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Orient Power Company (Private) Limited v Sui Northern Gas Pipelines Limited
PLD 2019 Lahore 607
Introduction
International commercial arbitration has emerged as an expeditious and cost-effective mechanism of dispute resolution compared with the traditional means of litigation. The objective of international or foreign arbitration is to provide a neutral forum for settlement of disputes for parties engaged in international business transactions. While appreciating the efficacious mode of commercial dispute resolution through arbitration, Pakistan signed a multilateral treaty, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“Convention”) and enacted the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 (“2011 Act”) to give effect to the Convention. Section 10 of the Act repeals the Arbitration (Protocol and Convention) Act 1937 (“1937 Act”) which was previously applicable in Pakistan.
The Convention envisages a pro-enforcement policy which is also highlighted in Section 8 of the 2011 Act.3 Before the 2011 Act, there was some confusion as to the definition of a foreign arbitral award as well as its enforcement.4 It created uncertainty and incoherence in the domestic jurisprudence causing long delays in the enforcement of foreign arbitral awards. However, Section 2 (e) of the 2011 Act defines that an award made in a Contracting State5 is a foreign award. Section 3 of the 2011 Act provides that the High Court shall have exclusive jurisdiction for the recognition and enforcement of foreign awards. The 2011 Act aims to minimise delays that hindered the enforcement of foreign awards. This judgment implements the 2011 Act in its letter and spirit, ushering an era of expeditious enforcement of foreign arbitral awards in Pakistan.
This case note provides brief facts of the case and narrates the objections raised before the court. It discusses arguments of the counsels and opinion of the court. It analyses the judgment of the division bench of the Lahore High Court (“LHC”), which deals with the recognition and enforcement of foreign arbitral awards and makes jurisprudential contribution in three important areas. Firstly, the judgment decides as to the exclusive jurisdiction of the LHC for the recognition and enforcement of foreign arbitral awards while highlighting the pro-enforcement policy of the Convention. This judgment has effectively addressed the confusion caused by the Taisei Corporation v A.M. Construction Company (Pvt.) Ltd. (“Taisei case”), in which the LHC held that the Arbitration Act 1940 (”1940 Act”) Secondly, the judgment enriches jurisprudence of commercial contracts such as the energy sector agreements. While extensively exploring foreign jurisdictions, the LHC explains the meaning and concept of take or pay clause and holds that it stipulates a contractual obligation and not a penalty clause. Thirdly, the judgment determines the meaning and scope of the public policy of Pakistan after a broad analysis of foreign and domestic jurisprudence. In conclusion, this case note makes a few suggestions for defining the meaning and source of the public policy of Pakistan.
Facts of the Case
In October 2016, Orient Power Co. (Private) Ltd. (“Appellant”) and Sui Northern Gas Pipelines Ltd. (“Respondent”) entered into a Gas Supply Agreement (“GSA”) for supply of gas to the Appellant for its power generation plant. A dispute arose between the parties as to the Appellant’s obligation to take or pay under clause 3.6 of the GSA. In terms of clause 18.3 of the GSA, the dispute was referred to the London Court of International Arbitration, which passed the Awards dated 27.2.2017 and 13.6.2017 (“Awards”).
The Appellant raised objections on the Awards before the civil court under Section 14(2) of the 1940 Act. The Respondent approached the Lahore High Court under Section 6 of the 2011 Act for the recognition and enforcement of the Awards. The learned single judge of the Lahore High Court recognised the Awards on 4.4.2018 after finding that the High Court has exclusive jurisdiction to enforce foreign arbitral awards under the 2011 Act. An intra-court appeal was filed before the division bench of the Lahore High Court and the same was dismissed.
Objections Raised Before the Court
The Appellant challenged the impugned order dated 4.4.2018, passed by the learned single judge of the Lahore High Court and raised the following objections:
Preliminary objection: The High Court does not have exclusive jurisdiction to recognise and enforce the foreign arbitral awards and that the civil court also has similar power. In other words, the High Court and the civil court have parallel jurisdiction to recognise and enforce the foreign arbitral awards. The Appellant has the legal right to file objections against the Award before both the courts; before civil court under the 1940 Act and before the High Court under the 2011 Act.
First objection: In view of Article V (1) (c) of the schedule to the Act, the arbitrator had no jurisdiction over the first claim of Rs.104,133,296/- due under the Payment Agreement dated 11.1.2010 as there was no arbitration clause under the said Agreement.
Second objection: As per Article V (2) (b) of the schedule to the Act, the second claim of Rs.603,202,083/- under clause 3.6 of the GSA is against Section 7414 of the Contract Act, 1872 (Contract Act) and the public policy of Pakistan. The following section contains the arguments of the both parties on these objections and the respective opinions of the court.
Arguments on Objections and Opinion of the Court
Arguments on the preliminary objection of jurisdiction of the High Court
The learned counsel for the Appellant contended that he was denied a fair opportunity of hearing as the impugned order dated 4.4.2018 was decided ex-parte; that he has a right to file objections against the Awards both under the 2011 Act and the 1940 Act; that this right is recognised in the Taisei Case, however, the single judge of the Lahore High Court made the impugned order without considering the matter of concurrent jurisdiction as recognised in Taisei Case, in which it was held that Sections 14, 30 and 33 of the 1940 Act are applicable to the foreign awards as equivalent provisions are not available under the 2011 Act; that the 1940 Act and the 2011 Act must be interpreted harmoniously to provide all rights available under the law to the Appellant.
The counsel for the Respondent argued that in view of Section 2(e),19 6, 7, and 8 of the 2011 Act, the High Court has exclusive jurisdiction to recognise and enforce the foreign arbitral awards and the 1940 Act is not applicable to foreign awards. Section 2(e) defines that an award made in a Contracting State, that is London in this case, is a foreign award, and the High Court is the court of enforcement. Section 6 stipulates that a foreign award be recognised and enforced per the order of the High Court. Section 7 states that an award is to be recognised and enforced as per Article V of the Convention; and Section 8 stipulates that in case of any inconsistency between the Act, the law, or any judgment of the court, Article V of the Convention shall prevail. The counsel argued that in Taisei Case, the court found that the award in question was a domestic award and the 1940 Act is applicable to domestic awards; that there is neither any ambiguity in the law nor the Appellant challenged any provision of the 2011 Act, thus, harmonious construction is not required.
Opinion on the preliminary objection
The apparent discrepancy regarding the jurisdiction between the High Court and civil court in enforcing a foreign award under 2011 Act and 1940 Act and held that under Section 2 (d) read with Section 3 of the 2011 Act, the High Court has exclusive jurisdiction for the recognition and enforcement of a foreign arbitral award. Section 6 enables the High Court to recognise and enforce foreign arbitral awards as order of a domestic court. Section 7 envisages that enforcement of a foreign award cannot be refused except on the grounds contained in Article V of the Convention that is appended with the schedule of the Act. The Court relied on various judgments to argue that even under the 1937 Act, the High Courts in Pakistan had exclusive jurisdiction to enforce and recognise foreign arbitral awards. The Court noted that the Taisei Case relied upon Hitachi Ltd. and another v Rupali Polyester and others, in which the provisions of the 1937 Act were interpreted. After the repeal of the 1937 Act, the Court noted, an award made in a contracting state, notwithstanding the governing law of the contract, is a foreign award and the 2011 Act is the applicable law. The Court further stated that allowing parties to approach the High Court and civil courts simultaneously is not only impracticable, but also contrary to the intent and purpose of the 2011 Act. It may cause conflicting judgments and uncertainty towards the same award. The Court pointed out that the 2011 Act aims to facilitate the recognition and enforcement of foreign arbitral awards to avoid litigious delay. The Court emphasised on Section 8 to establish that the 2011 Act intends to enforce pro-enforcement policy envisaged in the Convention and concluded that the High Court has exclusive jurisdiction for the recognition and enforcement of foreign arbitral awards.
Arguments on the first objection against the first claim: Article V (1) (c) of the schedule to the Act.
The first claim pertains to the payment of Rs.104,133,296/- to the Respondent under the Payment Agreement dated 11.1.2010.
The learned counsel for the Appellant argued that the Payment Agreement does not provide any arbitration clause, thus, the Arbitrator had no jurisdiction to decide the claim. He argued that the parties entered into the GSA, which provided a dispute resolution mechanism in clause 18; however, that mechanism is not applicable to the Payment Agreement; that the dispute with respect to the non-payment of Rs.104,133,296/- is beyond the jurisdiction of the Arbitrator. In the absence of a specific arbitration clause in an agreement, a matter cannot be referred to arbitration. Reliance was placed on Messrs MacDonald Layton and Company Limited v Messrs Association Electrical Enterprises Limited and another, Syed Arshad Ali v Sarwat Ali Abbasi, and Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan.
The Respondent’s counsel argued that the dispute between the parties falls under clause 3.6 (take or pay clause) of the GSA. After making the payment, the Appellant is given the choice either to take the gas or defer taking the gas to a subsequent date. The counsel argued that as decided by the Expert, the Appellant was bound to pay the amounts owed under clause 3.6 of the GSA to the Respondent within fifteen days, failing which the Appellant sought extension of time for making the due payments and that extension was provided under the Payment Agreement. The counsel stressed that clause 4 of the Payment Agreement specifically provides that the provisions of the GSA shall prevail and apply to the Payment Agreement. Thus, the arbitration clause of the GSA was applicable and the Arbitrator had jurisdiction to decide the claim; that the dispute was referred to the Expert under clause 18.2 of the GSA and his determination was binding on the parties. Therefore, the counsel argued, the Appellant is obliged to make the payment to the Respondent.
Opinion on the first objection
The Court observed that the first claim pertains to the demand for late payment surcharge under the Payment Agreement. The Court emphasised that as per clause 1 and 4 of the Payment Agreement, the definitions given in the GSA are not only applicable to the Payment Agreement but also have a prevailing effect. Thus, “the settlement recorded in the Payment Agreement is part and parcel of the obligations under the GSA.” The Court noted, “in pith and substance, the Payment Agreement reflects the Appellant’s acknowledgement that amounts are due to the Respondent under the GSA, however, since payments could not be made at the prescribed time as per the GSA, the parties agreed to make the payments as per the Payment Agreement. The obligation to pay arises under the GSA and not under the Payment Agreement which was entered into essentially to facilitate the Appellant.” The Court held that “the Payment Agreement was not an independent contract outside of the GSA. It was an agreement to make payment pursuant to obligations under the GSA that too on account of the Appellant’s default of making payments within the fifteen days mandated by the Expert.” Clause 18.3 of the GSA covers all disputes between the parties. This dispute was referred to the Expert under clause 1.1 of the GSA and the determination of the Expert was binding on both the parties. However, the Appellant failed to comply with that determination and sought extension in time for making the due payment to the Respondent. The matter was settled in terms of the Payment Agreement to accommodate request of the Appellant. Therefore, the Court held that “the entire purpose of the Payment Agreement was to ensure that the parties fulfil their obligations under the GSA. Therefore, we conclude that the dispute resolution mechanism under the GSA was applicable to the Payment Agreement and that the Sole Arbitrator was well within his jurisdiction to make determination in terms thereof.”
Arguments on the second objection against the second claim: Article V (2) (b) of the schedule to the Act
The second objection of the Appellant against the Award is that the amount of Rs.603, 202,083/- under clause 3.6 (take or pay clause) of the GSA is against Section 74 of the Contract Act, 1872 and the public policy of Pakistan.
The Appellant’s counsel argued that the Respondent is not entitled to this amount because under Clause 3.6 (a) of the GSA, the Appellant was under an obligation to take gas from the Respondent for the relevant period. The Appellant being not able to take gas is in breach of this obligation. As per Section 74 of the Contract Act, if a contract is breached, the complaining party can only claim reasonable compensation after proving an estimate of the actual loss suffered. Hence, the Respondent is required to prove actual loss suffered before claiming any amount from the Appellant. For this, the counsel placed reliance on Province of West Pakistan v Messrs Mistri Patel & Co. and another, Syed Sibte Raza and another v Habib Bank Ltd., Saudi-Pak Industrial and Agricultural Investment Company (Pvt.) Ltd., Islamabad v Messrs Allied Bank of Pakistan and another, The Bank of Punjab. Dewan Farooque Motors Limited, and Atlas Cables (Pvt.) Limited v Islamabad Electric Supply Company Limited and another.
Essentially, the counsel argued that clause 3.6 is a penalty clause and in case of its breach by the Appellant, the Respondent, at best, can claim damages to the extent of proving actual loss. The counsel pointed out that the Respondent admits that the actual loss amounts to Rs.356, 104,346.25/-, therefore, in any case, the Respondent cannot be awarded more than the admitted loss as it is against the public policy concerns such as fairness and morality. It would amount to unjust enrichment of the Respondent, which offends the principles of economic justice as embodied in the Constitution. The counsel stressed that the Appellant was entitled to take the make-up gas even after the cut-off date (March 2011). The counsel seems to argue that since the price of gas is paid to the Respondent, the Appellant can take the make-up gas anytime, and the forfeiture of the paid amount, without supply of gas (even after the cut-off date) offends Section 74 of the Contract Act and unjustly enriches the Respondent.
The counsel for the Respondent contended that as per clause 3.6 (c) of the GSA, the Appellant could take make up gas till the cut-off date being March 2011, which the Appellant failed to do so. After this date, the Respondent was not obliged to provide make up gas. The Appellant, however, continued consuming gas released from May to October 2011 and failed to make the payment. Instead of making payment for these six months, the Appellant attempted to adjust this payment against the lapsed make up gas entitlement, which cannot be granted per clause 3.6 (c) of the GSA.
As to the public policy of Pakistan, the Appellant argued that clause 3.6 is a penalty clause, and in case of its breach (by the Appellant), the Respondent can claim a reasonable compensation and that too after proving actual loss in terms of Section 74 of the Contract Act. The counsel reiterated that the claim amount of Rs.603,202,083/- is against the law and the public policy of Pakistan. As per Article V (2) (b) of the Convention, the enforcing court can refuse a foreign arbitral award on the ground of public policy. As the word ‘public policy’ is not defined in the Convention or the Act, the learned counsel relied on the literature and judgments from various jurisdictions to argue, “public policy means matters of national interest related to national sovereignty.”46 In context of the claim under dispute, the counsel argued that the Respondent should not be granted more than what it has actually suffered; that unjust enrichment of the Respondent would offend the constitutional principle of economic justice and contractual rule of reasonable compensation envisaged in Section 74 of the Contract Act.
The learned counsel for the Respondent argued that in terms of Section 23 of the Contract Act, “any element of injury to public interest would fall within the domain of public policy.” Reliance was placed on Nan Fung Textiles Ltd. v Sadiq Traders Ltd.,48 to define the scope of public policy. This judgment enumerates the objects which can nullify a contract on the basis of public policy: the objects which are illegal under the common law or any legislation and are injurious to good government either in the field of domestic or foreign affairs; the objects which interfere with the administration of justice; the objects injurious to family life and the objects, which are against the economic interest of the public. While relying upon Haji Abdul Karim and others v Sh. Ali Muhammad and others, Maulana Abdul Haque Baloch and others v Government of Balochistan through Secretary Industries and Mineral Development and others, Shri Lal Mahal Ltd. v Progetto Granto Spa, and Phulchand Exports Ltd. v O.O.O. Patriot, the counsel argued that the public policy exception is to be construed narrowly and it is relevant only when there is an element of injury to the public, which is not the case in hand. Hence, in this case, the Award cannot be refused based on public policy exception.
Opinion on the second objection
With respect to the second claim, the Court noted two issues: First, whether the take or pay clause is governed by the law of damages under Section 74 of the Contract Act. Second, whether the award of Rs.603,202,083/- is against the public policy of Pakistan.
The Court observed that “the take or pay clause is a common term in gas supply agreements, which gives the buyer the option to take supply of the gas or else pay for it and defer the taking of the gas supply. The rationale behind this clause is to allocate risk between the supplier and buyer over long term contracts. The buyer seeks stability in supply and some flexibility in prices and the seller seeks assurance for a guaranteed income.” The Court explained that the take or pay clause envisages two separate obligations of the seller: the obligation to supply gas during the firm delivery period and to provide make up gas after the cut-off date till a specified date. The obligation of the buyer is to pay for the gas. The Court held that “the obligation of the buyer under Clause 3.6 (a) of the GSA is to pay for the gas and not take the gas.” The court further clarified that “due to take or pay clause, a breach cannot be triggered on account of failure to take gas. The buyer has the right to exercise the option to take gas or invoke the take or pay clause. Hence the exercise of either option is valid under the GSA and would not constitute a breach thereof. Therefore we find that the take or pay payment is not due because of a breach or default rather it flows from the contracting party‘s valid choice to invoke the right to invoke the take or pay clause.”
While relying upon Port of Tilbury (London) Ltd. v Store Enso Transport & Distribution Ltd., M&J Polymers Ltd v Imerys Minerals Ltd., Cavendish Square Holding BV v Talat El Makdessi, Philips Hong Kong Ltd v Attorney General of Hong Kong, Prenalta Corporation v Colorado Interstate Gas Company, Universal Resources Corporation v Panhandle Eastern Pipe Line Company, Miraka Limited v Milk New Zealand (Shanghai) Co. Limited, and Churchill Falls (Labrador) Corporation Limited v Hydro Quebec,64 the Court observed that “the take or pay clause, being a common provision in commercial contracts, especially gas purchase agreements, is valid and enforceable and cannot be considered as a penalty provision.”
The Court noted that the Appellant neither challenged the take or pay clause nor the payments made thereunder. Rather, the Appellant is aggrieved for not taking make up gas within the cut-off date and argues that the Respondent cannot forfeit the agreed/paid price under the GSA and can only seek damages in terms of Section 74 of the Contract Act 1872. In view of the negotiated and agreed upon terms of the GSA, the Court observed that the Appellant’s argument cannot sustain. Hence, the Court held that “the take or pay clause does not offend Section 74 of the Contract Act.” In other words, the Court concluded that the take or pay clause is not governed by the law of damages envisaged under Section 74 of the Contract Act 1872.
With reference to the public policy exception, the Court examined the Convention and observed that “the intent of the Convention is pro-enforceability of foreign awards.” The Court relied upon Parsons & Whittemore Overseas Co., Inc. v Societe Generale de I’Industrie du Papier RAKTA and Bank of America, Polytek Engineering Co. Ltd. v Hebei Import & Export Corp.,Deutsche Schachtbau-und Tiefbohrgesellschaft m.b.H. v Ras Ali Khaimah National Oil Co., Shell International Petroleum Co. Ltd.
Court of Appeal, Allsop Automatic Inc. v Tecnoski snc, Corte di Appello, Ansell S.A. v OOO Med Bus, Serv., and Sultan Textile Mills (Karachi) Ltd., Karachi v Muhammad Yousuf Shamsi to conclude that “by and large the application of the public policy exception is restrictive and limited to exceptional circumstances that affect the most fundamental values of a State. Accordingly, public policy under Article V(2)(b) of the Convention is kept fluid and adaptive and can be invoked in cases of patent illegality or matters which are fundamental for a state.”
The Court observed that “the public policy exception should not be used as a ‘back door’ for ‘reviewing merits of a foreign arbitral award’ and to ‘create grounds’ which are not available under Article V of the Convention, as this would negate the obligation to recognise and enforce foreign arbitral awards.” On this premise, the Court stated that the “failure of the Appellant to invoke its make up gas right within the stipulated time does not render the take or pay clause as offensive to the fundamental or core values of Pakistan.” Finally, the Court held that “no loss is caused to the public and no fundamental policy is adversely impacted by requiring the parties to make good on their contractual commitments. Resultantly, the public policy exception is not made out even as per the Appellant’s own case.” In view of these findings, the appeal was dismissed and the order dated 4.4.2018 passed by the learned single judge of the High Court was maintained.
Analysis
This judgment is a significant contribution in the context of the increasing international commercial arbitration in Pakistan. It decides three important questions; the jurisdiction of the High Court for the recognition and enforcement of foreign arbitral awards; the meaning and scope of take or pay clause in commercial agreements such as the GSA; and the meaning and parameters of the public policy of Pakistan. While determining the jurisdiction of the High Court, the Court discussed and distinguished the case relating to the recognition and enforcement of foreign arbitral awards titled Taisei Corporation v A.M. Construction Company (Pvt.) Ltd., and decided two important legal issues: first, that after the repeal of the 1937 Act, the relevant law that caters for foreign arbitral awards is the 2011 Act; second, that the High Court has exclusive jurisdiction for the recognition and enforcement of foreign arbitral awards. This determination provides certainty in the law, which is a hallmark of any legal system.
The judgment moves on to elaborate the meaning and scope of take or pay clause in commercial contracts. While deciding the second claim, the Arbitrator observed that “Pakistani case law does not addrs the manner in which the take or pay clause should be interpreted and that there is a lacuna in Pakistani Law with regards to interpretation and validity of take or pay clause.” This judgment has filled this lacuna. The Court examined the jurisprudence of US, UK, Canada, and New Zealand to explain the meanings of take or pay clause, and concluded that “the take or pay clause being a common provision in commercial contracts…is valid and enforceable and cannot be considered as a penalty provision.”
The Court further observed that “the rationale behind this clause is to allocate risk over long term contracts. It acts as a risk sharing mechanism between the supplier and buyer where the buyer seeks stability in supply and some flexibility in prices and the seller seeks assurance for guaranteed income.” Thus, this judgment not only declares that take or pay clause is enforceable and not a penalty provision but also explains the rationale behind this clause. This is, in fact, the first judgment that explains the commercial sense of the take or pay clause in Pakistan.
The explanation of the public policy of Pakistan is also a valuable addition in the public policy jurisprudence. Our courts discussed public policy in Sultan Textile Mills (Karachi) Ltd., Karachi v Muhammad Yousuf Shamsi in the context of the 1937 Act, and in Nan Fung Textiles Ltd. v Sadiq Traders Ltd. with reference to Section 23 of the Contract Act. In Hub Power Co. v Wapda, the SC tagged corruption, fraud, and bribery as elements of public policy. However, these judgments failed to examine comparative jurisprudence and identify distinctive features of the public policy of Pakistan.
In this regard, the Court first examined the Convention and the 2011 Act to identify the pro-enforcement policy of foreign arbitral awards. Then, the Court explored the law and practice of public policy in foreign jurisdiction and observed, “the pro-enforcement policy is in itself a policy of the Contracting States.” The Court further noted that “violation of public policy must be compelling in order for us to justify setting aside a foreign arbitral award.” The Court observed that “by and large the application of the public policy exception is restrictive and limited to exceptional circumstances that affect the most fundamental values of a State.” In this case, the Court held that as “no injury is caused in the performance of the GSA to the public, no loss is caused to the public and no fundamental policy is adversely impacted by requiring the parties to make good on their contractual commitments. Resultantly the public policy exception is not made out.”
The Court brilliantly identified new elements of the public policy of Pakistan such as ‘core values of the State’ and ‘fundamental notions of morality and justice.’94 The Court observed that the impugned arbitral award does not offend these core values or the fundamentals, and held that “public policy exception cannot be used as back door to review the merits of a foreign arbitral award or to create grounds which are not available under Article V of the Convention.” The Court emphasised that the “failure of the Appellant to invoke its make up gas right within stipulated time does not render the take or pay clause as offensive to the fundamental or core values of Pakistan.”
Further, as the law 2011 had not been able to achieve its purpose and the Convention was not honoured in letter and spirit, this judgment emphasised on that purpose i.e. the enforcement of foreign arbitral awards without any delay. It is expected that this judgment inspires other courts in Pakistan to enforce foreign arbitral awards within a reasonable time.
The judgment requires that the contractual arrangement be honoured and does not allow one party to change the business deal simply to avoid liability. It would enhance the sanctity of commercial contracts creating a conducive business environment for both local and foreign investors.
Nevertheless, the judgment could have elaborated a few points. The relevant provisions of the 2011 Act could have been reproduced in the judgment for convenience of reference and appreciation of the law. The applicability and scope of the 1940 Act and the 2011 Act should have been discussed thoroughly to establish more clearly why the 2011 Act is applicable and/or why the 1940 Act is not applicable to foreign arbitral awards.
While deciding the jurisdiction of the High Court, the Court provided brief facts and findings of the Taisei Case, however, it ignored to rebut some findings specifically. For example, the finding that as under the 2011 Act, the Legislature has not repealed Sections 14, 30, and 33 of the 1940 Act, therefore, the remedies under these provisions remain available to a party affected by an award before the civil court was not thoroughly debated by the Court. The Court could have refuted this finding and the arguments built on this finding more effectively relying upon the principles of interpretation relating to the effect of repeal or non-repeal of pertinent provisions of a statute. Further, the Court omitted to discuss and distinguish facts of the Hitachi Case, which was, in fact, relied upon in the Taisei Case.
With reference to the meaning of public policy in Pakistan, the Court could have elaborated important issues, such as what could have rendered against the core or fundamental values of the State; what are those ‘core values’ and ‘fundamental notions of morality and justice’; and, where from these values and notions emerge? For example, the Court could have specified that anything against the national security and economic interest of the State, public good, morality and justice as enunciated in the Quran and Hadith, the aspirations given in the preamble and the principles of policy of the 1973 Constitution would be construed as against the public policy of Pakistan. Finally, the Court could have stressed on the framing of rules under Section 9 of the 2011 Act, for the effective enforcement of foreign arbitral awards in Pakistan.
Conclusion
The judgment makes immense contribution in three areas: first, it determines the exclusive jurisdiction of the High Court for the recognition and enforcement of foreign arbitral awards; second, having examined the jurisprudence of various jurisdictions, it clarifies the nature and scope of take or pay clause; third, it ascertains the meaning and scope of the public policy of Pakistan. This is the first judgment in Pakistan which elaborates the scope of take or pay clause and holds that it is not a penalty clause. It also highlights the pro-enforcement policy of the Convention and obligations of the contracting states to enforce foreign arbitral awards in a speedy manner.
With juristic lens, the Court identifies the essential ingredients of the public policy of Pakistan. This judgment is a rich source of knowledge for law students, academics, arbitrators and law practitioners. The substance of the judgment is excellent; however, its execution seems a bit flimsy at a few points. For instance, the Court could have unpacked the myth of the public policy of Pakistan with more precision. The scope and applicability of the 1940 Act and the 2011 Act could have been discussed with academic rigor. The findings of the Taisei Case could have been overturned more specifically and thoroughly. Finally, the formulation of rules to execute the pro-enforcement policy of the Convention and the 2011 Act could have been highlighted in the judgment.
