paragraphs.
• Style
– Uniformly follow a particular English convention
– An award must be concise and confined to points
required for reaching the final decision.
Drafting the Arbitration Award‐2
– Be consistent in the use of words, phrases and
terms and in the expression of reasoning.
– Avoid repetition
– Use impersonal language. “The arbitrator (or the
arbitration tribunal) finds . . .”
 Drafting the Arbitration Award‐3
Reasoning
• For reasoning to be cogent, of course it must
be logical and clear, but first it must be based
upon sound premises. The premises upon
which an arbitral award is based include,
firstly, the facts.
• The facts, in this context, include the relevant
law.
 Drafting the Arbitration Award‐3
Reasoning
• Indeed there is an argument that suggests
that the distinction between law and fact is
not a logical distinction but practical one,
simply to obviate the need for law, as such, to
be subject to proof.
• That proposition is supported by the approach
of the English legal system to foreign law,
which is a matter of fact, subject to proof.
 Drafting the Arbitration Award‐3
Reasoning
• The principal facts are those that the parties
have presented, some of which may have
been the subject of evidence by witnesses,
some of which may have been common
ground, and some of which may have been
within the arbitrator's own knowledge and
experience.
 Drafting the Arbitration Award‐4
General Legal Guidance
• The principles of natural justice require that each party
have a sufficient opportunity to present his or her case and
to deal with any matter that may be against them. Not, as is
sometimes said, to deal with the case of the other party,
but to deal with any matter that may be against them.
• If an arbitrator is aware of something, or becomes aware of
something ‐ regardless of whether it is fact or law, or even
his or her opinion, but not everyone agrees with that wide
scope ‐ it must be put to the parties if it is to be taken into
account, and it is better that it be put to the parties in any
event.
 Drafting the Arbitration Award‐4
General Legal Guidance
• Clearly understand the law of evidence
• He who claims something has a duty to prove it
• Decide on the preponderance of evidence
• Be as fair and even‐handed as possible, both
in letter and spirit and err on the side of
caution to avoid even a semblance of
misconduct
 Drafting the Arbitration Award‐4
General Legal Guidance
• That is important. The Arbitrator applies his
skill and knowledge, but not his special
knowledge of particular matters – at least not
without a lot of precautions.
 Drafting the Arbitration Award‐4
General Legal Guidance
• It is undoubtedly true that an expert arbitrator
can use his own expert knowledge. But a
distinction is made in the cases between general
expert knowledge and knowledge of special facts
relevant in the particular case
• Do not decide ex aequo et bono (from equity and
conscience), but in accordance with the law,
except where the arbitration agreement and the
law expressly provide to the contrary
 ex aequo et bono
• ex aequo et bono (eks ee‐kwoh et boh‐noh).
[Latin] According to what is equitable and
good
 Drafting the Arbitration Award‐4
General Legal Guidance
• Let us consider some examples. The principles
seem to me self‐evident, but they are also well
established.
• In British Oil & Cake Mills ‐v‐ Horace Battin & Co
(1922) 13 LL LR 443, per Darling J. at p. 444:
• "The people who go to arbitration desire to have
arbitrators or umpires who will not decide on
evidence alone, but will bring to the consideration
of the case a great deal of special knowledge."
 Drafting the Arbitration Award‐4
General Legal Guidance
• The theme is refined in Jordeson & Co ‐v‐ Stora
Kopparbergs Bergslags A/B (1931) 41 LL LR 201 per
Branson J. at p. 203
– "Now, I think that the fact that this umpire was an expert
in the timber trade and was appointed because he was
such an expert should not be lost sight of.
– I think the parties must be taken to have assented to his
using the knowledge which they chose him for possessing;
– I do not say knowledge of special facts relating to a special
or particular case, but the general knowledge of the timber
trade which a man in his position would be bound to
acquire.“
 Drafting the Arbitration Award‐4
General Legal Guidance
• That was about the state of things around
Vladivostok during the Manchurian war. From
a philosophical point of view, Darling J. may
not have been strictly correct. The arbitrator's
knowledge is a form of evidence, and that is
something that will become clearer as we
discuss it.
 Drafting the Arbitration Award‐4
General Legal Guidance
• A most misunderstood case is that of Fox ‐v‐ P.
G. Wellfair Ltd [1981] 2 Lloyd's Rep 514, in
which the arbitrator was removed, not (as is
sometime supposed) for using his special
knowledge, but for doing so without notice to
the party who was affected by it and by giving
the parties no opportunity to deal with it.
 Drafting the Arbitration Award‐4
General Legal Guidance
• Per Dunn L.J. at p 528:
– "He should not act on his private opinion without
disclosing it. It is undoubtedly true that an expert
arbitrator can use his own expert knowledge.
– But a distinction is made in the cases between
general expert knowledge and knowledge of
special facts relevant in the particular case. “
 Drafting the Arbitration Award‐4
General Legal Guidance
• And at p. 529:
– " . . If the expert arbitrator, as he may be entitled
to do, forms a view of the facts different from that
given in the evidence which might produce a
contrary result to that which emerges from the
evidence, then he should bring that view to the
attention of the parties."