Successful defence of SIAC award against invalidity, incapacity and public policy challenges
The Lahore High Court recently recognized a foreign arbitral award favouring Cargill International Trading Pte. Ltd., rejecting arguments by the award debtor, BBJ Steel Limited, that the signatory lacked authority. The RIAA Barker Gillette team, led by Mayhar Kazi, successfully argued for the recognition and enforcement of the award.
The dispute arose from a sales contract between Cargill and BBJ Steel for the steel coils supply. When BBJ Steel failed to establish the requisite letter of credit, Cargill terminated the contract and commenced arbitration proceedings before the Singapore International Arbitration Centre (SIAC). We assisted with Pakistan law submissions in the capacity and corporate authority arbitration. The sole arbitrator rendered an award in Cargill’s favour.
In the enforcement proceedings brought under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, BBJ Steel argued that the employee who signed the contract lacked authority from its board of directors, invoking the invalidity and incapacity defences under Article V(1)(a) and the public policy defence under Article V(2)(b) of the New York Convention. Denial of the signatory’s authority is a common defence in Pakistani enforcement proceedings.
The Court examined the issue of signatory authority, noting its importance in determining whether BBJ Steel agreed to the arbitrator’s jurisdiction. Importantly, the Court held that while an arbitrator’s decision on jurisdiction generally binds the parties, a party resisting enforcement has the right to have the enforcing court determine this issue. Relying on the UK Supreme Court’s decision in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, the Court affirmed that under the New York Convention, even if a party can no longer challenge the arbitrator’s jurisdiction at the arbitral seat, it can still do so before the enforcing court.
In a nuanced and well-reasoned judgment, the Lahore High Court upheld the award, even though it disagreed with the arbitrator’s “flimsy” reasoning that BBJ Steel’s signatory had implied or ostensible authority. The Court held that the invalidity defence under Article V(1)(a) must be established under the law governing the arbitration agreement, which the arbitrator had determined was Singapore law in this case. The Court upheld BBJ Steel’s right to challenge the arbitrator’s jurisdiction before the enforcing court but found it failed to make out the invalidity defence on the facts. The Court also rejected the public policy defence, noting its narrow scope.
“This judgment is a landmark decision that will boost confidence in Pakistan’s arbitration framework,” said Mayhar Kazi, the lead partner on the case. “It sends a strong signal that Pakistani courts will not lightly interfere with foreign awards on technical grounds.”
The case is notable for its nuanced treatment of the signatory authority issue in the context of the New York Convention defences. By focusing on the law governing the arbitration agreement, the judgment promotes consistency with international standards and enhances Pakistan’s reputation as an arbitration-friendly jurisdiction. It shows the courts’ pro-arbitration approach and reluctance to reopen the merits of awards. Parties seeking to enforce foreign awards in Pakistan can take comfort from this decision.
For expert guidance on cross-border commercial disputes, please contact Mayhar Kazi.
This article is not legal advice; it provides information of general interest about current legal issues.
RIAA Barker Gillette is Pakistan’s premier law firm, with an on-the-ground presence in four major cities in Pakistan: Karachi, Islamabad, Lahore, and Peshawar, and affiliated offices in Dubai (DIFC) and London.
The firm practices in all areas of corporate, commercial and dispute resolution law. Leading international legal directories consistently recognize the firm as a top-tier law firm in Pakistan.
RIAA Barker Gillette is the exclusive member firm in Pakistan for Lex Mundi, the world’s leading network of independent law firms with in-depth experience in over 125 countries worldwide.
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