This judgment shall dispose of C.R. No,34/94 and C.R. No,83/94 in which an important question of law as to the jurisdiction of the Courts in Pakistan to entertain proceedings in respect of .
Arbitrations conducted and awards rendered by the Arbitrators in a foreign country, falls for decision.
2. The circumstances in which this question arises as gathered from the pleadings of the parties, the documents filed by them and the respective contentions of their learned counsel briefly stated are that Messrs Rupali Polyester Ltd. (the petitioner) is a Company incorporated under the Companies Ordinance, 1984 in Pakistan, having its registered office at I.I. Chundrigar Road, Karachi.
Respondent No,1, Dr. Nael G. Bunni, is the Chairman of the Arbital Tribunal having been appointed as such by the International Court of Arbitration of International Chamber of Commerce at its Session held in November, 1991. Respondent No,2, Rt. Hon. Sir Michael Kerr, is a Member of the Tribunal appointed by the petitioner and respondent No,3, Professor John Uff, Q.C. Is the Arbitrator nominated by respondents Nos.4 and 5. Respondent No,4, Mitsui & Company is a Corporation incorporated under' the Laws of Germany while respondent No,5, Hitachi Ltd. Is a Company incorporated and registered in Japah.
3. On 20-5-1985, an agreement/contract was entered into between the petitioner and respondents Nos.4 and 5 whereunder these respondents undertook to supply to the petitioner plant, equipment, material, engineering-know-how, and supervisory services for erection, construction, installation and commissioning of a plant for production of ordinary chips of Polyester for filament yarn for apparel use with a daily production capacity of 80 metric tons against the price of Japanese Yen 2,262,500,000. It is a common ground between the parties that this agreement was executed in Pakistan and also that all the works thereunder were to be performed in District Sheikhupura.
4. Two clauses of the said contract which are relevant for the purpose of the present dispute are contained in Articles 16.7 and 13 which read as under:--- "16.7 CONTRACT shall be governed and construed by the Pakistan Law." Article 13.
13.1 In case any dispute, controversy or difference arises out of or in connection with contract, the parties shall firstly endeavour to settle such dispute, controversy or different amicably.
13.2 If both parties fail to reach such amicable settlement, all disputes, controversies or differences shall be finally settled by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three Arbitrators appointed in accordance with the Rules.
The arbitration shall be conducted in English language. If, the defendant in such dispute is Buyer, the arbitration shall take place in Karachi and in case that the defendant is Seller, the arbitration shall take place in London.
13.3. The awards thereof shall be final and binding upon both parties hereto."
5. Unfortunately disputes and differences arose between the parties. It was claimed by the petitioner that the plant and equipment supplied by respondents Nos.4 and 5 was defective, not of the requisite standard and not in conformity with the specifications. It was further alleged that due to The wrongful and wilful acts and neglect of the respondents, the petitioner had suffered huge losses which were continuing. After having made efforts to settle these disputes amicably as required by the Contract, The petitioner invoked clause 13 of the Contract and asked for arbitration.
Dr. Nael G. Bunni, respondent No,1, herein was appointed as Chairman, while respondent No,2, Rt.
Hon. Sir, Michael Kerr and respondent No,3, Professor John Uff were nominated as Arbitrators by the petitioner and respondents Nos.4 and 5 respectively. The Arbitrators commenced proceedings at London and drew up Terms of Reference on 10-5-1991. Two partial awards, one on 28-5-1993 and the other on 13-7-1993 were delivered by the Arbitrators holding that the petitioner was not entitled to consequential damages arising out of breaches of the contract.
6. On 2nd August, 1993, the petitioner filed an application under sections 14 and 17 of the Arbitration Act, 1940 in the Court of Senior Civil Judge, Sheikhupura impleading the three Arbitrators and contractors as parties. In this application, it was prayed that Arbitrators be directed to file the two partial awards in Court so as to enable the petitioner to challenge their validity under the Arbitration Act, 1940. On 6th December, 1993, another. Application under sections 5, 11 and 12 of the Arbitration Act, 1940 was moved by the petitioner seeking removal of the Arbitrators on the ground of their misconduct.
7. These applications were resisted by respondents Nos.4 and 5 who in their reply raised a preliminary objection as to the jurisdiction of the Courts in Pakistan to entertain the applications in respect of the arbitration proceedings conducted at London and awards rendered there.
Respondents Nos.1 to 3 did not appear before the Court but placed their point of view in writing.
8. The learned Senior Civil Judge, Sheikhupura, who was seized of the matter, treated the issue as to jurisdiction as a preliminary issue and after hearing the parties upheld the objection of respondents Nos.4 and 5 and decided that he had no jurisdiction to entertain the application under sections 14 and 17 and sections 5, 11 and 12 of Arbitration Act, 1940 filed by the petitioner. Resultantly, both the applications were dismissed on 22-12-1993. The reasons which prevailed with the trial Court for coming to this conclusion were; firstly that in the contract dated 20-5-1985, the venue of arbitration was chosen by the parties to be London and as such they are deemed to have accepted the jurisdiction of English Courts over the arbitration proceedings; secondly that the provisions of Arbitration Act, 1940 and the Code of Civil Procedure were not applicable and lastly; that the awards were foreign awards within the meaning of Arbitration (Protocol and Convention)
Act, 1937.
9. Mr. S.M. Zafar, the learned counsel for the petitioner at the very outset contended that even though the arbitration proceedings were held in London and the awards were also made there but the awards in question were in law domestic awards and could be challenged before the Civil Courts in Pakistan. It was explained by the learned counsel that the classification of the awards as 'foreign' or 'domestic' does not depend upon the place at which the same were delivered but, on the other hand, the determining factor would be the law applicable. He pointed out that in the contract itself the parties had expressly chosen the law applicable to be the law of Pakistan vide Article 16.7 and as Arbitration Agreement was governed by Pakistani Law and, therefore, notwithstanding any other consideration, the awards were domestic awards even though made in London. On these premises it was argued that the awards and the arbitration in question would fall outside the purview of the Arbitration (Protocol and Convention) Act, 1937 and would have to be dealt with under the Arbitration Act, 1940. The learned counsel referred to the definition of "Foreign Award" as given in Act VI of 1937 and also to the exclusion clause contained in section 9(b) thereof which provides that nothing in that Act shall apply to the arbitration governed by the law of Pakistan.
10. Referring to Arbitration Act, 1940, the learned counsel submitted that as per section 47 of the Act itself, it applies to all arbitrations and not . Necessarily only to those held in Pakistan. He explained that an application for filing or setting aside the awards can be made in the Court as defined by section 2(c) of the Arbitration Act, 1940 which would be the Court within the local limits of which subject-matter to which award relates is situated or located. Learned counsel relied upon various precedents in support of this contention to which reference will be presently made.
11. Mr. Khalid Anwar, learned counsel appearing for respondents Nos.4 and 5 pointed out that there was nothing unusual in the contract in question as in all international contracts involving persons/parties of different nationalities in modern times two clauses are always of essence; firstly that the claim for damages is limited by the contract to provide that incidental, remote or indirect damages cannot be awarded and secondly that the place of arbitration is also generally fixed.
12. The learned counsel for the respondent submitted that there can be three eventualities in case of a dispute arising under a contract; firstly where the proceedings commence in a Court of country before any recourse is made to the arbitration; secondly when award has been obtained from the arbitrators and; thirdly when proceedings are pending before the Arbitrators. According to the learned counsel in the first case a party to the agreement can commence legal proceedings in a Court having jurisdiction over the subject-matter which may or may not stay the proceedings in view of the arbitration clause. In the second case, namely, where the award has already been obtained, the prop& place for the enforcement of it would be where the assets of the defendants are located. He, however, emphasized that in the third event, namely, when recourse to legal proceedings is made during the pendency of arbitration, only the Courts of the sites (Seat) of the arbitration have the jurisdiction as the matter essentially relates to procedural/curial law and it is only the Courts within the jurisdiction of which the arbitration was being conducted which can supervise the same or interfere at an intermediary stage.
13. The learned counsel further argued that as the parties had specifically agreed that London shall be the seat of arbitration, it is only the English Courts which have jurisdiction in respect of procedural matters and no other Court including the Courts in Pakistan can claim any jurisdiction over it.
14. In reply, Mr. S.M. Zafar, learned counsel for the petitioner submitted that this Court is bound to decide the case in accordance with the laws of Pakistan and cannot refuse to give effect to it merely on the ground that these laws are not in consonance with the English principles of private international law/conflict of laws. According to the learned counsel, the awards being domestic awards attract the applicability of Arbitration Act, 1940 including sections 5, 11, 12, 14, 30, 31 and 33.
He has further emphasized that this Court was not called upon to decide as to whether or not English Courts have jurisdiction in the matter but the real question was as to whether the Courts in Pakistan have any jurisdiction in respect of the awards and the arbitration proceedings. The jurisdiction, according to Mr. S.M. Zafar, may as well be concurrent vesting in the Courts of both the countries.
15. Mr. Zafar also maintained that even according to the principles of conflict of laws as applicable to Pakistan and England, the matter would fall within the jurisdiction of the Courts in Pakistan as the parties had expressly chosen the law governing the contract to be the law of Pakistan.
16. The argument raised by Mr. S.M. Zafar, the learned counsel for the petitioner that the Courts of a particular country are bound to decide a cause in accordance with its municipal laws is unexceptionable. The Courts in Pakistan cannot refuse to give effect to its domestic law merely on the ground that it comes into conflict with the law of another country or the principles of conflict of laws/private international law. Even Mr. Khalid Anwar was not in a position to dispute the correctness of this argument.
17. While on this subject, it may be stated that each country has its own rules of private international law and such rules are subject to its domestic laws. The principles of conflict of laws cannot claim any precedence over the Municipal Law of a country. Therefore, even though the principles of private International Law of England are entitled to great respect but these principles cannot be pressed into service to take away the jurisdiction vesting in a Court of this country by its own laws. This is an age-old principle consistently followed about 100 years ago. In Companhia de Mozambique v. British South Africa Company,(LR 1892) 2 QB 358 (394), Lord Esher, M.R. Observed: "The question whether the Courts of a national will or will not entertain jurisdiction of any dispute is to be determined exclusively by its nation itself i,e, by its Municipal Law. If by express legislation the Courts are directed to exercise jurisdiction, the Courts must obey. If there is a proper inference to the same effect, the result is the same. But there are certain rules which have, by universal consent, indicated the circumstances from which the inference may properly be drawn." (Underlining is mine).
' The same principle was reiterated in Girdhar Damodhar v. Kassigar Hiragar (17 Born. 662) in the following words; "....It would be the duty of the Courts acting in the execution of a statutory enactment to give effect to it, it being immaterial whether the judgment rendered would in the circumstances be recognised by Foreign Tribunal as being consistent with International Law and the general principles of justice."
18. The terms "Private International Law" and "Conflict of Laws" are interchangeable. Unlike Public International Law which regulates the relationship between States inter se and which is invariably the same, the Private International Law of each country differs from country to country, the reason being that the principles of Private International Law only apply if these are adopted as a part of its domestic law by a country.
19. Dicey and Morris in their famous treatise "Conflict of Laws" (11th Edn.) have stated (page 4): "In contradistinction to public international law, which seeks primarily to regulate the relations between different sovereign States and is, at any rate in theory, the same very where, the rules of the conflict of laws (or private international law as it is sometimes called) are different from country to country. Even between England and Scotland there are some significant differences, notably in connection with the jurisdiction of Courts in actions in personam; while between England and Australia, the common law Provinces of Canada. New Zealand and the United States on the one hand and civil law States like those of continental Europe and Latin America on the other, the differences are much more deep-seated."
According to Cheshire and North's Private International Law (12th Edition), page 137, there are as many systems of 'Private International Law' as there are systems of Municipal Laws. Reference may also be made to Conflict of Laws by Eugene F. Scoles and Peter Hay, (2nd Edn.) at page 1, wherein the following statement of law appears:-- "....Rules of conflicts law, or of private international law, however, relate to legal issues between private persons and do not emanate from an international consensus, such as 'customary (public) international law'. Instead they are part of each state or nation's domestic law and therefore often differ from one jurisdiction to another."
20. Again at page 2, it has been stated that "however, since conflicts rules are domestic law in the United States, state law subject only to federal constraints a foreign rule will influence the result only if so viewed by the forums.
21. This question also came up for consideration before the Indian Supreme Court in the case of Vishwanathan and others v. Rukn ul Mulk Syed Abdul Wajid (AIR 1963 SC 1 at page 14 and 15) in which it was held that:-- "It is necessary to emphasize that what is called private international law is not law governing relations between independent States: private international law, or as it is sometimes called 'Conflict of Laws', is simply a branch of the civil law of the State evolved to do justice between litigating parties in respect of transactions or personal status involving a foreign element. The rules of private international law of each State must, therefore, in the very nature of things differed, but by the comity of nations certain rules are recognised as common to civilised jurisdictions. Through part of the judicial system of each State these common rules have been adopted to adjudicate upon disputes involving a foreign element and to effectuate judgments of foreign Courts in certain matters or as a result of international conventions."
22. From the above discussion, it follows that the principles of "Private International Law, are applied by the Courts of a country as a part of its domestic law and, therefore, differ from country to country. These principles cannot claim primacy or ascendency over the domestic law of a particular country but have to be applied subject to its Municipal Laws. Consequently, if the Courts in Pakistan have jurisdiction to entertain a cause, they cannot refuse to do so, merely on the ground that under the principles of Private International Law such a matter was triable by another Court. In somewhat similar circumstances, it was observed by the Patna High Court in Suresh Narain Sinha v, Akhuari Balbhadra Prasad (AIR 1957 Patna 256) that: "It was true that according to the principles of International Law a Court has no jurisdiction to entertain a suit against a foreigner who did not permanently or temporarily reside within its jurisdiction and who had not submitted to its jurisdiction. But if the legislature confirms jurisdiction upon the Court situated in a particular territory to entertain suits against foreigner, where cause of action, wholly or partly arises within its jurisdiction, thus such a Court undoubtedly has jurisdiction, if the condition provided by the law to which it is subject exist."
23. At this stage, it may also be noticed that it is an acceptable principle that if the jurisdiction vests in Pakistani Courts, it cannot even be taken away by the consent of the parties and if such an agreement would be void being against public policy under section 28 of the Contract Act. The leading judgment on this point is that of the Supreme Court of Pakistan in NA. Chowdhury v. M/s. Mitsui O.S.K. Lines Ltd. And 3 others PLD 1970 SC 373.
24. This principle was followed by the Supreme Court itself in M/s. Uzin Export and Import Enterprises for Foreign Trade v. M/s. M. Iftikhar & Company Limited (1993 SCM R 866). Reference may also be made to the judgment of this Court in Abdul Majid v. Ch. Bahawal Bakhsh and another (AIR 1950 Lah. 174) and that of Patna High Court in Rambilas Matho and others v. Babu Durga Bijal Prasad Singh and others (AIR 1965 Patna 239).
25. There is an instructive article in the Journal of International Arbitration, Vol. 7, No, 1, March, 1990 by V.S. Deshpande, a former Chief Justice of Delhi High Court, in which after considering various Textbooks on the question of exclusion of Indian procedural law, pointed out that:-- "Secondly, such an agreement by the parties would be opposed to the public policy of the system of law with reference to which the contract was made or which has the closest and most real connection with the contract. Such a choice of law and jurisdiction would, therefore, be illegal and void sections 23 and 28 of the Indian Contract Act, 1872 which codifies and revises the rules of English Common Law."
26. It is also to be stated that the arbitration agreement between the parties does not have the effect of depriving a Court of its jurisdiction which it otherwise possesses. In M/s. Uzin Export and Import Enterprises for Foreign Trade v. M/s. M. Iftikhar & Company Ltd. (1993 SCM R 866), it was observed that "in this case in the contract there was provision for arbitration of, International Chamber of Commerce in Paris. This provision does not oust the jurisdiction of Courts in this country and this clause is to be treated at par with provision for arbitration within the country.
27. The principles which emerge from the above discussion are--
(i) that the principles of Private International Law are subject to the Municipal Laws of Pakistan,
(ii) that the Courts of Pakistan are bound to decide the question of jurisdiction in accordance with the law operating in Pakistan,
(iii) that jurisdiction vested in the Courts cannot be taken away even by express agreement of the parties and, lastly,
(iv) that the arbitration agreement even where Rules of International Chamber of Commerce apply do not have the effect of depriving the Courts of their jurisdiction.
28. Keeping in view the above principles, the case may now be examined with reference to the Municipal Laws of Pakistan. On the subject of arbitration, there are two laws which operate in this country, namely, the Arbitration Act, 1940 and the Arbitration (Protocol and Convention) Act, 1937.
The latter Act namely, Arbitration (Protocol and Convention) Act, 1937 was promulgated on 4-3- 1937 to give effect to the Geneva Convention on arbitration and provides for enforcement of 'Foreign Awards' as defined in section 2 thereof. It makes provisions in section 4 for the effect of foreign awards, in section 5 for filing of foreign awards and section 6 for enforcement of foreign awards. Subsection (1) of section 7 enumerates the conditions for enforcement of foreign award, while subsection (2) of section 7 provides circumstances in which the Court may refuse to enforce the award. Another important provision in this regard is in section 9 which ordains that the Arbitration (Protocol and Convention) Act, 1937 shall not be applicable to an award made on an arbitration agreement governed by the law of Pakistan. This provision reads as under:- ' Saving.--Nothing in this Act shall--
(a) ............................................................
(b) apply to any award made on an arbitration agreement governed by the law of Pakistan."
29. Mr. Khalid Anwar, learned counsel for respondents Nos.4 and 5 frankly conceded that the Act VI of 1937 will not apply to the two awards in the present case. Despite this concession, I have also examined the matter from my own point of view and have reached the same conclusion in view of the exclusion contained in section 9(b), it cannot be said that the awards in the present fall within the ambit of Arbitration (Protocol and Convention) Act, 1937 as the arbitration agreement pursuant to which awards have been rendered was governed by the law of Pakistan.
30. It will be remembered that arbitration agreement in the present case is not contained in an independent or separate document but in Article 13 which is a part of and is embedded in main contract executed between the parties. The contract itself specifically provides in Article 16.7 that it shall be governed and construed by the laws of Pakistan. That being so, the arbitration agreement which is a part of the same contract is also governed by the law of Pakistan. It is a well-established principle and indeed has not been disputed by the learned counsel for respondents Nos.4 and 5 that it is open for the parties to the international agreement to make a choice of law which would apply to the contract and autonomy of the parties in this behalf is respected by the Courts and there is, therefore, no reason to hold that clause 13 would not be governed by Pakistani law.
31. Both the learned counsel are agreed that in a contract having international element, there are four potential laws which may apply. Those are, (a) proper law of contract, (b) proper law of arbitration agreement, (c) proper law of reference and (d) purial or procedural law. See Mustill and Boyd's Commercial Arbitration, 2nd Edn., pages 61 and 62 and Sumitomo Heavy Industries Ltd. v. Oil and Natural Gas Commission ((1994) 1 Lloyd's Law Rep. 45 at pages 56 and 57).
32. Proper law of contract is the law which is expressly chosen by the parties. If, however, the parties have not chosen any law to be the proper law of contract, then proper law would be the law of the country or place with which the contract has closest and real connection. (See Dicey and Morris on `Conflict of Laws' (11th Edn.) rule 180 at pages 1161 and 1162, Mustill and Boyd on Commercial Arbitration (2nd Edn.) at page 71 and also National Thermal Power Corporation v. Singer (1992) 2 Comp. LJ 256 (SC)). The proper law of contract determines the substantive rights of the parties under the contract as explained by the Mustill and Boyd at page 72: Mr. Khalid Anwar, learned counsel for respondents Nos.4 and 5 has not disputed that in view of the clear choice of the parties expressed in Article 16.7, the proper law of contract is the Pakistani Law.
33. More important question, however, is as to what would be the proper law of arbitration agreement. The answer to this question depends on the applicability of Arbitration (Protocol and Convention) Act, 1937, as section 9(b) provides that the Act shall not apply to awards made on the arbitration agreements governed by the law of Pakistan.
34. The principle which is deducible from the various textbooks and the decisions of the Courts is that proper law of arbitration agreement is the law expressly chosen by the parties. If, however, no express choice of proper law of arbitration agreement is made, it will be the same as proper law of contract if arbitration agreement is embedded and contained in the main contract itself especially when the parties have, as in the present case, expressly given their choice about law applicable to the contract.
35. In National Thermal Power Corporation v. Singer (1992) 2 Comp. LI 256, the principles for determination of the proper law of the arbitration agreement have been enunciated by the Indian Supreme Court which at pages 22 and 24 page 263 has held that the proper law of the Arbitration R Agreement, in the absence of express choice to the contract is the same as the proper law of the contract. It has been laid down that:-- ".... The proper law of the arbitration agreement is normally the same as the proper law of the contract. It is only in exceptional cases that it is not so even where the proper law of the contract is expressly chosen by the parties. .... On the other hand, where the proper law of the contract is expressly chosen by the parties, as in the present case, such law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract, is nevertheless a part of such contract."
36. In Woh Hup (Pte) Ltd. v. Property Development Ltd. (1991) 3 MLJ 82, the High Court of Singapore held that (at page 86):-- "As a general rule the arbitration agreement will be governed by the same law (the proper law of the contract), since it is part of the substance of the underlying contract."
37. In the latest case of the High Court of England titled "Sumitomo Heavy Industries Ltd. v. Oil and Natural Gas Commission (1994) 1 Lloyd's Law Rep. 45, there was a contract which contained an express choice of Indian law and a provision that arbitration shall be conducted under International Chamber of Commerce Rules. It was held that the law governing the arbitration agreement was the same as the law governing the contract. At page 57, Potter, J. Said:-- ".... (the proper law of the contract) will usually be decisive as to (the proper law of the arbitration agreement) in the absence of an express contrary choice. ... In this case as to (the proper law of the contract) the parties have made an express choice of Indian law as the proper law of the contract. As to (the proper law of the arbitration agreement), it seems to me likely (although it is not necessary finally to decide) that the proper law of the arbitration agreement is similarly Indian law, since the arbitration agreement is part of the substance of the underlying contract..."
38. In International Tank and Pipe v. Kuwait Fuelling Ltd. (1975) 1 All ER 242 the contract provided that it should be construed in accordance with the Laws of England and contained an arbitration clause. The High Court held that (at page 243):-- "As English law was the proper law of the contract, it governed the interpretation and effect of the contract between the parlies, and in particular it governed the arbitration clause, even though the law governing the procedure in an arbitration arising from the contract might be some other law."
39. In the Marques de Bolarque (1984) 1 Li Rep. 652 charter party expressly made subject to Spanish law contained a clause providing for arbitration in London. The shipowner sought a declaration that the arbitration agreement was void. In these circumstances the parties treated the proper law of the arbitration agreement to be applied in determining whether the clause was void or not as too obvious to be litigated. Hobhouse, J. Noted that (at page 653):-- "It is agreed that the charterparty was 'governed by Spanish law and therefore the validity of the arbitration clause is likewise governed by Spanish law."
40. In Kienta Osakeyhtio v. Britain and Overseas Trading Co. Ltd. (1952) 2 Q.B. 569 a contract for the sale of timber was governed by Finnish law and contained an arbitration clause providing for arbitration in Helsignfors. Devlin, J. Says (page 576):-- "It is not disputed that the first principal agreement is an agreement which is governed by Finnish law, and the result is that the arbitration clause in the first principal agreement falls to be construed under Finnish law."
41. In Qatar Petroleum v. Shell (1983) 22 Loyld's, Rep. 35, two contracts expressly provided that they should be governed and interpreted according to the law of the Netherlands and contained arbitration clauses providing for arbitration in Paris under ICC Rules. A question arose as to whether certain claims were outside the arbitration. Dillon, L J. Said in the English Court of Appeal (page 43):-- "This is a question of the law of the Netherlands, since although the two agreements are expressed in the English language they contain express provisions, that they are to be exclusively governed by and interpreted in accordance with Netherlands law."
42. The proposition is also supported by the views of the eminent textbook writers on the subject.
Russell on Arbitration (20th Edn.) says at page 58:-- "Where a contract is made between parties resident in different countries, or is made in one country to be performed in another, the validity and effect of an arbitration clause in the contract are to be determined (unless the contract specifically provides otherwise, as is not infrequently the case) by the 'proper law' of the contract as a whole; that is to say, whatever system of law it was intended by the parties should govern the contract. This intention, where not expressly set out in the contract itself, must be gethered from the language of the whole contract considered in the light of surrounding circumstances."
43. Red fern and Hunter "Law and Practice of International Commercial Arbitration", 2nd Edn. At page 75 say:-- "Where the agreement is contained in an arbitration clause, it is recognised that it has its own autonomous existence, independent of the main contract; but it will usually be governed by the same law as that which governs the substantive rights and obligations of the parties under the main contract."
' Again at page 160, it is stated that:-- "An arbitration clause almost invariably forms part of a wider contract between the parties; and so the law applicable to the arbitration clause will usually be the law applicable to that contract. The parties will generally make an express or tracit choice of this law (the "proper law" of the contract); but if they failed to do so, the choice will be made for them."
44. In Cheshire and North "Private International Law" (12th Edn.) at page 446, it is stated that:-- "... The proper law of the arbitration agreement is usually the same as the law governing the contract as a whole."
45. Examined in the light of the above principles, there cannot be any doubt that the proper law of arbitration agreement in the present case is the law of Pakistan which has been expressly chosen by the parties to be the proper law of contract in Article 16.7. The word "contract" used in that Article would obviously include all the clauses including Article 13 which embodies in itself the arbitration agreement between the parties. In Vol.1 of Conflict of Laws by Dicey and Morris (11th Edn.) at page 537, it is stated that "if there is an express choice of the proper law of the contract as a whole, the arbitration agreement will be governed by that law."
46. However, even if it be assumed that there is no express choice of law regarding proper law of arbitration agreement yet on the principle cited above, proper law of arbitration would be the same as the proper law of contract, more so, when the arbitration agreement is contained and embedded in the same contract. Even Mr. Khalid Anwar, learned counsel for respondents Nos.4 and 5 was not in a position to dispute that the proper law of arbitration agreement in the present case would be the same as the law of contract i,e, law of Pakistan. Clearly, therefore, as the awards were rendered in pursuance of the Arbitration Agreement governed by the law of Pakistan, the Arbitration (Protocol and Convention) Act, 1937 has no application to these awards.
' I am supported in this view by the judgment of the Court of Appeal in Dalmia Dairy Industries Ltd. v.
National Bank of Pakistan (1978) 2 Lloyd's Law Rep. 223 wherein at page 228, it was observed that:- "(d) The law governing the arbitration.---Clause (ix) of the guarantee provided that the law governing the guarantee and the arbitration was to be Indian Law. It was common ground that this had the effect that the proper law governing the arbitrations and determining the validity of Professor Lalive's awards was the law of India. It was also common ground that the relevant Indian legislation governing the effect and validity of the awards was the Indian Arbitration Act, 1940 (which corresponds broadly to our 1950 Act) and not the Foreign Awards (Recognition and Enforcement) Act, 1961, which gave effect to the New York. Convention of 1958 and corresponds to our Arbitration Act, 1975. The reason is that the Indian Act of 1961 giving effect to the New York Convention provides that the Act shall not apply to "any award" made on an arbitration agreement governed by the law of India."
' From these observations, it is apparent that the awards were treated to be domestic not because of any agreement between the parties or the exclusive jurisdiction of any Court but because the awards had been made on arbitration agreement governed by law of India.
47. It is interesting to notice that this judgment was delivered by Lord Justice Kerr (as he then was) who is now one of the Members of the Arbitral Tribunal.
48. The next question which, therefore, arises, is as to whether the Arbitration Act, 1940 is applicable to the awards in question and the arbitration proceedings being conducted by the Arbitrators. The Act according to its preamble was framed with a view to consolidate and amending the law relating to Arbitration. The arbitration agreement has been defined in section 2(a) as meaning a written instrument to submit present or future differences to arbitration. "Award", according to section 2(b) means an arbitration award. Section 2(c) defines "Court" as a Civil Court having jurisdiction to decide the question forming the subject-matter of the reference if the same had been the subject-matter of a suit but it does not include Small Causes Court. Section 5 of the Act empowers the Court to revoke the authority of the Arbitrator while under sections 9 and 10, power is vested in it to appoint Arbitrators in certain cases. The Court is authorised by section 11 to remove the Arbitrator or Umpire in the circumstances mentioned therein. Section 12 provides where the Arbitrator is removed or the authority revoked, the Court can fill in the vacancy. Section 14 of the Arbitration Act requires the Arbitrators or the Umpire as the case may be, to make the award and, if so-called upon by the parties or the Court to file the same in the Court. Section 15 authorises the Court to modify the award, by section 16 to remit the award or by section 17 to make a rule of the Court and pronounce a decree in terms of the award. After the award has been filed, it can be set aside by the Court under section 30 of the Arbitration Act on the grounds mentioned therein.
Section 31 defines the jurisdiction of the Court where the award can be filed. It is further provided that all questions regarding validity, effect or existence of an award or an arbitration agreement between the parties shall be decided by the Court in which the award under the agreement has been, or may be, filed and by no other Court. Section 32 bars the filing of a suit to challenge the validity of the award or the arbitration agreement while section 33 vests a right in a party to arbitration agreement to apply to Court for a decision on the question of existence or validity of an arbitration agreement or an award or its effect.
49. Other important provisions which deserve notice in the context of the present controversy, are sections 46 and 47 of the Arbitration Act, 1940. These two sections read as under:-- "46. Application of Act to statutory arbitrations.--The provisions of this Act except subsection (1) of section 6 and sections 7, 12, 36 and 37, shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as this Act is inconsistent with that other enactment or with any rules made thereunder.
47. Act to apply to all arbitrations.--Subject to the provisions of section 46, and save in so far as is otherwise provided by any law for the time being in force the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder: Provided that an arbitration award otherwise obtained may with the consent of all the parties interested be taken into consideration as a compromise or adjustment of a suit by any Court before which the suit is pending."
50. From a reading of the Arbitration Act, 1940 as a whole especially sections 46 and 47, it is obvious that it applies to all arbitrations except as otherwise provided by any law. There is nothing in this Act which restricts or confines its applicability only to awards rendered in Pakistan or made in proceedings conducted here. The Act applies to all awards irrespective of the place where the same has been made or delivered. All awards are liable to be filed in the Court having jurisdiction over the subject-matter of reference, which in the present case, was Sheikhupura.
51. It may also be stated at this stage that the legal error into which the trial Court fell was that while holding that Courts in Pakistan have no jurisdiction, it treated the two awards as "foreign" and not "domestic" awards on the ground that the awards were made in proceedings for arbitration held in London. Unfortunately, the trial Court failed to appreciate that the answer to the question as to whether a particular award is domestic or foreign award does not depend upon the venue of arbitration but upon the law applicable to it. If the arbitration agreement is governed by laws of.
Pakistan, then notwithstanding the awards have been made abroad, the awards shall be deemed to be domestic awards and shall as such be governed by domestic law of Pakistan.
52. Mr. S.M. Zafar has referred to the Fifth Report of the U.K. Private International Law Committee on Recognition and Enforcement of Foreign Arbitral Awards which was presented to the English Parliament in October, 1961 of which three eminent Judges of England namely Mr. Justice Cross, Mr. Justice Megaw, C.B.E. And Mr. Justice Wilberforce, C.M.G., O.B.E. Were members. While defining domestic award in terms of Geneva Conventions, 1937, it was stated at pages 22/23 of the report that:-- "... The fundamental distinction drawn in the Arbitration Act, 1950, is between awards made in the United Kingdom and those made outside; this is not expressed but seems to be clearly implied since the methods by which the Courts can intervene seem to be applicable in the main only to an award made within the jurisdiction. Awards made out of the jurisdiction fall into two main classes; those which satisfy the defined term "foreign awards", and those which do not. The former again fall into two sub-clauses; those which are made on arbitration agreements governed by the law of England and those made in pursuance of arbitration agreements governed by some other law. The net effect is that the English legislation implementing the Geneva Convention, 1927 applies, so far as enforcement in England is concerned, only to awards made outside the United Kingdom and on arbitration agreements governed by some law other than English law. This looks very like....
Distinction mentioned above between "foreign" and "domestic" awards. If an award is made in Hamburg on an arbitration agreement governed by English law, we treat it as not falling within the scope of the Convention, 1927. If we enforce it we do so as part of our domestic law. .. "
53. While commenting upon this report, E.J. Cohn wrote in Vol. 25 of Modern Law Review, 1962, at page 450 that:-- "English law, ... Treats as foreign those awards which have been made in a foreign country in pursuance of an arbitration agreement the proper law of which is not English law, but as domestic all awards made in England or made abroad under and arbitration agreement governed by English law."
54. Mr. K.W. Patchett in his book titled Recognition of Commercial Judgments and Awards in the Commonwealth while discussing English legislation under Geneva Convention, 1927 in para. 7.24 at page 257 states that: "... Where the law governing the agreement is that of the enforcing state the ensuing award is outside the scheme."
55. This proposition is supported by Dalmia Dairy Industries Ltd. v. National Bank of Pakistan (1978) 2 Lloyd's Rep. 223 in which Kerr, J. (as he then was) (who incidentally is one of the Arbitrators) observed that:-- "The reason is that the Indian Act of 1961 giving effect to the New York Convention provides that the Act shall not apply to 'any award made on an arbitration agreement governed by the law of India'. I am not concerned with the question whether or not this provision accords with the New York Convention, the consequence, however, is that by Indian law these awards were 'domestic' and not 'foreign' awards."
' The Indian Supreme Court in National Thermal Power Corporation v. Singer Company and others (1992) 2 Comp. U 256 (SC) observed in para. 33 that:- "An International commercial arbitration necessarily involves a foreign element giving rise to questions as to the choice of law and the jurisdiction of Courts. Unlike in the case of persons belonging to the same legal system, contractual relationships between persons belonging to different legal systems may give rise to various private international law questions such as the identity of the applicable law and the competent forum. An award rendered in the territory of a foreign State may be regarded a domestic award in India, where it is sought to be enforced by reason of Indian law being the proper law governing the arbitration agreement in terms of which the award was made. The Foreign Awards Act incorporating the New York Convention, leaves no room for doubt on the point."
' Again in para. 38 it is stated that: "An award is 'foreign' not merely because it is made in the territory of a foreign State, but because it is made in such a territory on an arbitration agreement not governed by the law of India. An award made on an arbitration agreement governed by the law of India, though rendered outside India, is attracted by the saving clause in section 9 of the Foreign Awards Act and is, therefore, not treated in India as a 'foreign award'."
56. It would thus appear from the above that the English Courts as well as the Indian Supreme Court have come to the same conclusion that the basis for holding an award to be 'domestic' or 'foreign' is the governing law of the arbitration agreement.
57. Another reason as to why the jurisdiction of the Courts in Pakistan does not stand excluded is that the contract in question has the closest connection with Pakistan. To use the words by the Indian Supreme Court in Singer's case (supra), it is redolent of Pakistan. It is a common ground between the parties that the agreement was executed in Pakistan, all works thereunder were to be performed by the respondents in Pakistan, the breach, if any, was also committed in Pakistan.
Consequently, the cause of action also arose wholly in Pakistan. In MA. Chowdhury v. Mitsui O.S.K.
Lines Ltd. And 3 others PLD 1970 Supreme Court 373, it was observed at page 389 that: "The principle that where two Courts are equally competent to try a cause or matter, then it is open to the plaintiff to choose his forum or for the parties to the dispute to agree to a particular forum in advance, must in my opinion, be read subject to the laws of the country in which the contract was made and in which it was intended to be performed."
' Again in M/s. Uzin Export and Import Enterprises for Foreign Trade v. M/s. M. Iftikhar & Company Ltd.
(1993 SCM R 866), it was observed at pages 877 and 878 that: "In this case the main contract is between Attock Cement Company of Pakistan and appellants for construction and completion and successful operation of cement plant which provides for appointment of sub-contractors. Resultantly, respondents entered into contract as sub-contractor with appellants. Contract from which present proceedings arise was executed in this country and the works had also to be executed here. In the circumstances arbitration proceedings cannot be allowed to be taken to Paris which would be inconvenient to the parties and also would prove to be expensive.
' This question was also considered by Lord Denning in re: The Fehmarn in (1958) 1 All ER 333 who observed at page 335 that: "I would ask myself therefore; is this dispute a matter which properly belongs to the Courts of this country? Here are English Importers, the cargo-owners, who, when they take delivery of the goods in England, find them contaminated. The goods are surveyed by surveyors on both sides, with the result that the English cargo-owners make a claim against the German Shippowners. The vessel is a frequent visitor to this country. In order to be sure that their claim, if substantiated, is paid by the shippowners, the English cargo-owners are entitled by the procedure of our Courts of Admiralty to arrest the ship whenever she comes here in order to have security for their claim. There seems to me to be no doubt that such a dispute is one that properly belongs for its determination to the Courts of this country.
58. As observed earlier, the fact that the contract has the closest relation with Pakistan cannot be disputed or denied. Consequently, the dispute raised in the two applications before the trial Court was clearly amenable to the jurisdiction of Pakistani Courts. Another important factor to be noticed in this regard is that as the contract involved payment of consideration in foreign exchange, it was subject to the approval of the Government of Pakistan as was provided in Article 15.1 of the Contract, which was in fact in the nature of a condition precedent to contract becoming effective.
On 19th May, 1985, the Government of Pakistan approved the contract with certain conditions mentioned in its letter bearing No, IBP/CH/R-Polyester/Con.II/84, one of which was that the agreement and arbitration should be made subject to laws of Pakistan. The contract itself was authenticated on 21st May, 1985 under the stamp of the Government of Pakistan which bears the endorsement that the approval was being granted in terms of its letter No, IBP/CH/RPolyester/Cont.II/84, dated 21st May, 1985. This letter provides that the authentication was subject to the condition that the arbitration should be made subject to Pakistani laws. The imposition of this condition was essence of contract which fact was fully known and accepted by the parties as otherwise there would be no contract at all. The arbitration contained in the contract having been made subject to law of Pakistan, it cannot be contended that the laws of Pakistan stood excluded as regards arbitration proceedings.
59. It may also be mentioned that the award rendered by an arbitrator is lifeless and is not capable of being executed till such time the life is infused in it by the Court by passing a decree in accordance with the same. (See Oil and Natural Gas Commission v. The Western Companies of North America ((1987) 1 Arbitration Law Report 60) and Rambilas Matho and others v. Babu Durga Bijal Prasad Singh and others (AIR 1965 Patna 239). Similarly, it is also well settled that the arbitration agreement between the parties does not have the effect of depriving a Court of its jurisdiction. (Also see MA. Chowdhury v. M/s. Mitsui O.S.K. Lines Ltd. And 3 others PLD 1970 SC 373.
Again in M/s. Uzin Export and Import Enterprises for Foreign Trade v. M/s. M. Iftikhar & Company Ltd.
(1993 SCM R 866), it was observed that even if I.C.C. Arbitration Rules are chosen by the parties to apply to arbitration it does not take away the jurisdiction of the Pakistani Courts. It was further observed that Pakistani Courts have jurisdiction under the Arbitration Act, 1940 to deal with the matter if they have jurisdiction over the subject-matter forming reference. Consequently even if the plea of Mr. Khalid Anwar that the parties had agreed to exclude the jurisdiction of Pakistani Courts by choosing the seat of arbitration to be London is accepted yet this exclusion has no validity in law and cannot be given effect to.
60. The case can also be examined from another angle. As the subject-matter of the dispute between the parties namely the plant and equipment was located at Sheikhupura, according to section 2(c) of the Arbitration Act, 1940, any proceedings under the Arbitration Act could be brought before the Civil Court which would be competent to try a suit in respect of the subject- matter. Under section 20 of the C.P.C. a suit can be filed in a Civil Court within the local limits of which cause of action partly or wholly arises. In matters of contract, it cannot be disputed that the place where the agreement is entered into or is to be performed or is broken are the places where cause of action wholly or partly arises. That being so, no valid objection can be taken to the jurisdiction of the Courts at Sheikhupura where the petitioner has filed two applications under the Arbitration Act, 1940. It appears to me that the petitioner in this respect was doing nothing but following the course of action suggested by Lord Justice Kerr himself in the case of Dalmia Dairy Industries Ltd. v. National Bank of Pakistan ((1978) 2 Lloyd's Law Rep. 223) in which at page 248, it is stated that:-- "....By requiring the arbitrator to file the award and then applying under section 30 (of the Arbitration Act, 1940) to set it aside the Bank could have raised before the Indian Courts every point which it is seeking to raise here, including two which it appears to accept cannot be raised here, viz., misconduct on the part of the arbitrator (as opposed to a denial of the rules of natural justice) and error on the face of the award."
61. The contention of Mr. Khalid Anwar that as the respondents do not reside and are not located in Pakistan, the two applications in question could not be filed at Sheikhupura, has no force. It is well settled that the jurisdiction of the Courts is not dependent upon the residence of the defendants but also upon other considerations, like accrual of cause of action or part thereof. The residence of the respondents or the possession of nationality other than that of Pakistan is not of much consequence in this behalf.
62. Mr. Khalid Anwar, Advocate has relied upon the judgment of the Privy Council in Gurdyal Singh v.
Raja of Faridkot ((1894) 22 ILR 222) in support of his abovenoted contention. However, much water has passed under the bridge since the pronouncement of the Privy Council which, in any case does not lay down what the learned counsel wishes me to hold. Gurdyal Singh's case (supra) was examined and considered in many subsequent judgments wherein it was observed that it was not the authority for the proposition that the Indian Courts cannot exercise in personam jurisdiction over the foreigners. In Suresh Narain Sinha v. Akhauri Balbhadra Prasad and others AIR 1957 Patna 256, it was ruled that: "....It was true that according to the principles of International Law a Court has jurisdiction to entertain a suit against a foreigner who did not permanent or temporarily reside within its jurisdiction and who had not submitted to its jurisdiction. But if the legislature confers jurisdiction upon the Court situated in a particular territory to entertain suits against foreigner, where cause of action, wholly or partly arises within its jurisdiction, then such a Court undoubtedly has jurisdiction, if the condition provided by the law to which it is subject exist. The rule of Private International Law is, therefore, in this regard subject to the rules of Municipal Law."
' The same proposition has been enunciated in another case, Swaminathen Chettiar v.
Somasundaram Chettiar AIR 1938 Mad. 731 wherein it was held that even against non-resident foreigners the Courts in British India had jurisdiction in personam in suits based upon a cause of action arising in British India. Similar view has been expressed by a Division Bench of the Bombay High Court in Chunilal Kasturchand Marwadi v. Dundappa Damappa (ILR 1950 Bombay 640). In Neelakanda Pillai v. KA. Kunju Pillai (AIR 1935 Madras 545), it was held that: "The next and the more important point that arises is, whether the application of section 20 is excluded by reason of the fact that the defendant is a. Non-resident foreigner."
' While noticing the case of Gurdyal Singh v. Raja of Faridkot (1895) 22 Cal. 222, the Court observed that: "What the Privy Council held was that by International Law the decree of the Court of Faridkot State was an absolute nullity and it should be regarded by the Courts of British India. But an important reservation contained in their Lordships' judgment must not lose sight of: `It (the foreign decree) must be regarded as a near nullity by the Courts of other nations except (when authorised by special local legislation) in the country of the forum by which it was pronounced'."
' The learned Judge further held that: "In the present case the question is not whether, after a decree passed a foreign will recognize it...But whether a British Indian Court, having regard to section 20, Civil P.C., will pass a decree against a nonresident foreigner when the cause of action has arisen within its local limits....But in 20 Born. 133 (Raoji v. Pralhaddas Subkararam (18%) 20 Bom. 133) a plaint was filed in the Bombay High Court with leave to sue under clause 12 of the letters patent. Apart of the cause of action having been found to have arisen in Bombay, it was held that the Court had jurisdiction against a non- resident foreigner."
' The learned Judge noted the distinction drawn by Starling, J. In Birdhar Damodar v. Hisagar (17 Bombay 662) and stated that: "It would be the duty of the Courts acting in the execution of a statutory enactment to give effect to it, it being immaterial whether the judgment rendered would in the circumstances be recognized by foreign Tribunal as being consistent with International Law and the general principles of Justice."
' In Viswa nathan and others v. Rukn ul Mulk Syed Abdul Wajid (AIR 1%3 Supreme Court 1) the Indian Supreme Court held that:- "...Section 20 of the Code extends the jurisdiction of the Courts to persons or transactions beyond the territorial limits of the Courts. Such jurisdiction in personam which transcends territorial limits is conferred on the Courts by the law-making authority of many States. In England, by Order XI, Rule 1 of the Rules of the Supreme Court, discretionary jurisdiction in personam is exercisable by the Courts by effecting service outside the jurisdiction of a writ of summons or notice of a writ of summons against an absent defendant in the classes set out therein."
' Further held that: "But there is no general rule of private international law that a Court can in no event exercise jurisdiction in relation to persons, matters or property outside jurisdiction. Express enactment of provisions like section 20, Civil Procedure Code, Act V of 1908 and Order XI, Rule 1 of the Supreme Court Rules in England, negative such an assumption."
(Also see Brajmohan Bose Benimadhav v. Kishorilal Kishanlal (AIR 1955 MB 1), Girdhar Damodar v.
Kassigar Hiragar 17 Bom. 622 and Union of India v. Bakhtawar Singh Bal Krishen ((1985) ALR 67). The weight of the authority therefore, clearly is against the contention raised by the learned counsel for the respondents and cannot prevail.
63. It follows from the above discussion that under the Municipal Law of Pakistan, the two applications filed by the petitioner were competent and the learned Civil Judge, Sheikhupura was not correct in refusing to entertain the same. If the arbitration agreement is governed by the law of Pakistan, as indeed it is, the applicability of Arbitration Act, 1940 or any provision contained therein cannot be doubted. On no principle can it be held that though according to the laws of Pakistan, Pakistani Courts have jurisdiction in the matter but by virtue of Private International Law, even if, it be to the contrary, this jurisdiction stands ousted. It may also be mentioned that the question as to whether the Courts of a particular country have or have not jurisdiction in the matter can only be decided by that Court and it is neither appropriate nor proper that the Courts of any other country to hold that it has jurisdiction over the matter to the exclusion of that country, for in such an event there is nothing in law, which stops the Courts of the other country from ruling to the contrary.
Supposing, in a given case, the English Courts held that they have exclusive jurisdiction but if the matter is reagitated before the Foreign Court on no principle can it be said that the decision of the English Courts is binding upon a latter Court which is entitled to come to its own conclusion.
64. Although the findings recorded above sufficient in themselves for the acceptance of these petitions but as Mr. Khalid Anwar has argued with great vehemence that under the principles of Private International Law/Conflict of Laws English Courts alone have jurisdiction in the matter, this aspect may also be examined. In support of this submission, the main reason advanced was that as the seat/situs of arbitration was chosen by the parties to be London, the procedural law/curial law is deemed to be lex arbitri or lex fori i,e, the law of England under which the English Courts alone have jurisdiction in respect of proceedings for arbitration conducted in that country.
65. The first thing to be noticed in this behalf is that though the principle pressed into service by the learned counsel as will be presently seen is to some extent but not invariably supported by the English Law but it has no universal application and is not accepted by many other countries like those of continental Europe where the modern trend appears to be to delocalise the arbitration.
(See Dicey and Morris, Conflict of Laws, Vol. 1 (11th Edn.) at page 541).
66. Secondly, if this principle is applied with rigidity, it can lead to anomalous results. For example under the Belgian law, the Courts of that country disown any jurisdiction over the arbitration or proceedings which are not between the parties one of whom is a national of that country. (See Redfern and Hunter on 'International Commercial Arbitration' (2nd Edn.) at page 298, wherein it is stated that "the Courts in Belgium only seized of a request for the annulment of an international award made in Balgium where one or other of the parties is a physical person having Belgian nationality or residence, or a legal entity created in Belgium or having a branch or establishment there"). If the contention of Mr. Khalid Anwar is accepted then in such a case the aggrieved person would be left with no remedy.
67. Having heard the learned counsel for the parties, considered their arguments and examined the various textbooks and the precedents cited by them, I am of the view that the correct principle is that which has been expressed by the Indian Supreme Court in National Thermal Power Corporation v. Singer Company and others ((1992) 2 Comp. L.J. 256 (SC)), wherein it has been ruled that the control over the arbitration vests in the Courts of the country where seat of arbitration is located as also in the country with which the contract/agreement has the closest connection.
68. That case arose out of a contract between an Indian Corporation (National Thermal Power Corporation) which entered into an agreement with Singer, a foreign Company, for carrying out certain works in India. The agreement was executed in New Delhi and under an Article 7.2 providing that the law applicable to the contract would be the law in force in India. The arbitration agreement, embodied in the contract was in two parts; the first of which detailed with situation, where the Contractor was Indian and provided that in such an. Event, the venue of arbitration shall be New Delhi and arbitration proceedings would be conducted in the manner prescribed by the Arbitration Act, 1940. The second part which is of more importance and relevance is that in the event of foreign arbitration, the arbitration was to be conducted by three arbitrators, one each to be named by the parties and the third to be named by the President of International Chamber of Commerce. The arbitration was to be conducted at such place as the Arbitrator may determine and had to be conducted in accordance with the rules of International Chamber of Commerce.
The relevant clauses in the said agreement may be reproduced below: "7.2. The laws applicable to this contract shall be the laws in force in India. The Courts of New Delhi shall have exclusive jurisdiction in all matters arising under this contract.
27.6.2. In the case of an Indian Contractor the arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof. The venue of arbitration shall be New Delhi, India.
27.7. In the event of a foreign contractor, the arbitration shall be conducted by three arbitrators, one each nominated by (N.I.P.C. And Singer) and the third to be named by the President of the International Chamber of Commerce. Save as above, all rules of (the I.C.C.) shall apply to such arbitrations. The arbitration shall be conducted at such place as the arbitrators may determine.
32.3. The contract shall in all respects be construed and governed according to Indian laws."
69. The dispute having arisen between the parties one of them commenced arbitration, the place of arbitration was fixed by the I.C.C. Court at London. The interim award on the preliminary issue was rendered by the Tribunal in London. The National Thermal Power Corporation filed an application under sections 14, 30 and 33 of the Arbitration Act, 1940 for filing of the award and setting aside of the same. In their reply, Singer Company took up the objection that the interim award was governed by the Indian Foreign Award Act and the provisions of Arbitration Act, 1940 were not applicable. The High Court held that the award was not governed by the Arbitration Act, 1940 and that London being the seat of arbitration, the English Courts alone have jurisdiction to set aside the award. On this finding, the applications filed by National Thermal Corporation were dismissed.
70. In the wording of the Supreme Court, the real issue before that Court was that:- ' Para.
7. " .The fundamental question is whether the arbitration agreement contained in the contract is governed by the law of India so as to save it from the ambit of the Foreign Awards Act and attract the provisions of the Arbitration Act, 1940. Which is the law which governs the agreement on which the award has been made ?
' While answering this question, the Indian Supreme Court observed that:-- "....The parties have the freedom to choose the law governing an international commercial arbitration agreement. They may choose the substantive law governing the arbitration agreement as well as the procedural law governing the conduct of the arbitration. Such choice is exercised either expressly or by implication. Where there is no express choice of the law governing the contract as a whole, or the arbitration agreement in particular, there is, in the absence of any contrary indication, a presumption that the parties have intended that the proper law of the contract as well as the law governing the arbitration agreement are the same as the law of the country in which arbitration is agreed to be held. On the other hand, where the proper law of the contract is expressly chosen by the parties, as in the present case, such law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract is nevertheless a part of such contract."
' The Indian Supreme Court explained what is regarded as the overriding nature of its powers in a case where Indian law governed the parties arbitration agreement (para. 25, p.264) it said: "....The overriding principle is that the Courts of the country whose substantive laws govern the arbitration agreement are the competent Courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised by the Courts of the seat of the arbitration is merely concurrent and not exclusive, and strictly limited to matters of procedure. All other matters in respect of the arbitration agreement fall within the exclusive competence of the Courts of the country whose laws govern the arbitration agreement; see Mustill and Boyd Commercial Arbitration, 2nd Edition; Allen Red fern and Martin Hunter, Law and Practice of International Commercial Arbitration, 1986, Russell on Arbitration, 20th Edn. (1982), Cheshire and North's Private International Law, 11th Edn. (1987)."
38. An award is "foreign" not merely because it is made in the territory of a foreign State, but because it is made in such a territory on an arbitration agreement not governed by the law of India. An award made on an arbitration agreement governed by the law of India, though rendered outside India, is attracted by the saving clause in section 9 of the Foreign Awards Act and is, therefore, not treated in India as a 'foreign award'.
42. The Foreign Awards Act contains a specific provision to exclude its operation to what may be regarded as a "domestic award" in the sense of the award having been made on an arbitration agreement governed by the law of India, although the dispute was with a foreigner and the arbitration was held and the award was made in a foreign State....
' Such an award necessarily, falls under the Arbitration Act, 1940, and is amenable to the jurisdiction of the Indian Courts and controlled by. The Indian system of law just as in the case of any other domestic award, except that the proceedings held abroad and leading to the award were in certain respects amenable to be controlled by the public policy and mandatory requirements of the law of the place of arbitration and the competent Courts of that place."
' In conclusion it was held that:-- "All substantive rights arising under the agreement including that which is contained in the arbitration clause are, in our view, governed by the law of India. In respect of the actual conduct of arbitration, the procedural law of England may be applicable to the extent the I.C.C. Rules are insufficient or repugnant to the public policy or other mandatory provisions of the laws in force in England. Nevertheless, the jurisdiction exercisable by the English Courts and the applicability of the laws of that country in procedural matters must be viewed as concurrent and consistent with the jurisdiction of the competent Indian Courts and the operation of Indian laws in all matters concerning arbitration in so far as the main contract as well as that which is contained in the arbitration clause are governed by the laws of India."
71. It may be noticed that the principles laid down in paras. 25 and 52 in Singer's case (supra) were cited with approval by the Queen Bench Division in its latest judgment in the case of Sumitomo Heavy Industries Ltd. v. Oil and Natural Gas Commission (1994) 1 Lloyd's Law Rep. 45) in which it was observed that the guidance can usefully be derived from judgment of the Indian Supreme Court in relation to the issue.
72. In Sumitom's case (supra), it was argued that the Indian Courts had alone the jurisdiction in the matter to the exclusion of the English Courts. That argument was rejected by Potter, J. By observing that (page 58):-- "....There is nothing in....The authorities relied on, to indicate to me that Indian law regards the choice of curial law and the implications which arise from the parties' choice of arbitration in London and/or I.C.C. Arbitration in any way differently from the English Courts."
' The fact that the proceedings before the Indian Court were also competent is clearly spelt out from the following portion of the judgment of Potter, J. (page 66):-- "....In relation to the particular remedy sought, England was the appropriate forum as opposed to the Courts of Bombay, and the making of the (English) Order was of no substantial prejudice to (O.N.G.C.) in the Bombay proceedings....(because) London is the seat of the arbitration and English law the curial law...The grant of the application was of no real prejudice to (ONGC) ....Because it did no more than endow the arbitrators with powers without obliging them to exercise them and, if
(ONGC) saw fit to pursue the Bombay proceedings timeously, would not cause any substantial prejudice. It is plain that, when apprised of the English proceedings in that light, the Bombay Court considered that the question of jurisdiction and the propriety of the (English) Order was a matter appropriate to be left to the English Court."
73. Redfern and Hunter authors of "International Commercial Arbitration", 2nd Edn. At page 91 admit the possibility of concurrent jurisdiction and as an example state as under: "One concept which has been the subject of much theoretical discussion is that of subjecting an arbitration in one state to the procedural law of another. Thus, for example, an arbitration would be held in Switzerland but, by agreement between the parties, would be subject to the procedural law of Germany.
' It is difficult to understand why parties might wish to complicate the conduct of an arbitration in this way. It means that the parties, and the arbitral tribunal, would need to have regard to two procedural laws---that of Germany, as the chosen procedural law, and that of Switzerland, to the extent that the provisions of Swiss arbitral law....Are mandatory."
74. In the case of Dalmia Dairy (1978) 2 Lloyds Law Rep. 223, the award was rendered in Geneva, Kerr, J:, had expressly decided that the arbitration was governed by Swiss Law but he held that the award made on the arbitration agreement governed by Indian Law was a domestic award, and as such; (i) both the Swiss and the Indian Courts had potentially concurrent jurisdiction in reviewing the awards for errors of law on the face of the record, and (ii) the Indian Arbitration Act, 1940 was the appropriate statutes under which there would be a review for error of law on the face of the record, Kerr, J. Said (page 233): "I should also mention in passing that although all the arbitrator's awards in both arbitrations were 'speaking awards' with full reasoning, the Bank rightly did not seek to contend that the awards could be attacked before me on the ground that they contained errors of law on their face. This could only have been done in proceedings to set aside the awards under the Indian Arbitration Act, 1940, before the Indian Courts, or possibly in the Swiss Courts, but no such proceedings were ever brought."
' The English Courts per Sawille, J. In Union of India v. McDonnell Douglas (1992) 1 LL Rep. 48 at 51, accept possible concurrent jurisdiction with that of a foreign Court: "....The choice of a procedural law, different from the law of the place of the arbitration will, at least where that place in this country, necessarily mean that the parties have actually chosen to have their arbitral proceedings at least potentially governed both by their express choice and by the laws of this country."
' In the case Dalal v. Bank Mellat (1986) 1 QB 441 at page 458, Hobhouse, J. Said that there is no reason in principle why the curial law of a tribunal cannot derive concurrently from more than one system of municipal law. He said that: "It is a fallacy to suppose that arbitral proceedings must take their authority from the local municipal law of the country within which they take place...There is no reason in principle why the curial law of a tribunal cannot derive concurrently from more than one system of municipal law."
75. There is an interesting article by Let Sigvard Jorve, a Member of I.C.C. Court titled ICC Arbitral para 5; the place of arbitration; to be in ICC Bulletin of October, 1993, a copy of which has been placed on record in which it has been opined that there is no warrant of possession that in the absence of express choice, the procedural law of the place of arbitration would become automatically applicable. As already observed in many countries of the world especially of Europe, the seat of arbitration has no relevance to determine the procedure for arbitration. The discussion at page 81 of Law and Practice of International Commercial Arbitration by Redfern and Hunter (2nd Edn.) is relevant and instructive. At page 88, it has been stated:- "The intention underlying the delocalisation theory is a sensible one. It is to grant freedom to international commercial arbitration from the constrains of different national legal systems, and so make the place of arbitration a matter of no legal significance. An arbitral tribunal would not need to be concerned with the law of the place in which the arbitration was being held; all that it would need to do would be to comply with the requirements of international public order (including, in particular, the requirement of a fair hearing) so as to ensure the international acceptability of its award."
76. In support of his contention Mr. Khalid Anwar, learned counsel for respondents Nos.4 and 5 has mainly relied upon the following five cases to plead exclusive jurisdiction of English Courts where seat of arbitration was located in England which may now be considered.
77. The first case is that of James Miller and Partners Ltd. v. Whitworth Street Estates (Manchester)
Ltd. (1970) 1 Lloyd's Rep. 269), in which a dispute arose between an English Company and Scottish contractors in connection with reconstruction of factory premises in Scotland. The contract was o standard form of Royal Institute of British Architects and there was no choice of proper law of contract or of procedural law. The dispute having arisen between the parties, an arbitration was held in Glasgow in accordance with the Scottish procedural law without any objection from the respondents. Question arose before the English Courts as to whether the law applicable would be the law of Scotland or English as the case may be. In Court of Appeals, it was held that the proper law of contract was English as the contract has more real and closest connection with England and, therefore, the procedural law of the Arbitration taking place in Scotland is English law and the English Courts have jurisdiction. When the matter went to the House of Lords, the decision of the Court of Appeal was reversed not on the ground that the Court disagreed with the principles on which the judgment of the Court of Appeal has proceeded but because the House of Lords took the view that the parties by their own conduct throughout the arbitration has adopted without any objection the procedural law of Scotland. It was on these premises held that Scottish Court shall have exclusive jurisdiction. This case was analysed by Dicey and Morris in their famous book entitled "Conflict of Laws" (11th Edn.) at page 359. It was stated that "House of Lords held that the contract was governed by English Law. The arbitration was governed by "Scottish Law" because the parties have evinced an agreement that the arbitration should be governed by the "Scottish Law".
78. The second case cited by Mr. Khalid Anwar is Black Clawson International Ltd. v. Paperwork's Waldhof Aschaffenburg AG ((1981) 2 Lloyd"s Rep. 446). In that case dispute between the parties was subjected to arbitration in Zurich. It was specifically agreed that the procedural law of arbitration shall be that of Zurich. This case is clearly distinguishable as the parties have specifically agreed that the curial law (procedural law) would be the Swiss law. Furthermore in that case the parties had been invoking the jurisdiction of Swiss Court without any objection and on that ground also the Court refused to assume jurisdiction but there is nothing in that precedent to show that the jurisdiction of the other Courts was ousted. Be that as it may, the case has its own peculiar facts and should be analysed in the light thereof. The comments on this case by Mustill and Boyd in their book 'Commercial Arbitration' (2nd Edn.) at page 61 on footnote 5 are interesting and may usefully be reproduced:- "A discussion on these lines was attempted in Black Clawson International Limited v. Papierwork Waldhof-- Aschaffenburg AG ((1981) h. Lloyd's Rep. 446). The result is not attractive. The need for such a laboured analysis may suggest that either the Black Clawson's case or Millar v. Whitworth Street Estates, or both have been misunderstood."
79. The other comments appearing at page 92 of the same book at footnote 12, made by the authors are that:- "In Naviera Amazonica Peruana SA v. Compania International de Seguros Del Peru ((1988) 1 Lloyd's Rep. 116, at 120 Kerr, L.J. Went so far as to say that the Court has no jurisdiction over arbitration held abroad, even under English curial law, because the jurisdiction is territorially limited. In such a limit exists, it is limited to arbitration, and does not appear to be a limit imposed upon foreign Courts in case covered by Article V(1)(e) of the New York Convention, nor on the ' English Court under Order 73, Rule 7, both of which treat the curial law as carrying with it jurisdiction over an arbitration conducted outside the territory of the state exercising jurisdiction."
80. The next case referred to is the case of Naviera Amazonica Pesuana SA v. Compania International de Seguros Del Peru ((1988) 1 Lloyd's Rep. 116) (CA). That case is an authority for the proposition that in the absence of express choice, the procedural law, prima facie, will be the law of place of arbitration. With great respect, that judgment proceeds upon the principle of English law which according to the learned Judge rests upon the territorially limited jurisdiction of the Courts of that country under which an agreement to arbitrate in country 'X' subject to English procedural law would not empower the Court to exercise jurisdiction over arbitration in that country, while coming to this conclusion reliance was placed by the learned Judge on Whitworth's case. But in that case, lex fori was held to be the law of Scotland not because of the seat of arbitration but due to the reason that the parties had by their conduct chosen that law to be the curial law. It is so stated by Dicey and Morris, in 'Conflict .Of Laws', Vol. 1 at page 540, footnote 37 in the following words:-- "But Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd. (supra) n.28, proceeded on the basis that there was no reason in principle why parties conducting an arbitration in Scotland could not have agreed to subject themselves to English review procedure."
81. Reliance of Mr. Khalid Anwar on Bank Mellet v. Helliniki Techniki SA. (1984) QB 291 (CA) is not apt.
In that case, what has been held was that if the arbitration was being conducted in England, an application can be made to the English Courts to remove an Arbitrator. That may be so but this is not an authority for the proposition that no other Court will have jurisdiction.
82. The last case is that of International Tank and Pipe v. Kuwait Fuelling Limited ((1975) 1 All ER 242).
The case is again distinguishable and has in fact no relevance. It was observed that under section 27 of the Arbitration Act, 1950, the Court has the power to extend time notwithstanding that the Arbitration might be held in some foreign country selected in accordance with the rules of International Chamber of Commerce.
83. Mr. Khalid Anwar also cited Avari Hotels Ltd. v. Hilton International Company (PLD 1985 Kar. 445) to show that an arbitration held under the rules of I.C.C. Was a foreign arbitration and the award rendered therein was a foreign award under the Act VI of 1937. There is no detailed discussion on this aspect which is in issue before this Court. What was held in that case was that in view of the adoption of I.C.C. Rules for governing the conduct of arbitration, the implied condition of arbitration as contained in the Schedule to the Arbitration Act, 1940 to the extent of repugnancy, would not apply. The Supreme Court of Pakistan in Uzin Import and Export Enterprises for Foreign Trade v.
Iftikhar & Co. Ltd., (1993 SCM R 866) has been pleased to observe that provision for arbitration under the I.C.C. Rules does not oust the jurisdiction of Courts in this country and this clause is to be treated at par with provision for arbitration within the country. Reliance in this respect was placed upon MA. Chaudhry v. M/s. Mitsui O.S.K. Lines Limited and 3 others (PLD 1970 SC 373), A.M. Qureshi v.
Union of Soviet Socialist Republic and another (PLD 1981 SC 377) and M/s. Eckherdt & Co. Marine Gambh v. Muhammad Hanif (PLD 1973 SC 42). It was observed that in the case of arbitration the jurisdiction of Court is not ousted and even the provision for arbitration by International Chamber of Commerce do not operate as an ouster of jurisdiction of the Courts in Pakistan.
84. There is thus no warrant for assumption that either under the laws of Pakistan or under its Private International law or even under the English Private International Law the Courts of the country where the arbitration proceedings are held alone have the exclusive jurisdiction in respect thereto. Mr. Khalid Anwar, the learned counsel himself has relied upon Union of India v. McDonell Dauglas Corporation ((1993) 2 Lloyd's Rep. 48) which runs counter to his argument as would be evident from the following Observation of Saville, J. At page 51 of the report:-- " the choice of the procedural law, different from the law of the place of the arbitration will, at least where that place is this country, necessarily mean that the parties have actually chosen to have their arbitral proceedings at least potentially governed by their express choice and by the laws of this country."
85. In Dalal v. Bank Mellat ((1986) 1 QB 441), it was observed that:--.
"It is a fallacy to suppose that arbitral proceedings must take their authority from the local municipal law of the country within which they take place .There is no reason in principle why the curial law of a tribunal cannot derive concurrently from more than one system of municipal law."
86. The possibility of concurrent jurisdiction vesting in two Courts or more is also spelt out by the judgment in Sumitomo Heavy Industries Ltd. v. Oil and Natural Gas Commission (1994) 1 Lloyd's Law Rep. 45) wherein the. Principle laid down in Singer's case by the India Supreme Court was cited with approval. Another case of which notice may be taken is that of Dalmia Dairy Industries Ltd. v.
National Bank of Pakistan ((1978) 2 Lloyd's Law Rep. 223) which was a case decided by Kerr Lord, J.
(as he then was), who is now one of the learned Members of the Arbitral Tribunal. At page 232 of the report, it was held that "since the arbitration was held in Geneva, Swiss law was the procedural law of the arbitration in the absence of any choice by the parties of any procedural law." However, at page 228, it was observed that: "The reason is that the Indian Act of 1961 giving effect to the New York Convention provides that the Act shall not apply to 'any award made on an arbitration agreement governed by the law of India'. I am not concerned with the question whether or not this provision accords with the New York Convention, the consequence, however, is that by Indian Law these awards were 'domestic' and not 'foreign awards'."
' Again at page 415, it was laid down that: "....The guarantee provided that the law governing the guarantee and the arbitration was to be Indian law. It was common ground that this had the effect that the proper law governing the arbitrations and determining the validity of Professor Lalive's awards was the law of India. It was also common ground that the relevant Indian legislation governing the affect and validity of the awards was the Indian Arbitration Act, 1940 (which corresponds broadly to our 1950 Act) and not the Foreign Awards (Recognition and Enforcement Act, 1961 which gave effect to the New York Convention of 1958 and corresponds to our Arbitration Act, 1975."
' Another statement which appears at page 417 of the report and which is of importance is as follows:-- "I would also mention in passing that although all the arbitrator's awards in both arbitrations were 'speaking awards' with full reasoning, the Bank rightly did not seek to contend that the awards could be attacked before me on the ground that they contained errors of law on their face. This could only have been done in proceedings to set aside the awards under the Indian Arbitration Act, 1940, before the Indian Courts, or possibly in the Swiss Courts, but no such proceedings were ever brought."
' The relevant clause in the agreement that all questions arising from and pertaining to the grant of arbitration shall be decided with reference to Indian Law. The Indian Law was, therefore, held to be the proper law of the agreement. While examining the applicability of this law at page 248 of the report, two important statements appear which are instructive and are, therefore, being reproduced hereunder:-- "In Indian Law the position is regulated by the Indian Arbitration Act, 1940.... An award is final and binding unless and until it is set aside by any procedure available for this purpose under section 14 the arbitrator may be required by either party or dated by the Court to file the award and certain other documents with the Cour. This is the only method of enforcing a "domestic" award under Indian Law. In such a case there is no procedure for bringing an action on an award. ..By requiring the arbitrator in file the award and then applying under section 30 (of the Indian Arbitration Act, 1940) to set it aside the Bank could have raised before the Indian Courts every point which it is seeking to raise here, including two which it appears to accept cannot be raised here, viz. Misconduct on the part of the arbitrator (as opposed to a denial of the rules of natural justice) and error on the face of the award. Alternatively, if--- understandably---the bank did not wish to take any steps to procure the filing of the award, because this step would more naturally be taken by the other party which seeks enforcement, then the bank could have applied directly under section 33 (of the Indian Arbitration Act, 1940) and sought a decision that the awards are invalid on all of the grounds raised before me."
87. The learned Judge observed that the arbitrator in that case namely Professor Lelivs who was in Geneva to file his award which were held to be domestic and accepted that it could be set aside by the Indian Court. This is exactly what has been done by the petitioner in the present case when it filed the first application at Sheikhupura asking for filing of award so as to challenge the same.
88. While on this subject, it is to be noted that the reason given as to why the curial law has in certain cases been held to be the law of the seat of arbitration is that in the absence of any choice of the parties, that law should be applied as it has closest connection with the arbitration proceedings. This theory may hold good in cases where there is an unequivocal and invariable choice of seat of arbitration made by the parties and not where more than one places for arbitration are contemplated. In this case, under clause 13 of the Contract, arbitration can take place either at Karachi or London depending upon the fact as to who was the claimant. There are as such, two seats of arbitration to be chosen by the parties. While Karachi has the closest connection with the contract as the contract was executed in Pakistan and the works were also performed here, London has no connection whatsoever with the subject-matter of reference.
Consequently, even if the principal advocated by Mr. Khalid Anwar is applied, still the jurisdiction of Pakistani Courts cannot be ousted. In the present case, apart from contesting the claim of the petitioner, the respondents too have made a counter-claim before the Arbitrators. Supposing instead of filing the counter-claim, they had separately invoked the arbitration clause by filing a claim in that event the seat of arbitration had to be Karachi. This brings clearly into the infirmity of the plea of exclusive jurisdiction of the English Courts and I find myself unable to hold that the English Courts had exclusive jurisdiction in the matter of procedure on account of curial law being English law. Indeed as already observed in many countries of the world, especially of Europe, the seat of arbitration has no relevance to the determination of procedure for arbitration. The discussion at page 81 of Law and Practice of International Commercial Arbitration, by Redfern and Hunter (2nd Edn.) is relevant and instructive.
89. This, however, does not conclude the controversy as the next question which arises is that even if it be held that in matter of procedure, the Courts of the country where seat of arbitration is located have exclusive jurisdiction, the next question which would then arise is as to whether right to challenge an award can be said to be a matter merely of procedure or does it affect the substantive right of the parties.
90. Having heard the learned counsel for the parties, to me it appears that at least so far as the laws of Pakistan are concerned, the right to challenge an award cannot be considered to be a matter of procedure but is one of substance. This right has been granted by sections 30 and 33 of the Arbitration Act, 1940 and is more akin to the right of appeal and review which have throughout been held to be substantial rights and not matters of procedure. In the Province of Punjab v.
Nadeem & Company (PLD 1976 Lah. 1273) it was observed by this Court that it would not be correct to say that section 33 of Arbitration Act, 1940 is a procedural in nature. It may also be mentioned that the Arbitration Act, 1940 applies as a whole to Pakistan and there is no distinction as regards the applicability of substantial and procedural provisions.
91. So far as the English Law is concerned, the position does not appear to be very clear. Mustill and Boyd at page 87 of their book Commercial Arbitration, 2nd Edn. Have stated that the power to appoint an arbitrator, to set aside the award or to give leave to appeal on a question of law are statutory remedies. Again at page 154 of the same Book, it has been stated that though "the law of arbitration is thus mainly procedural in content. But it does also deal with certain substantive aspects of the arbitral process, in the sense that it creates and regulates the jurisdiction of the Court to intervene in the event of an erroneous decision by the Arbitrator on some issue or issues arrived in the dispute which is submitted to him pursuant to an agreement to arbitrate".
92. Even under the English Law, the question of enforcement and honouring an award and its matter of validity is relatable not merely to the curial law but also to proper law of arbitration agreement which in the present case was Pakistani law. Reference in this connection may be made to Mustill and Boyd's Commercial Arbitration at page 6, Note 61 where it is stated:-- "Moreover, so far as we can see, the only occasion on which the proper law of the reference will come into play is whether it is suggested that the agreement to refer the individual dispute has come to an end leaving intact the continuous agreement to refer future disputes--as was argued in the Black Clawson case, ante (perhaps questions relating to the validity and enforcement of the award are also referable to this law. It seems more likely, however, that they belong to the proper law of the arbitration agreement, which contains the original promise to honour the award,"
93. It follows from the above discussion that even if it be held that English Courts have jurisdiction in respect of procedural maiters yet the jurisdiction of the Pakistani Courts over substantive matters which affects the rights of the parties are not being matters of procedure would be governed by the law of Pakistan which is the law chosen by the parties to be the law according to which the Contract is governed and also for the reason that the agreement has closest connection with Pakistan.
94. At this stage, the prejudice which is likely to be caused to the petitioner in case it is held that it is only the English Courts which have jurisdiction in the matter and not the Courts of Pakistan may be pointed out. It is a settled proposition that under the English Law, there is no requirement of filing an award in the Court or passing a judgment and decree thereof to make it enforceable. No application can, therefore, be made for setting aside the awards which, according to the learned counsel for the petitioner are illegal. It is also to be noticed that so far as the English law is concerned, the decision on the question of law of Pakistan are treated to be the question of fact and not of law, and, therefore, no remedy is available to the parties in respect of patent errors of facts, even if apparent on the face of record. It was so held in Andre Cie v. ETS Michel Blanc & Fils ((1979) 2 Lloyd's Law Rep. 427). (Also see Mustill and Boyd's Commercial Arbitration, 2nd Edn., pages 633 and 634). Under the English Arbitration Act, 1950 provides that the High Court shall not have jurisdiction to set aside or remit the award on an arbitration agreement on the ground of errors of fact on the face of the record. The law of Pakistan, however, is different in this respect as an award can be set aside on the ground of error of law apparent on the face of the record. In these circumstances, if it is held that the Courts in Pakistan have no jurisdiction to entertain the applications presented by the petitioner, the petitioner would be left remedyless which would clearly be against public policy.
95. In M.A. Chaudhry v. Mitsui O.S.K. Lines Ltd. (PLD 1970 SC 373), it has been observed by the Supreme Court that before giving up its jurisdiction even the Pakistani Courts will require where a remedy is available to the affected party in the Foreign Court. It was laid down that (page 390) "even upon the principle adopted by the East Pakistan High Court in each case, there should of necessity have been an enquiry to find out whether under the proper law of contract the foreign Court to which exclusive jurisdiction was sought to be given, had, in fact jurisdiction to try the cause of matter according to the laws of that country If it so happens that the Foreign Court has no jurisdiction in the matter, or is unable to grant relief sought for, then the plaintiff would be left with no redress at all". In this view of the matter also, the plea of ouster of jurisdiction of the Courts in Pakistan cannot be upheld.
96. It was lastly contended by Mr. Khalid Anwar learned counsel for respondents Nos. 4 and 5 that if an order is passed by this Court directing the arbitrators to file award they may not comply with that order which would render it to be futile and as such this Court should stay its hands in the matter.
97. I am not impressed with this argument. There is no reason to apprehend that any order passed by this Court would be ignored by the Arbitrators who are men of high learning. There is nothing in their conduct which can even remotely suggest any defiance of the order passed by the Courts in Pakistan. Be that as it may, if the jurisdiction vests in the Courts of Pakistan, as it does, this is hardly a ground on the basis of which the Courts of this country would forsake their jurisdiction.
98. As observed earlier in the case of contract involving foreign element, four potential laws which may apply are (i) proper Law of contract, (ii) proper law of arbitration agreement, (iii) procedural/curial law and (iv) proper law of reference. While detailed discussion as regards the first three laws have been made above, not much has been said about the proper law of reference for the reason that it is a common ground between the parties that proper law of reference is invariably the same as the proper law of arbitration agreement. According to Mustill and Boyd on Commercial Arbitration at page 61, proper law of reference, i,e, the law governing the contract which regulates the individual reference to arbitration. This law is, therefore, of not much relevance in the present case.
99. The arguments of Mr. Khalid Anwar having been dealt with, it is now time to state that in response to the notice issued by this Court, no one has appeared on behalf of learned Chairman and Members of the Arbitration Tribunal, respondents Nos. 1 to 3, herein. However, two letters dated 31-1-1994 and 7-2-1994 have been received by this Court from the Tribunal. Although our law which I am sure is equally the law in England does not permit any of the parties to write any letter to the Court but nevertheless keeping in view the status and eminence of the Arbitrators in their respective fields the points raised by them may be. Briefly dealt with which are more or less the same as have been addressed by Mr. Khalid Anwar, Advocate. So far as the statement by the Tribunal that the position adopted by it is in accordance with the generally accepted principles of private International Law, suffice it to say that as already held that this Court has to decide the cause on the basis of its own domestic and municipal law and the principles of International law cannot override the statutory provisions and in any case, the law of Pakistan need not be the same as that of England so far as Private International Law was concerned. Furthermore even under the English principles of law, as already discussed, the position does not appear to be different.
100. So far as the term of Reference drawn by the Arbitration Tribunal on 10-5-1991 to which reference has been made by the learned Arbitrators, it may be stated that the words in Article 7.1 are that the arbitration shall take place in London and not that the seat of arbitration shall be London. It is unnecessary for the present case to enter into any detailed discussion but two things which need to be stated in this behalf are, firstly that, as already held by Lord Justice Kerr in Naveria's case, while seat is a word of art, the provision that the arbitration shall be held at a particular place may refer to a convenient geographical location. The second thing which comes to one's mind is that in the present case the place where the arbitration was to be held was variable depending upon the fact as to who was the claimant. It cannot, therefore, be said that the parties had expressly chosen that they shall be subject to English Court's law and to no other Courts. (See James Miller and Partners Limited v. Whitworth Street Estates (Manchester) Ltd. ((1970)
1 Lloyd's Rep. 269 at page 281, Compagnie Tunisienne De Navigation S. A. v. Compagnie D'armement Maritime S. A. ((1970) 2 Lloyd's Rep. 99).
101. It has also been stated by the learned Arbitrators that at no stage was it objected that the curial law would not be the English Law. However, Mr.S.M. Zafar made reference to letter dated 17-3- 1991 written by the petitioner's learned counsel to all the learned Members of the Tribunal wherein it has been stated that the law applicable was Pakistani law which has its own Arbitration Act, Code of Civil Procedure and relevant laws.
102. It may also be mentioned that in Article 8.1 of the Term of Reference, the Arbitrators themselves have stated that nothing in the Term of Reference shall derogate from the scope of the powers of the Arbitrators or from provisions of any mandatory procedural law. The word "any" is susceptible and if interpreted has meaning more than one. Moreover, Term of Reference does not specifically provide that the curial law or the procedural law would be the English law.
103. In conclusion, therefore, it is held that as in the present case, the cause of action had arisen in Sheikhupura; the proceedings under the Arbitration Act could validly be commenced before that Courts in view of section 2 (c), sections 30, 33. 41 and 47 of the Arbitration Act read with section 20 of the Code of Civil Procedure; that the jurisdiction of the Courts in Pakistan could only be taken away by another Statute of that country and not by any principles of any other law; that the awards were domestic awards made on arbitration agreement governed by Pakistani law and, therefore, the Arbitration (Protocol and Convention) Act, 1937 was not applicable; that the awards were domestic in nature for the same reason; that even under the principles of Private International Law that jurisdiction of the Courts in Pakistan do not stand excluded, the trial Court was, therefore, not correct in holding that it has no jurisdiction to proceed with the two applications filed by the petitioner.
104. Before parting with the case, I wish to place on record my appreciation for the valuable assistance rendered by Mr. S. M. Zafar, Advocate, Mian Saqib Nisar, Advocate and Mr. Ali Zafar, Advocate for the petitioner and Mr. Khalid Anwar, Advocate, Mr. Umar Ata Bandial, Advocate and Mr. Muneeb Akhtar, Advocate for respondents Nos. 4 and 5.
As a result of what has been stated above, both these petitions are allowed and the impugned orders of the trial Court are set aside with no order as to costs and the cases are remanded to it for proceeding further on merits.