Arbitration in Pakistan: What Changes Once the Arbitration Act 2024 Takes Effect
The 1940 Act still governs domestic arbitration today. Here’s what shifts once the pending UNCITRAL-based reform is enacted.
Anyone drafting an arbitration clause for a Pakistan-seated arbitration today is still working under the Arbitration Act, 1940 — a statute that predates the New York Convention and gives courts considerably more scope to intervene in the arbitral process than most international counterparties expect going in. That’s worth knowing before signing anything, because a reform is coming, but it isn’t law yet.
Where things actually stand
The Arbitration Law Review Committee, working under the Law and Justice Commission of Pakistan, drafted a new Arbitration Act built on the UNCITRAL Model Law — the same modern framework most arbitration-friendly jurisdictions already use. The Federal Cabinet approved the bill in 2024. As of today, though, it remains before the National Assembly rather than in force. Until it’s actually passed, every arbitration seated in Pakistan is still governed by the 1940 Act, not the reform.
What’s expected to change once it passes
The core shift is toward limiting court intervention to the narrow grounds the Model Law recognises — things like a tribunal exceeding its jurisdiction or a clear violation of due process — rather than the broader supervisory role Pakistani courts currently have under the 1940 Act. That should mean faster enforcement of awards, fewer opportunities to delay proceedings through court applications, and a framework that international counterparties recognise from other jurisdictions, which in turn should make Pakistan-seated arbitration a more credible option for cross-border contracts.
What this means for a clause being drafted right now
A dispute resolution clause signed today should be drafted with the current 1940 Act framework in mind, not the anticipated reform — but it’s worth building in enough flexibility that the clause doesn’t become awkward to work with once the new Act does take effect. Separately, enforcement of foreign arbitral awards in Pakistan already runs under a different statute, the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, which implements the New York Convention and isn’t affected by this pending domestic reform either way.
KBL & Associates advises on dispute resolution clauses with this transitional landscape specifically in mind, and will update this note once the Arbitration Act 2024 is actually enacted.